MERGER PURCHASE AGREEMENT
AMONG
XXXX GROUP, INC.,
AS PURCHASER,
AND
XXXX MERGER SUBSIDIARY, INC.
AS MERGER SUBSIDIARY AND
SURVIVING CORPORATION
AND
XCD INCORPORATED,
AS TARGET CORPORATION
AND ITS
SHAREHOLDERS
DATED AS OF OCTOBER 28, 1998
TABLE OF CONTENTS
1. Defined Terms.....................................................................1
2. The Merger Transaction............................................................6
2.1. The Merger...................................................................6
2.2. The Closing..................................................................6
2.3. Actions at the Closing.......................................................6
2.4. Effect of Merger.............................................................7
2.5. Procedure for Payment of XCD Shareholders....................................7
2.6. Dissenting XCD Shares........................................................8
2.7. Adjustments Upon Changes in Capitalization...................................8
2.8. Restricted Securities........................................................8
2.9. Holdback.....................................................................9
3. Other Agreements..................................................................9
3.1. Repayment of Certain XCD Obligations.........................................9
3.2. Employment Agreements........................................................9
3.3. Non-Solicitation Agreement...................................................9
3.4. Confidentiality.............................................................10
4. Representations and Warranties of the Target Corporation and each of the XCD
Shareholders.....................................................................10
4.1. Organization and Good Standing..............................................10
4.2. Authority...................................................................10
4.3. No Subsidiaries.............................................................11
4.4. Financial Statements........................................................11
4.5. Leaseholds and Improvements.................................................11
4.6. Real Property...............................................................11
4.7. Personal Property...........................................................11
4.8. Intellectual Property Rights................................................12
4.9. Litigation..................................................................12
4.10. Compliance with Laws.......................................................13
4.11. Entire Business............................................................13
4.12. Contracts..................................................................13
4.13. Receivables: Payables......................................................14
4.14. Certain Transactions.......................................................15
4.15. Employees..................................................................16
4.16. Employee Benefit Plans.....................................................16
4.17. Licenses and Permits.......................................................19
4.18. Transactions with Affiliates...............................................20
4.19. Truthfulness...............................................................20
4.20. Unlawful Payments..........................................................20
4.21. Insurance..................................................................20
4.22. Environmental Matters......................................................21
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4.23. Status of XCD Shareholders.................................................21
4.24. Tax Matters................................................................21
4.25. No Sale....................................................................22
4.26. Brokers and Finders........................................................22
4.27. Purchase Commitments.......................................................22
4.28. Certain Reports............................................................22
4.29. Certain Payments to Shareholders...........................................22
4.30. Bank and Securities Accounts...............................................22
4.31. Charter Documents..........................................................23
4.32. Capitalization.............................................................23
4.33. Officers and Directors.....................................................23
4.34. Dividends..................................................................23
5. Representations and Warranties of Purchaser and Merger Subsidiary................23
5.1. Organization................................................................24
5.2. Authority...................................................................24
5.3. Litigation..................................................................24
5.4. Truthfulness................................................................24
5.5. Capitalization..............................................................24
5.6. Material Changes............................................................25
5.7. No Default..................................................................25
5.8. Board and Shareholder Action................................................25
5.9. Compliance with Laws Generally..............................................25
5.10. Financial Statements.......................................................26
5.11. Employee Benefit Plans.....................................................26
5.12. ...........................................................................28
5.13. Tax Matters................................................................28
6. Further Covenants and Agreements.................................................29
6.1. Conduct of Business.........................................................29
6.2. Third Party Consents........................................................32
6.3. Access: Information.........................................................32
6.4. Audited Financial Statements................................................32
6.5. Interim Financial Statements and Other Financial Reports....................32
6.6. Insurance Proceeds..........................................................33
6.7. California Franchise Board Tax Clearance....................................33
6.8. Financing...................................................................33
7. Conditions Precedent to Obligations of Purchaser and Merger Subsidiary...........33
7.1. Opinion of Counsel..........................................................33
7.2. Performance by Target Corporation and XCD Shareholders......................33
7.3. Representations and Warranties..............................................33
7.4. No Actions or Proceedings...................................................33
7.5. No Material Adverse Change..................................................34
7.6. Officer's Certificate.......................................................34
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7.7. Satisfaction of Counsel.....................................................34
7.8. Consents and Estoppels......................................................34
7.9. Title Reports...............................................................34
7.10. Employment Agreements......................................................34
7.11. Merger Documents...........................................................35
7.12. California Franchise Tax Board Clearance...................................35
7.13. Investment Letters.........................................................35
7.14. Financing..................................................................35
7.15. No Dissenters..............................................................35
8. Conditions Precedent to Obligations of XCD.......................................35
8.1. Opinion of Counsel..........................................................35
8.2. Performance by Purchaser....................................................35
8.3. Representations and Warranties..............................................35
8.4. No Actions or Proceedings...................................................35
8.5. Officer's Certificate.......................................................35
8.6. Employment Agreements.......................................................36
8.7. Satisfaction of Counsel.....................................................36
8.8. Merger Documents............................................................36
8.9. Merger Consideration........................................................36
8.10.............................................................................36
8.11.............................................................................36
9. Indemnification..................................................................36
9.1. Indemnities.................................................................36
9.2. Claims Procedures...........................................................37
9.3. Limitations.................................................................38
10. Miscellaneous...................................................................38
10.1. Attorneys'Fees.............................................................38
10.2. Expenses...................................................................38
10.3. Amendments and Waivers.....................................................38
10.4. Transferability Assignment.................................................38
10.5. Termination................................................................38
10.6. Notices....................................................................39
10.7. Governing Law; Choice of Forum.............................................40
10.8. Partial Invalidity.........................................................40
10.9. Section Headings...........................................................40
10.10. Counterparts..............................................................40
10.11. Entire Agreement..........................................................40
10.12. Public Announcements......................................................40
10.13. Gender....................................................................40
10.14. No Waiver: Cumulative Remedies............................................40
10.15. Survival..................................................................41
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MERGER PURCHASE AGREEMENT
EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBITS "A-1" - Employment Agreements
EXHIBIT "B" Form Of Agreement Of Merger To Be Filed With Secretary Of
State Of California and Delaware
EXHIBIT "C" FORM OF REGISTRATION RIGHTS AGREEMENT
SCHEDULES
Schedule 3.1.1 XCD Shareholder Loans
Schedule 3.1.2 XCD Deferred Compensation Obligations
Schedule 2.4.4 Officers and Directors of Surviving Corporation
Schedule 2.4.5 Merger Consideration Schedule (for each XCD Shareholder)
Schedule 4.1 Organization and Good Standing
Schedule 4.2 Required Consents; Conflicts
Schedule 4.3 Related Companies
Schedule 4.4 HIstorical Financial Statements
Schedule 4.5 Leaseholds
Schedule 4.6 Real Property
Schedule 4.7 Liens
Schedule 4.8 Intellectual Property Rights
Schedule 4.9 Litigation
Schedule 4.12 Contracts
Schedule 4.13 Receivables
Schedule 4.14 Certain Transactions
Schedule 4.15 Employees
Schedule 4.16 Employee Plans
Schedule 4.18 Transactions with Affiliates
Schedule 4.21 Insurance
Schedule 4.25 Taxes
Schedule 4.29 Certain Payments to Shareholders
Schedule 4.30 Bank and Securities Accounts
Schedule 4.32 Capitalization
Schedule 4.33 Officers and Directors
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MERGER PURCHASE AGREEMENT
This MERGER PURCHASE AGREEMENT is dated as of October 28, 1998,
("Agreement"), among XXXX GROUP, INC., a Delaware corporation ('Purchaser"),
XXXX MERGER SUBSIDIARY, INC., a Delaware corporation ("Merger Subsidiary" or,
after giving effect to the merger described in this Agreement, the "Surviving
Corporation"), and XCD, INCORPORATED, a California corporation "XCD"" or the
"Target Corporation") and the shareholders of Target Corporation identified
on the signature page hereto the "XCD Shareholders."
This Agreement contemplates a transaction in which Purchaser will
acquire all of the outstanding capital stock of XCD for cash and common stock
of Purchaser through a forward subsidiary merger of Target Corporation with
and into Merger Subsidiary, with Merger Subsidiary to be the Surviving
Corporation. Such acquisition is intended to qualify as a partially tax-free
reorganization within the meaning of Section 368(a)(i)(A) of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the respective
promises herein made, and in consideration of the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
1. DEFINED TERMS. The following terms shall have the respective meanings
ascribed to them below:
"Affiliate" shall mean, with respect to any party, any person who
directly or indirectly through stock ownership or through any other
arrangement either controls, or is controlled by, or is under common control
with, such party. The term "control" shall mean the power to direct the
affairs of such party by reason of ownership of voting stock or other equity
interests, by contract or otherwise.
"Agent" shall mean Xx. Xxxxx Xxxxxxxx, as agent for all of the XCD
Shareholders with respect to claims under Section 9 hereof In the event of
the death or incapacity of Xx. Xxxxx Xxxxxxxx, "Agent" shall mean such other
person designated by a majority in interest of the XCD Shareholders.
"Assets" shall mean all of the assets, properties, interests, cash on
hand and in bank accounts, cash equivalents, investments, marketable
securities, business, goodwill, claims and other rights of the Target
Corporation of every kind and nature whatever, tangible or intangible, vested
or unvested, fixed, contingent or otherwise, real, personal or mixed, and
wherever located, whether or not reflected on the books and records of the
Target Corporation and whether or not described herein or in any of the
exhibits or schedules delivered or to be delivered to Purchaser hereunder,
including, without limitation, all respective right, title and interest of
the Target Corporation in, to and under the names "XCD INCORPORATED" and
"XCD," the Tangible Personal Property (including the Inventories); the
Leaseholds; the Improvements; all rights, benefits, privileges and interests
under the Contracts (including all security and other deposits thereunder);
Receivables; Licenses; Intellectual Property Rights; Warranties; Records;
prepaid expenses; backlog; advances; rights, benefits, claims, credits,
prorations and refunds due or belonging to the Target Corporation under any
Contracts or insurance policies or otherwise; and all rights to any deposits
made by the Target Corporation to obtain goods, services, rights or
privileges of any kind; and including all of the foregoing acquired by or on
behalf of the Target Corporation between the date of this Agreement and the
Closing Date.
"Audit Accountants" shall have the meaning set forth in Section 6.4.
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"Audited Financial Statements" shall mean the audited balance sheet
and results of operations (including audited statements of income or loss,
cash flows and shareholders' equity) of the Target Corporation as of and for
the fiscal years ended December 31, 1996 (reviewed, not audited) and December
31, 1997.
"Business" shall mean, collectively, the business of the Target
Corporation, which, in the aggregate, includes all current operations, but is
not necessarily limited to the sale of existing products and the research,
development and sale of other proprietary and non-proprietary software and
hardware.
"California Franchise Tax Board Clearance" shall mean the franchise
tax clearance required to be issued by the State of California in connection
with the XCD Merger.
"Capital Stock Change" shall have the meaning specified in Section 2.7.
"Closing" shall have the meaning specified in Section 2.2.
"Closing Date" shall have the meaning specified in Section 2.2.
"COBRA" shall have the meaning specified in Section 4.16.6.
"Confidential Information" means any information concerning the
business and affairs of the Purchaser or XCD which is not generally known or
available to the public.
"Contracts" shall mean, collectively, and "Contract" shall mean,
individually, all leases relating to Leaseholds, distribution agreements,
franchise agreements and arrangements, maintenance agreements, service
agreements, equipment or other personal property leases, arrangements
regarding the loaning of equipment or value added services, use agreements,
loan, credit, or financing agreements of any kind, security agreements,
chattel or leasehold mortgages, license agreements, agency agreements,
purchase orders, sales orders, blanket or master agreements with customers,
supply contracts, output or requirements contracts, commitments to purchase
or sell goods, products or services of any kind, stockholders agreements,
stock redemption agreements, stock option, warrant, purchase or rights
agreements, any other agreements relating to or affecting the capital stock
of the Target Corporation, buy-sell agreements, indentures, notes,
restrictive covenants of any kind, and other contracts and agreements of any
kind or nature, whether written or oral, to which the Target Corporation is a
party or by which the Target Corporation or the Assets or the Business (in
whole or in part) are subject, and all rights, interests, benefits and
privileges arising thereunder.
"Dissenting XCD Shares" shall have the meaning specified in Section
2.6.
"Effective Time" shall have the meaning specified in Section 2.4.
"Employee" shall mean, as the context requires, any former or current,
active or inactive, employee, officer, agent, consultant, independent
contractor or subcontractor of the Target Corporation.
"Employee Agreement" shall have the meaning specified in Section
4.16.1.
"Employee Plan" shall have the meaning specified in Section 4.16.1.
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"Employment Agreement" shall mean the Employment Agreement to be
executed and delivered by the Surviving Corporation, as employer, and the
Employee(s), as employee, on the Closing Date, in the forms attached as
Exhibits "A-1" through "A-5."
"Environmental Laws" shall have the meaning specified in Section 4.22.
"ERISA" shall have the meaning specified in Section 4.16.1.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Hazardous Substances" shall have the meaning specified in Section
4.22.
"Historical Financial Statements" shall mean the unaudited balance
sheet and results of operations (including unaudited statements of income or
loss, cash flows and shareholders' equity) of the Target Corporation as of
and for the nine (9) month period ending September 30, 1998, and the Audited
Financial Statements.
"Improvements" shall have the meaning specified in Section 4.5.
"Indebtedness" shall mean any (i) debt for the payment of money or
borrowed money or for the deferred purchase price of property or services,
(ii) obligations evidenced by notes, bonds, debentures or other instruments,
(iii) lease obligations which would normally be capitalized under GAAP, and
(iv) obligations under direct or indirect guarantees of (including
obligations, contingent or otherwise, to assure a creditor against loss in
respect of) indebtedness or obligations of others of any of the types
referred to in clauses (i), (ii) or (iii) above.
"Interim Financial Statements" shall mean the Target Corporation's
internal unaudited balance sheet and statement of income or loss as of and
for the month ending September 30, 1998 and as and for each month thereafter
the last day of which is more than fifteen (15) days prior to the Closing
Date.
"Intellectual Property Rights" shall mean (i) Patents, (ii) Know-how,
(iii) Trademarks, (iv) Trade Names, and (v) shop rights, copyrights,
inventions, technology, service marks and all other intellectual property
rights, whether registered or not.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Inventories" shall mean all inventories of XCD.
"Inventory List" shall have the meaning specified in Section 4.7.3.
"Key Employees" shall mean Xxxxx Xxxxxxxx, Xxxx (Xxxxxxx) Xxxxxxx, Xxx
Xxxxxxx, Xxx (Xxxxx) Xxxxx, Xxx Xxxxxxxxx, Xxxxxx Xxxxxxxx and Xxxx (Xxxxxxx)
Xxxxxx.
"Know-how" shall mean all trade secrets, know-how (including, without
limitation, product know-how and use and application know-how), processes,
product designs, specifications, work flow analyses, charts and designs,
selling, quoting, bidding and other business techniques, methods and systems,
customer requirements, quality control procedures, computer databases and
software, telephone numbers, facsimile numbers, technology and all other
information and similar intangibles, including, without limitation, technical
information, safety information, research records, market information and
surveys and all
3
promotional literature, customer and supplier lists (and all other
information relating to suppliers and customers) and similar data.
"Leaseholds" shall mean the real property and interests in real
property leased or used by the Target Corporation in connection with the
Business, or any part thereof; or otherwise.
"Liabilities" shall mean, collectively, with respect to any Person,
all types of Indebtedness, liabilities, obligations, debts, duties and
responsibilities of, and all claims, demands, judgments, orders, fines and
penalties against, such Person of any kind or nature whatever, fixed or
contingent, liquidated or unliquidated, known (but not unknown), disclosed or
undisclosed.
"Licenses" shall mean all local, municipal, state, federal and foreign
licenses, franchises, permits, consents, approvals, waivers, rights and
authorizations used or required for use in connection with the conduct of the
Business (or any part thereof), and all industry certifications of the
Business or the Assets (or any part thereof).
"Lien" shall mean any mortgage, pledge, deed of trust, assignment,
lien, charge, encumbrance, judgment, restriction or security interest of any
kind or nature whatever, or the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Material Contract" shall mean any, and "Material Contracts" shall
mean all, of the following Contracts: (a) any Contract providing for the
purchase of Inventories (other than routine purchase orders made in the
ordinary course of business consistent with past practice) by, or the sale of
Inventories to, the Target Corporation (e.g., distributor, franchise,
purchasing and supplier agreements); (b)any Contract (other than routine
purchaser orders received in the ordinary course of business consistent with
past practice) with any customer of the Target Corporation; (c) any Contract
relating to borrowings made by the Target Corporation, or pursuant to which
Assets of the Target Corporation are pledged or assigned as collateral, or
the Business (in whole or in part) is restricted; (d) any Contract which in
any manner relates to the capitalization, capital structure or authorized
shares of the Target Corporation, or to any XCD Shares, or to rights
(contingent or otherwise) to acquire any security of; or interest in, the
Target Corporation or the Business, including any agreement between or among
any XCD Shareholders relating to the Target Corporation or the Business
(whether or not the Target Corporation is a party thereto); (e) any Contract
which is not terminable upon ninety (90) days (or shorter) notice without
liability or cost to the Target Corporation, (f) any Contract relating to any
of the Leaseholds; (g) any Contract relating to insurance for the Business or
the Assets, any Employee Plan, any Intellectual Property Rights or any
Licenses; (h) any Contract relating to any of the real property; (i) any
Contract which a reasonably prudent business person knowledgeable of the
Business and exercising reasonable business judgment would deem material to
the Business; and (j) any Contract entered into Outside of the ordinary
course of business consistent with past practice.
"Merger" shall have the meaning specified in Section 2.1.
"Merger Consideration" shall have the meaning specified in Section
2.4.5.
"Merger Subsidiary" shall mean Xxxx Merger Subsidiary, Inc., a
Delaware corporation, and a wholly-owned subsidiary of Purchaser.
4
"Patents" shall mean patents (including all reissues, divisions,
continuations, continuations in part and extensions thereof), patent
applications and patent disclosures docketed and all other patent rights
(including, without limitation, all claims against third parties for past
infringement not heretofore asserted).
"Person" shall mean any natural person, corporation, association,
partnership, governmental agency or subdivision thereof; joint venture or
other entity.
"Purchaser" shall mean Xxxx Group, Inc., a Delaware corporation.
"Purchaser's S-1 Registration Statement" shall mean Registration No.
333-5 1523 as filed with the SEC, and all amendments or supplements thereto.
"Receivables" shall mean, collectively, all accounts receivable,
claims, notes and other amounts receivable by, or owed to, the Target
Corporation or which may be claimed by the Target Corporation as a result of
the operation or ownership of the Business (or any part thereof), including,
without limitation, all amounts due from franchisees, customers, vendors and
Employees, together with any unpaid financing charges accrued thereon,
whether or not arising in the ordinary course of business.
"Records" shall mean, collectively, originals, or, to the extent
originals are not available, true and complete copies, of all business,
accounting and financial records, including corporate minute books and
records, and stock ledgers and records, property records, contract records,
personnel records, correspondence, files, books and documents of the Target
Corporation, including, without limitation, production, testing, quality
control, sales, marketing and advertising data and materials, customer and
supplier records and mailing lists of any and all types, vendor and customer
invoices, billing records, software and related documentation, art work,
photographs and advertising material, manuals and teaching aids, and all
other records relating to the Business as presently and heretofore conducted.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Surviving Corporation" shall mean Merger Subsidiary after giving
effect to the Merger.
"Tangible Personal Property" shall mean, collectively, all fixed
assets, machinery, equipment, tools, vessels, containers, computers,
vehicles, furniture, fixtures, leasehold improvements, office equipment,
plant, supplies, inventory (including, without limitation, Inventories) and
other tangible personal property owned by the Target Corporation of any kind
or nature.
"Target Corporation" shall mean XCD INCORPORATED.
"Taxes" shall mean all taxes of any kind, including, without
limitation, those on, or measured by or referred to as, income, gross
receipts, capital gains, built-in gains, retained earnings, sales (including,
without limitation, sales taxes due or payable on leases), use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, documentary stamp, intangible (recurring and
non-recurring), occupation, premium, property or windfall profits taxes,
customs duties or similar fees, import or export duties, and assessments or
charges of any kind whatever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign.
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"Trademarks" shall mean trademarks, registrations thereof, pending
applications therefor and such unregistered rights as may exist through use.
"Trade Names" shall mean, collectively, trade names, brand marks,
trade dress, brand names and all other names and slogans used in connection
with the Business embodying the Target Corporation's good will for which no
trademark registration has been obtained and for which no application is
pending.
"Xxxx Share" shall mean a share of common stock, $.01 par value, of
Purchaser.
"Warranties" shall mean, collectively, all warranties in favor of the
Target Corporation with respect to any and all Tangible Personal Property
(including Inventories) or pursuant to any Contract, including, without
limitation, warranties of any supplier of Tangible Personal Property
(including Inventories) sold to the Target Corporation, whether resold or to
be resold by the Target Corporation to its customers.
"XCD" shall mean XCD INCORPORATED., a California corporation, which is
sometimes herein referred to as "Target Corporation."
"XCD's Shares" shall mean, collectively, the 37,900,000 shares of
common stock of XCD which are issued and outstanding on the date hereof and
which, at the Effective Time, shall constitute all of the issued capital
stock of XCD.
"XCD Shareholders" shall mean all of the holders of XCD Shares.
"XCD Shareholder Loans" shall mean all of the obligations described on
Schedule 3.1.1.
2. THE MERGER TRANSACTION.
2.1. THE MERGER. On and subject to the terms and conditions of this
Agreement, Target Corporation will merge with and into Merger Subsidiary
(the "Merger") at the Effective Time. Merger Subsidiary shall be the
corporation surviving the Merger.
2.2. THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Xxxxxxx & Associates, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx
Xxxxx, Xxxxxxxxxx, commencing at 10:00 a.m. local time on October 30,
1998 or such other place or date as the parties may mutually determine
(the "Closing Date"); provided, however, in no event shall the Closing
Date be later than November 14, 1998, unless by written agreement such
Closing Date is extended by all of the parties hereto.
2.3. ACTIONS AT THE CLOSING. At the Closing: (i) XCD and/or the XCD
Shareholders will deliver or cause to be delivered to Purchaser and
Merger Subsidiary the various certificates, instruments, agreements and
documents referred to in Section 7 of this Agreement; (ii) Purchaser and
Merger Subsidiary will deliver or cause to be delivered to XCD and the
XCD Shareholders the various certificates, instruments, agreements and
documents referred to in Section 8 of this Agreement; (iii) XCD and
Merger Subsidiary will file with the Secretary of State of the State of
Delaware Agreement of Merger substantially in the form attached hereto
as Exhibit "B;" (iv) Merger Subsidiary shall file the documents required
by California Corporations Code Section 1108(d); (v) Purchaser will
deliver or will cause to be delivered, or provide for the delivery of;
the Merger Consideration in the manner provided below in this Section 2;
and (vi) Merger Subsidiary shall change its name to XXXX XCD, Inc.
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2.4. EFFECT OF MERGER.
2.4.1. GENERAL. The Merger shall become effective at the time (the
"Effective Time") XCD and Merger Subsidiary file the XCD Agreement of
Merger with the Secretary of State of the State of Delaware. The
Merger shall have the effect set forth in the Delaware General
Corporation Law. The Surviving Corporation may, at any time after the
consummation of the Merger, take any action (including executing and
delivering any document) in the name and on behalf of the Target
Corporation with which it was merged in order to carry out and
effectuate the transactions contemplated by this Agreement.
2.4.2. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of Merger Subsidiary immediately prior to the Effective
Time, except that the name of Merger Subsidiary shall be changed to
"XXXX XCD, Inc."
2.4.3. BYLAWS. The Bylaws of the Surviving Corporation shall be the
Bylaws of Merger Subsidiary immediately prior to the Effective Time.
2.4.4. DIRECTORS AND OFFICERS. The director(s) and officers of the
Surviving Corporation at and as of the consummation of the Merger
shall be as set forth on Schedule 2.4.4 hereto.
2.4.5. CONVERSION OF XCD SHARES. At and as of the Effective Time,
all of the outstanding XCD Shares shall be exchanged for the following
(the "Merger Consideration"): (i) an aggregate cash amount of One
Million Five Hundred Fifty Thousand Dollars ($1,550,000); and (ii)
171,430 Xxxx Shares. The Merger Consideration payable to each XCD
Shareholder is set forth on Schedule 2.4.5.
2.4.6. XCD OPTIONS. At and as of the Effective Date, all
outstanding options for the purchase of XCD capital stock shall be
canceled and shall become null and void.
2.4.6.1 EMPLOYMENT AGREEMENT OPTIONS. Certain of the Key Employees
shall receive options to purchase Xxxx Shares, all as provided in
their Employment Agreements or the exhibits thereto.
2.4.7. SHARES OF MERGER SUBSIDIARY. None of the issued shares of
capital stock of Merger Subsidiary shall be converted as a result of
the Merger, but all of such shares shall remain issued shares of
capital stock of the Surviving Corporation.
2.5. PROCEDURE FOR PAYMENT OF XCD SHAREHOLDERS.
2.5.1. Upon the effectiveness of the Merger, all XCD Shares,
without any further action being required, shall automatically be
cancelled and be of no further force, effect or significance. At the
Closing, all stock certificates evidencing any issued XCD Shares
(together with spousal consents, for all married XCD Shareholders, in
form and content reasonably satisfactory to Purchaser) shall be
delivered to Purchaser. Purchaser may, upon or following the
effectiveness of the Merger, xxxx all of such certificates "void" or
"cancelled" and/or take such other action as appropriate or desirable
to evidence the cancellation and cessation of existence of all of XCD
Shares.
7
2.5.2. As soon as reasonably practicable following the Closing Date
(but in no event later than the Closing Date), Purchaser shall pay
and/or cause to be paid the Merger Consideration in accordance with
Schedule 2.4.5.
2.5.3. For the convenience of Purchaser, fractional Xxxx Shares
shall not be issued. Any person who would otherwise be entitled to
receive a fractional interest in a Xxxx Share shall receive, at the
time the Merger Consideration is paid one (1) whole Xxxx Share in lieu
of such fractional share.
2.6. DISSENTING XCD SHARES. Should there hereafter arise, for any
reason, a situation wherein any shareholder of the Target Corporation could
have rights under applicable law to dissent from the approval of the Merger,
Purchaser shall NOT be obligated to close the transactions contemplated
hereby (even assuming all other conditions precedent to its obligation to
close under this Agreement have been satisfied or waived). Holders of
dissenting XCD Shares, if any, shall be entitled to such dissenters' rights
in respect of the Merger as are set forth in the California Corporations
Code, as applicable, and all applicable procedures therein contained shall be
observed (such shares are hereinafter referred to as "dissenting XCD
Shares"). Holders of Dissenting XCD Shares shall not be considered XCD
Shareholders or entitled to the Merger Consideration for any purpose of this
Agreement or any Exhibit to this Agreement. It is again emphasized that no
Dissenting XCD Shares are anticipated, and that this Section 2.6 has been
included only to address any unforeseen circumstance which would create
dissenters' rights. In the event that Dissenting XCD Shares do exist,
Purchaser and Merger Subsidiary elect to close the transaction, and the
payment in solely cash (as opposed to cash and stock) to the dissenters would
be required, Schedule 2.4.5 shall be adjusted accordingly. In such event, the
number of Xxxx Shares to be issued as part of the Merger Consideration shall
be reduced by the number of Xxxx Shares applicable to a the Dissenting XCD
Shares, as well as the cash portion such Dissenting XCD Shares would have
received. Any payments required to be made to Dissenting XCD Shares shall be
made by Purchaser (and not the Target Corporation or Merger Subsidiary) and
shall reduce the aggregate Merger Consideration on a dollar for dollar basis,
as if the holder of such Dissenting XCD Shares had not been a shareholder on
the Closing Date.
2.7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The Target Corporation
and the XCD Shareholders shall not cause or permit to occur any. stock split,
reverse stock split, stock dividend, reclassification or recapitalization
which changes the character or amount (a "Capital Stock Change") of the XCD
Shares. Nonetheless, without in any manner limiting Purchaser's or Merger
Subsidiary's rights or remedies in respect of any breach of the obligations
set forth in the preceding sentence or elsewhere in this Agreement, should a
Capital Stock Change with respect to any XCD Shares occur prior to Closing,
and Purchaser nevertheless elects to close, Purchaser shall make such
adjustments to the Merger Consideration as shall be equitable and appropriate
in order to make such Merger Consideration (as a whole and per affected
stockholder of the Target Corporation), as nearly as practicable, equivalent
in value to such Merger Consideration (as a whole and per affected
stockholder of the Target Corporation) prior to the Capital Stock Change.
2.8. RESTRICTED SECURITIES. The Xxxx Shares to be issued in exchange for
shares of the Target Corporation have not been registered under the
Securities Act by reason of an exemption therefrom, and may not be
transferred or resold except pursuant to an effective registration statement
or
8
exemption from registration and each certificate representing Xxxx Shares
will be endorsed with the following legend and any legend required to be
placed thereon by applicable state securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO SUCH SHARES, OR AN
OPINION OF THE ISSUER'S COUNSEL TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT."
2.9. HOLDBACK. Notwithstanding and in addition to the restrictions
imposed under Section 2.8 hereof; the XCD Shareholders agree that none
of the Xxxx Shares received as part of the Merger Consideration will be
sold, transferred or otherwise disposed of without the prior written
consent of Purchaser for a period of one year from and after the Closing
Date. Each XCD Shareholder agrees and consents to the entry of a stop
transfer instruction with Purchaser's transfer agent against a transfer
in violation hereof. Each XCD Shareholder agrees to execute a separate
letter for the benefit of Purchaser's underwriters confirming the
provisions hereof and agreeing to permit Purchaser's underwriters to act
on their behalf in distributing or selling their Xxxx Shares after the
restrictions herein lapse.. The XCD Shareholders shall have the benefit
of a Registration Rights Agreement in the form of Exhibit "C" hereof.
3. OTHER AGREEMENTS.
3.1. REPAYMENT OF CERTAIN XCD OBLIGATIONS.
3.1.1. REPAYMENT OF SHAREHOLDER LOANS. On or before the
Closing Date, Target Corporation must repay $226,752.77
representing all principal and interest on the XCD Shareholder
Loans. If, on or prior to the Closing Date, neither XCD nor
Merger Subsidiary shall have paid the XCD Shareholder Loans,
Merger Subsidiary shall assume the obligation to pay all
amounts due with respect to the XCD Shareholder Loans. The XCD
Shareholder Loans are described on Schedule 3.1.1 hereto.
3.1.2. DEFERRED COMPENSATION OBLIGATIONS. Merger Subsidiary
shall assume the obligation to pay all amounts due with
respect to the obligations of XCD listed on Schedule 3.1.2.
3.2. EMPLOYMENT AGREEMENTS. On the Closing Date, certain of the Key
Employees and the Surviving Corporation shall execute and deliver the
Employment Agreements attached hereto as Exhibits A-1 through A-5.
3.3. NON-SOLICITATION AGREEMENT. In addition to any covenants
contained in any of the Employment Agreements, each XCD Shareholder
hereby covenants and agrees that such XCD Shareholder shall not solicit,
hire or induce in any. manner any employee, consultant or customer of
XCD to cease his or her relationship as such with XCD or Merger
Subsidiary at any time while such XCD Shareholder is employed by Merger
Subsidiary and for three years after termination of such employment. In
such cases where such XCD Shareholder is not employed by XCD or Merger
Subsidiary after the Closing Date, such covenant shall run for a period
of one year after the Closing Date.
9
3.4. CONFIDENTIALITY. Each XCD Shareholder will treat and hold as
confidential all of the Confidential Information obtained from Purchaser
or Merger Subsidiary in connection with this Agreement and each XCD
Shareholder agrees not to disclose any of such Confidential Information
to any party without the prior written consent of Purchaser. The
restrictions herein contained shall not apply to any Confidential
Information which is generally available to the public immediately prior
to the time of disclosure.
4. REPRESENTATIONS AND WARRANTIES OF THE TARGET CORPORATION AND EACH OF THE
XCD SHAREHOLDERS. As a material inducement to Purchaser to enter into this
Agreement, the Target Corporation and the XCD Shareholders, jointly and
severally, hereby represent and warrant to Purchaser, Merger Subsidiary and
Surviving Corporation, which representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger), as follows:
4.1. ORGANIZATION AND GOOD STANDING. The Target Corporation is a
corporation duly organized, validly existing and in good standing under
the laws of the State of California, with full power and authority to
own or lease its properties and assets as presently owned or leased and
to conduct its businesses as presently conducted and to consummate all
transactions contemplated to be consummated by it under this Agreement.
Except as set forth on Schedule 4.1, the Target Corporation is in good
standing and duly qualified to do business in each other jurisdiction in
which the ownership, leasing or operation of the Assets or the conduct
of the Business by it requires such qualification and where the failure
to so qualify would have a material adverse effect on the Business or
the Target Corporation.
4.2. AUTHORITY. Target Corporation has full power and authority to
execute and deliver this Agreement and the other agreements and
instruments to be executed and delivered by it pursuant hereto and to
consummate the transactions contemplated hereby and thereby. This
Agreement has been and, as of the Closing Date, each of such other
agreements and instruments will be, duly executed and delivered by the
Target Corporation and each XCD Shareholder and (assuming due
authorization, execution and delivery by Purchaser and Merger
Subsidiary) this Agreement constitutes, and each of such other
agreements and instruments when duly executed and delivered by the
Target Corporation and each XCD Shareholder will constitute, legal,
valid and binding obligations of the Target Corporation and each XCD
Shareholder enforceable against the Target Corporation and each XCD
Shareholder in accordance with their respective terms. Except as set
forth in Schedule 4.2, the execution and delivery by the Target
Corporation and each XCD Shareholder of this Agreement and such other
agreements and instruments and the consummation by the Target
Corporation and each XCD Shareholder of the transactions contemplated
hereby and thereby will not (a) violate, or conflict with, result in any
breach of; constitute a default (or an event which with notice or lapse
of time or both would become a default) under, permit the cancellation
of; or result in the creation of a Lien on any of the XCD Shares, the
Business or any of the Assets pursuant to, the Articles of Incorporation
or Bylaws of the Target Corporation, or any indenture, mortgage, deed of
trust, lease, Contract or other agreement or instrument, judgment,
order, decree, law, ordinance, rule or regulation to which the Target
Corporation or any XCD Shareholder is a party or by which the Target
Corporation or any XCD Shareholder or any of the Business or any of the
Assets is bound or affected, or the terms of any License held by the
Target Corporation, or (b) permit or result in the acceleration of the
maturity of ay Indebtedness of the Target Corporation, or of any
Indebtedness secured by any Assets. No approval, authorization, consent
or other order or action of or filing with
10
any court, administrative agency or other governmental authority or
any other person is required or desirable to obtain for or in
connection with the execution and delivery by the Target Corporation
and each XCD Shareholder of this Agreement or such other agreements
and instruments or the consummation by the Target Corporation and each
XCD Shareholder of the transactions contemplated hereby or thereby.
4.3. NO SUBSIDIARIES. The Target Corporation does not own stock or
any other equity interest in, or controls, directly or indirectly, any
corporation, association, partnership, business, enterprise, joint
venture or other entity or person. Except as set forth in Schedule 4.3,
the Target Corporation is not a party to any participation, stockholder,
joint venture or partnership agreement.
4.4. FINANCIAL STATEMENTS. The Historical Financial Statements,
true, correct and complete copies of which are attached as Schedule 4.4
hereto, (a) were prepared in accordance with the books of account and
records of the Target Corporation, (b) present fairly in all material
respects the financial position and results of operations of the Target
Corporation as of the dates and for the periods indicated therein, (c)
were prepared in accordance with GAAP throughout the periods covered
thereby (except that the unaudited financial statements do not include
notes which would otherwise be required by GAAP), and (d) make full and
adequate disclosure of; and provision for, all material Liabilities of
the Target Corporation and have adequate reserves for all taxes as of
the dates thereof which are required to be disclosed by application of
GAAP.
4.5. LEASEHOLDS AND IMPROVEMENTS. Schedule 4.5 contains a complete
list of all real property and interests in real property leased or used
by the Target Corporation in connection with the Business (or any part
thereof) or otherwise. The improvements located on the real property
subject to the Leaseholds (the "Improvements") which are material to the
conduct or operation of the Business are, and as of the Closing will be,
in operating and working condition, and fit for operation in the usual
course of business, ordinary wear and tear excepted. The Target
Corporation is the lessee of each of the leasehold estates listed in
Schedule 4.5 as being leased by it. Schedule 4.5 correctly identifies
(A) each lease by the Target Corporation of any real property and each
space allocation arrangement with any other person covering any real or
other material property used in the Business (or any part thereof) and
(B) each guaranty by the Target Corporation of or relating to, any such
lease or space allocation arrangement. Except as set forth in Schedule
4.5, each lease pursuant to which each Leasehold is purported to be
granted is valid without any default thereunder by the Target
Corporation, or, to the best of the Target Corporation's knowledge, any
other party thereto. Such leases are the only leases of real property to
which the Target Corporation is a party or where offices of the Business
are maintained or on which tangible Assets (except for Inventories in
transit) are located. Except as set forth in Schedule 4.5, the Merger
will not be subject to any lease restriction or required consent or
other approval provision in any such lease.
4.6. REAL PROPERTY. Except as set forth in Schedule 4.6, the Target
Corporation owns no real property which it uses in connection with the
Business or any part thereof.
4.7. Personal Property. Inventories and Title to Property.
4.7.1. All Tangible Personal Property owned, leased or used
by the Target Corporation is reflected in the Historical
Financial Statements, and is in operating and working
condition and fit for operation in the usual course of
business, ordinary wear and tear excepted, and all
11
such Tangible Personal Property (except for Inventories in
transit) is located on premises covered by Leaseholds or owned
by the Target Corporation.
4.7.2. (i) Except as set forth in Schedule 4.7, the Target
Corporation has good and marketable title to all of its
Assets, and a good and valid leasehold interest in all
property leased by the Target Corporation, free and clear of
all Liens.
(ii) All of the Improvements and Tangible Personal
Property owned or leased by the Target Corporation are being
used and operated in material conformity with all applicable
laws, statutes, codes, regulations and ordinances. The Assets
are, in the aggregate, sufficient in all material respects to
continue operating the Business as it is presently conducted
and as it is contemplated to be conducted by the Target
Corporation in the foreseeable future if the merger were not
to take place.
4.7.3. A true and complete list of all Inventories of the
Target Corporation as of September 30, 1998 has been delivered
to Purchaser (the "Inventory List"). Substantially all of such
Inventories are in good condition and usable in the ordinary
course of the Business and in such quantities as will be
utilized in the ordinary course consistent with past practice.
As of the Closing Date, the Inventories of the Target
Corporation will be of a quantity, mix, age, type and nature
which are substantially similar to the Inventories set forth
on the Inventory List.
4.8. INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Schedule
4.8, the Target Corporation does not own, or has ever owned, or
licenses, or has ever licensed or obtained, the right to use, any
Patents. The Target Corporation has not used any Trademarks or Trade
Names in connection with the Business other than those listed on
Schedule 4.8 and the Target Corporation validly owns, beneficially and
of record, and holds the entire right, title and interest in and to, all
of the Intellectual Property Rights (including, without limitation, the
Know-how) used in the Business conducted by it, free and clear of any
Lien. To the best of the Target Corporation's knowledge, the operation
of the Business by the Target Corporation does not and will not infringe
any patent, trade secret, trademark, intellectual property rights, or
any other rights of any nature whatsoever of others. No action, suit or
arbitration, or legal, administrative or other proceeding, or
governmental investigation, is pending, nor has any claim been asserted
or threatened, which involves any Intellectual Property Rights of or
used by the Target Corporation, and no state of facts exists under which
any such action, suit, arbitration, proceeding or investigation might be
based. The Target Corporation is not subject to any judgment, order,
writ, injunction or decree of any court or any federal, state, local or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator, nor has the
Target Corporation entered into or is it a party to any Contract, which
restricts or impairs the use of any such Intellectual Property Rights.
4.9. LITIGATION. Except as set forth in Schedule 4.9, there is no
claim, legal action, counterclaim, suit, arbitration, governmental
investigation or other legal, administrative or tax proceeding, or any
order, decree, judgment, settlement agreement or settlement order, in
effect, in progress or pending, or to the best of the Target Corporation
and the XCD Shareholders' knowledge, threatened against or relating to
the Target Corporation, the Business or the Assets, nor does the Target
Corporation nor the XCD Shareholders know or have reason to be aware of
any basis for the same. Except as set forth in Schedule 4.9, the Target
Corporation is not a party to any legal, administrative or Tax
proceeding,
12
or arbitration or mediation, of any kind or nature. Except as set forth
in Schedule 4.9, there is no outstanding order, writ, injunction,
judgment or decree of any court, governmental agency or arbitration
tribunal or any settlement agreement or arrangement of any kind against,
with, binding upon or involving any XCD Shareholder, the Target
Corporation, the Business (or any part thereof) or any of the Assets.
4.10. COMPLIANCE WITH LAWS. To the best knowledge of the management
of the Target Corporation, the Target Corporation has complied and is
currently in compliance in all material respects with all laws,
ordinances, regulations, licensing requirements, rules, decrees, awards
and orders applicable to it, the Business and the Assets including,
without limitation, any thereof relating to wages, hours, hiring,
promotions, retirement, working conditions, use and occupancy of the
Improvements, air or water pollution, disposal of wastes or hazardous or
toxic substances, other environmental matters, nondiscrimination,
health, safety, pensions, employee benefits, except where the failure to
comply would not, as to individual failures or as to all failures in the
aggregate, have a material adverse effect on the Target Corporation, the
Business or the Assets.
4.11. ENTIRE BUSINESS. The Merger will effectively convey to the
Surviving Corporation, directly or indirectly, unrestricted,
unencumbered (except for any Liens identified in Schedule 4.7), l00%
beneficial ownership of the entire Business. The Assets, properties and
rights which will be owned, possessed or leased by the Target
Corporation as of the Closing will constitute all of the tangible and
intangible property used by the Target Corporation in connection with
the conduct of the Business as now conducted, and will be transferred to
the Surviving Corporation after giving effect to the Merger. Except for
the sale of Inventories, disbursements of cash to pay Liabilities when
due in the ordinary course of business or repay XCD Shareholder loans or
pay Deferred Compensation obligations and collection of accounts
receivable in the ordinary course of business, all of the Target
Corporation's Assets on the date hereof shall be transferred to the
Surviving Corporation as a result of the Merger.
4.12. CONTRACTS.
4.12.1. Schedule 4.12 contains a true and complete list of
all Material Contracts to which the Target Corporation is a
party or which are or will be binding upon the Target
Corporation, the Business (or any part thereof) or the Assets.
Except for the Material Contracts listed on Schedule 4.12
(true and complete copies of which have been previously
delivered to Purchaser or, in the case of oral agreements, if
any, descriptions of which are set forth on Schedule 4.12),
and routine purchase orders sent or received in the ordinary
course of business consistent with past practice, the Target
Corporation is not a party to nor is any of the Assets or the
Business bound or affected by any Material Contract.
4.12.2. The Target Corporation has in all material respects
performed all material obligations required to be performed by
it under all Material Contracts to which it is a party or by
which it is bound, and will in all material respects perform
all material obligations required to be performed by it under
Material Contracts entered into after the date hereof Neither
the Target Corporation nor, to the best of the Target
Corporation' and the XCD Shareholders' best knowledge, any
other party to a Material Contract with the Target
Corporation, is in material default under any such Material
Contract, and no event exists which with the giving of notice
or the passage of time, or both, would create such a default.
13
4.12.3. Each of the Material Contracts has been, and each
Material Contract entered into after the date hereof will be,
lawfully entered into and is or will be valid and in full
force and effect and is or will be enforceable in accordance
with its terms for the period stated in such Material
Contract. The Target Corporation has not received any notice
of cancellation of(or notice of threat of cancellation of),
nor are there any outstanding disputes under any Material
Contracts.
4.12.4. Except as set forth on Schedule 4.12 the
consummation of the transactions contemplated by this
Agreement (including, without limitation, the Merger) does not
require any consent under any Material Contract (pursuant to
or due to the existence of an anti-assignment provision, in
order to avoid or prevent a default or acceleration of
obligations, or otherwise), and the consummation of the
transactions contemplated by this Agreement (including,
without limitation, the Merger) will not require any consent
under any Material Contract entered into after the date
hereof; in each case, which will not have been obtained by the
Closing (and copies of such consents will be given to
Purchaser on or prior to the Closing Date), and such
consummation will not result in the termination of any right
or privilege under any Material Contract now existing or
entered into after the date hereof The Target Corporation has
not received notice that any party to any Material Contract
intends to cancel such Material Contract, nor has any party
given the Target Corporation notice of any alleged breach of
any Material Contract or of its intent to take any legal
action in order to enforce its rights thereunder.
4.12.5. Except as set forth in Schedule 4.12 neither the
Target Corporation nor any of the XCD Shareholders is a party
to, nor is the Target Corporation or any of the XCD
Shareholders or the Business (or any part or aspect thereof)
bound by, any shareholders agreement, buy-sell agreement,
non-competition agreement or arrangement or any other
agreement or arrangement restricting or prohibiting, in any
fashion, the way in which the Business (or any part or aspect
thereof) is operated.
4.12.6. Schedule 4.12 includes all non-competition or other
agreements or arrangements (if any) which restrict, in any
fashion, any Person or Persons from competing with the Target
Corporation or which otherwise are for the benefit of the
Target Corporation or the Business (or any part or aspect
thereof).
4.13. RECEIVABLES: PAYABLES.
4.13.1. The accounts receivable set forth in the Historical
Financial Statements constitute all of the Receivables of the
Business as of the respective dates thereof Except as set
forth in Schedule 4.13, all of the Target Corporation's
Receivables arose from valid sales and bona fide transactions
in the ordinary course of business of the Target Corporation.
4.13.2. The Receivables, as reflected in the Historical
Financial Statements and subsequent thereto through the date
hereof are, to the best of the Target Corporation's knowledge,
the genuine, valid and legally enforceable obligations of the
account debtor thereunder and are not actually or contingently
subject to any set-off or other defense on the part of such
account debtor, or to any claim on the part of such account
debtor denying liability thereunder; and represent bona fide
transactions arising in the ordinary course of
14
business, completed substantially in accordance with the terms
and provisions contained in any agreements or documents related
thereto. Target Corporation has not received any notice of and
does not know of any counterclaim or set off with respect to
any of the receivables.
4.13.3. A true, complete and correct schedule of the
accounts receivable of the Target Corporation as of September
30, 1998 (or a more current date) showing aging on a 30, 60,
90 and over 90-day basis has been delivered to Purchaser.
4.13.4. All accounts payable and other Liabilities reflected
in the Historical Financial Statements arose or will have
arisen in the ordinary course of the Target Corporation's
business. A true, complete and correct schedule of all
accounts payable relating to or arising out of the operation
of the Business of the Target Corporation as of September 30,
1998 (or a more current date) showing thereon any accounts
payable which are 30, 60, 90 or more than 90-days past due
and, with respect to any overdue amount, accompanied by an
explanation as to why such amount is overdue, has been
delivered to Purchaser.
4.14. CERTAIN TRANSACTIONS. Except as set forth in Schedule 4.14,
since September 30, 1998, the Target Corporation has conducted its
business only in the ordinary course consistent with past practice and
has not: (i) paid, or made any accrual or arrangement for the payment
of; bonuses or special compensation of any kind or any severance or
termination pay to any Employee; (ii) made any general wage or salary
increases concerning its Employees or increased or altered in any
material respect any other benefits or insurance provided to or
maintained on behalf of any Employee or, except as set forth in Schedule
4.15, declared or paid any bonus to any Employee; (iii) mortgaged,
pledged or subjected to Lien or any other restriction any of the Assets;
(iv) sold, assigned or transferred or agreed to sell, assign or transfer
any of the Assets which in' the aggregate exceed $10,000 in value, other
than sales of Inventories in the ordinary course of business consistent
with past practice; (v) granted any rights or licenses relating to any
Intellectual Property Rights or entered into any licensing, franchise,
agency, distributorship, requirements, output or similar arrangements;
(vi) canceled or agreed to cancel any debts or claims; (vii) waived or
agreed to waive any material rights (contractual or otherwise); (viii)
made or permitted any amendment or termination of any Contracts other
than in the ordinary course of business; (ix) effected any change in the
accounting methods or principles used in connection with its books,
records and financial statements; (x) suffered any damage, destruction,
deterioration, impairment or loss to any Assets or the Business, whether
or not covered by insurance, or suffered any event or condition of any
character, which, individually or in the aggregate with others, might
reasonably be expected to have a material adverse effect on the Target
Corporation, the Business or the financial condition or prospects of the
Target Corporation or the Business; (xi) suffered any material adverse
change in its financial condition or operations; (xii) incurred, assumed
or guaranteed or paid, discharged or satisfied, any obligations or
Liabilities except in the ordinary course of business consistent with
past practice or the repayment of XCD Shareholder loans or the payment
of XCD's Deferred Compensation Obligations, as permitted by, Sections
3.1.1 and 3.1.2. respectively, (xiii) suffered any default under, or
suffered any event which with notice or lapse of time or both would
constitute a default under any Contract, debt instrument or other
agreement to which the Target Corporation is a party or by which it, the
Business or any of the Assets is bound; (xiv) terminated or amended, or
suffered a termination or amendment of; any License; (xv) made or paid
any distributions, dividends or extraordinary payments to any of its
shareholders other than salary and bonuses described in Schedule 4.15,
except as otherwise
15
described in this Agreement; or (xvi) entered into any transaction not
in the ordinary course of business.
4.15. EMPLOYEES.
4.15.1. Schedule 4.15 contains a list setting forth the name
and current annual salary and other compensation (of any kind)
payable by the Target Corporation to each current Employee
with compensation in excess of $35,000 per year, and the
profit sharing, bonus or other form of additional compensation
paid or payable by the Target Corporation to or for the
benefit of each such person for the current fiscal year.
Except as set forth herein or in Schedule 4.12 or under the
employment, consulting or other agreements listed thereon or
in Schedule 4.16, there are no oral or written contracts,
agreements or arrangements obligating the Target Corporation
to increase the compensation or benefits presently being paid
or hereafter payable to any of its Employees or other persons
or to pay any bonus. Except as set forth in Schedule 4.9, to
the best knowledge of the management of the Target Corporation
or the XCD Shareholders. there is not now, and there will not
be as of the Closing Date, any liability or basis for
liability of the Target Corporation arising out of claims made
or suits brought (including, without limitation, workers'
compensation claims and claims or suits for contribution to,
or indemnification of; third parties, occupational health and
safety, environmental, consumer protection or equal employment
matters) for injury, sickness, disease, discrimination, death
or termination of employment of any Employee or other
employment matter attributable to an event occurring or a
state of facts existing on or prior to the Closing Date and
there is no threatened charge, complaint, allegation or other
process or claim with regard to any of the foregoing.
4.15.2. Neither the Target Corporation nor any Affiliate of
the Target Corporation is party to any collective bargaining
agreement, written or oral, which covers any Employees or
which is binding upon the Target Corporation. There have been,
and there are, no strikes, grievances, disputes or
controversies pending or, to the best of the Target
Corporation's knowledge, threatened between the Target
Corporation and any of its Employees or any union or other
organization claiming to represent such Employees' interests.
There is no request for union representation pending or, to
the best of the Target Corporation's knowledge, no present
union organizing or election activities in progress or
threatened with respect to any Employees. There is no unfair
labor practice complaint pending before the National Labor
Relations Board or, to the best of the Target Corporation's
knowledge, threatened against or relating to the Target
Corporation or any of its Employees.
4.15.3. The Target Corporation has not engaged in any unfair
labor practice or discrimination on the basis of race, age,
gender, disability or otherwise in its employment conditions
or practices with respect to Employees the effect of which,
individually or in the aggregate, could have a material
adverse effect on the Target Corporation, the Business or the
Assets.
4.16. EMPLOYEE BENEFIT PLANS.
4.16.1. Schedule 4.16 annexed hereto contains a true and
complete list of each plan, program, policy, practice,
contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance award,
stock or stock-related award,
16
fringe benefit or other employee benefit of any kind,
whether formal or informal, proposed or final, funded or
unfunded, and whether or not legally binding, including,
without limitation, each "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), ("Employee
Plan") which is now, or ever has been, maintained,
contributed to, or required to be contributed to, for the
benefit of any Employee, and each management, employment,
severance or consulting agreement or contract between the
Target Corporation and any Employee, each, an "Employee
Agreement". There are no oral employment or consulting or
similar arrangements (other than purely "at will"
employments or arrangements) between the Target Corporation
and any Person (each, an "Employee Agreement"). The Target
Corporation will provide to Purchaser prior to the Closing:
true and complete copies of all documents, if any, embodying
each Employee Plan and Employee Agreement, including all
amendments thereto and written interpretations thereof; the
two most recent annual reports filed with respect to each
Employee Plan required under ERISA the most recent summary
plan description, if any, with respect to each Employee Plan
required under ERISA the most recent favorable determination
letter from the Internal Revenue Service, if applicable,
with respect to each Employee Plan; and all material
communications, if any, to any Employee relating to each
Employee Plan.
4.16.2. Each Employee Plan that is intended to be qualified
under the Internal Revenue Code has received a determination
letter from the Internal Revenue Service to the effect that
such Employee Plan and related trust are qualified and exempt
from federal income taxes under Sections 40 1(a) and 50 1(a)
(as amended by the Tax Reform Act of 1986 and subsequent
legislation), respectively, and no such determination letter
has been revoked or, to the best of the Target Corporation's
knowledge, has revocation been threatened. Nothing has
occurred or is expected to occur which would adversely affect
the qualified status of any such Employee Plan or any related
trust subsequent to the issuance of such determination letter.
4.16.3. The Target Corporation has performed in all material
respects all obligations required to be performed under each
Employee Plan, and each Employee Plan has been established and
maintained in all material respects in accordance with its
terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to
ERISA and the Internal Revenue Code. No Employee Plan is a
defined benefit plan within the meaning of Section 3(3 5) of
ERISA. No Employee Plan is a multi-employer plan within the
meaning of Section 3(37) of ERISA. The Target Corporation does
not have any liability with respect to any defined benefit
plan or multi-employer plan as a result of having been
considered a "single employer" within the meaning of Section
414(b), (c), (m), (n) and (o) of the Internal Revenue Code, or
otherwise, and there is no basis for such liability being
imposed. There are no investigations, claims, suits or
proceedings pending, or to the best of the Target
Corporation's knowledge, threatened or anticipated (other than
routine claims for benefits) against any Employee Plan or the
assets of any Employee Plan, and, to the best of the Target
Corporation's knowledge, there are no facts that could give
rise to any liability in the event of any such investigation,
claim, suit or proceeding. Each Employee Plan can be amended,
terminated or otherwise discontinued prior to the Closing
without liability to Purchaser, the Target Corporation or the
Surviving Corporation. All premiums required by any Employee
Plan have been paid thereunder. All contributions due to, and
payments from, the Employee Plans that may have been required
to be made have been made. No "prohibited
17
transaction" within the meaning of Section 4975 of the
Internal Revenue Code or Section 406 of ERISA has occurred
with respect to any Employee Plan, and, to the best of the
Target Corporation's knowledge, no action or failure to act
with respect to any Employee Plan could subject Purchaser,
the Target Corporation, the Surviving Corporation or any
Employee Plan to any tax, penalty or other liability, for
breach of fiduciary duty or otherwise, under ERISA or any
other applicable law, whether by way of indemnity or
otherwise.
4.16.4. With respect to any plan that, notwithstanding
Section 4.16.3 above. may be construed as a defined benefit
plan of the Target Corporation, there has been no failure to
make any contribution or pay any amount due as required by
Section 412 of the Internal Revenue Code Section 302 of ERISA
or the terms of such defined benefit plan, and there has been
no request for or receipt of any funding waiver from the
Internal Revenue Service. No trust has been established in
connection with such defined benefit plan pursuant to Section
4049 of ERISA (as in effect on December 17, 1987), and no
liabilities that would have a material adverse effect on the
condition of the Business have been asserted against the
Target Corporation or any entity with which it would be
considered a "single employer" in connection with the Pension
Plan by the Pension Benefit Guaranty Corporation ('PBGC") or
by a trustee appointed pursuant to Section 4042(b) or (c) of
ERISA, and no Lien has been attached and neither the PBGC nor
the Internal Revenue Service has threatened to attach a Lien
on any Assets of the Target Corporation or any entity within
which it would be considered a "single employer" as a result
of any failure to comply with the Internal Revenue Code or the
Treasury regulations thereunder or ERISA. Neither the Target
Corporation nor any entity with which it is or would be
considered a "single employer" has provided or is required to
provide security to any such defined benefit plan pursuant to
Section 40 1(a) of the Internal Revenue Code. Neither the
Target Corporation nor any entity with which it is or would be
considered a "single employer" has incurred or reasonably
expects to incur any Liabilities under Title IV of ERISA with
respect to any such defined benefit plan. Neither the Target
Corporation nor any entity with which it is or would be
considered a "single employer" has transferred any assets or
liabilities of such defined benefit plan which had, at the
date of such transfer, "unfunded benefit liabilities" within
the meaning of Section 400 1(a)(18) of ERISA. No "reportable
event", within the meaning of Section 4043(b) of ERISA, has
occurred with respect to any such defined benefit plan. As of
September 30, 1998, no such defined benefit plan had any
amount of "unfunded benefit liability", within the meaning of
Section 400 1(a)(18) of ERISA, and termination of any such
defined benefit plan has not resulted and will not result in
any liability to the Target Corporation or any entity with
which it is or would be considered a "single employer",
Purchaser or the Surviving Corporation.
4.16.5. The Target Corporation does not maintain or
contribute to any Employee Plan which provides, or has any
liability to provide, life insurance, medical or other
employee welfare benefits to any Employee upon his retirement
or termination of employment, and the Target Corporation has
never promised, represented to, or contracted with (orally or
in writing) any Employee (individually or as a group) that
life insurance, medical or other employee welfare benefits
would be provided upon their retirement or termination of
employment.
4.16.6. Each "group health plan" within the meaning of
Section 4980B(g)(2) of the Internal Revenue Code maintained by
the Target Corporation or any entity with which the
18
Target Corporation is or would be considered a "single
employer" has been administered in good faith in compliance
with the continuation coverage requirements contained in the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), as set forth at Section 4980B of the
Internal Revenue Code and any regulations promulgated or
proposed thereunder (if such proposed regulations constitute
substantial authority within the meaning of Section 6662 of
the Internal Revenue Code and any regulations promulgated
thereunder).
4.16.7. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
(including, without limitation, the Merger) will not (either
alone or when taken together with any additional or subsequent
events) constitute an event under any Employee Plan or
Employee Agreement that will or may result in any payment,
upon a change in control or otherwise, whether of severance,
accrued vacation, or otherwise, acceleration, vesting,
distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
4.16.8. The Target Corporation (except to the extent that
any of the following non-compliances, failures or liabilities
would not, either individually or in the aggregate, have a
material adverse effect on the Target Corporation), the
Business or the Assets: (i) is in material compliance with all
applicable federal and state laws, rules and regulations
respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case,
with respect to all Employees; (ii) has withheld all amounts
required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (iii) is not liable
for any arrearages of wages or any Taxes or any penalty for
failure to comply with any of the foregoing; and (iv) other
than routine payments to be made in the normal course of
business and consistent with past practice and reserved for on
the September 30, 1998 balance sheet included within the
Historical Financial Statements, is not liable for any payment
to any trust or other fund or to any governmental or
administrative authority with respect to unemployment
compensation benefits, Social Security or other benefits for
Employees.
4.16.9. No material promises or commitments have been made
with respect to any Employee Plan of the Target Corporation
other than in accordance with a reasonable interpretation of
the terms of such Employee Plan. There is no plan or
commitment, whether legally binding or not, to establish any
new Employee Plan of the Target Corporation, to modify any
Employee Plan or to enter into any new Employee Plan; nor has
any intention or commitment to do any of the foregoing been
communicated.
4.17. LICENSES AND PERMITS. The Target Corporation has all Licenses
necessary or appropriate for the operation of the Business and the use
of its Assets and properties as presently operated or used by it except
where the failure to obtain such Licenses would not, individually or in
the aggregate, have a material adverse effect upon the Target
Corporation, the Business or the Assets. All Licenses held by the Target
Corporation are valid and in full force and effect and no proceedings
which could result in the termination or impairment of any such License
are pending, or, to the best of the Target Corporation's knowledge,
threatened. The Target Corporation is not in violation of, has not
received any notice of any violation of, nor, to the best of the Target
Corporation's knowledge, does any state of facts exist which could lead
to a penalty in respect of or termination of any License. The
19
consummation of this Agreement (including without limitation the Merger)
will not result in or create the loss or impairment of; or a reduction
of the benefits or privileges conferred by, or an obligation to make
payments of any kind to maintain, any License.
4.18. TRANSACTIONS WITH AFFILIATES. Except as set forth in Schedule
4.18, the Target Corporation has not purchased, acquired or leased any
property or services from, or sold, transferred or leased any property
or services to, or loaned or advanced any money to, or borrowed any
money from, or guaranteed or otherwise become liable for any
indebtedness or other obligations of; or acquired any capital stock,
obligations or securities of, or made any management, consulting or
similar fee arrangement with any Affiliate or any officer, director or
stockholder of the Target Corporation, nor is the Target Corporation
party to any agreement oral or written with respect to any of the
foregoing.
4.19. TRUTHFULNESS. No statement, representation or warranty of the
Target Corporation in this Agreement (including the Exhibits and
Schedules hereto) or in any written document or certificate delivered by
or on behalf of the Target Corporation or the XCD Shareholders pursuant
to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not
misleading.
4.20. UNLAWFUL PAYMENTS. Neither the Corporation nor any director,
officer or Employee thereof, nor, to the best of the Corporation's
knowledge, any other Person (including, without limitation, any
representative of; or broker for, the Corporation acting on behalf of
the Corporation) has ever, directly or indirectly, on behalf of or with
respect to the Corporation, had any transactions or payments which are
not recorded in the Corporation's accounting books and records or
disclosed in its financial statements, or had any off-book bank or cash
accounts or "slush funds".
4.21. INSURANCE. Schedule 4.21 contains a complete list of all
insurance policies or binders insuring the property, assets or business
liabilities of the Target Corporation and with respect to the Business,
true and complete copies of which have been made available to Purchaser.
All properties and assets of the Target Corporation are insured by
reputable insurance companies against loss or damage by fire and other
risks. Except as set forth in Schedule 4.21, the Target Corporation is
in compliance with the terms of all policies and instruments of
insurance it owns and coverage thereunder will not be affected by the
transactions contemplated hereby (including, without limitation, the
Merger). With respect to the Business, there are no pending or asserted
material claims against such insurance by the Target Corporation as to
which the insurers have denied liability. Schedule 4.21 sets forth each
claim in excess of $10,000 (if any) made against said insurance for the
preceding two (2) years (both insured and self-insured).
4.22. ENVIRONMENTAL MATTERS. There has been no manufacture,
refining, storage, disposal or treatment of Hazardous Substances (as
hereinafter defined) by the Target Corporation at any real property
currently or in the past owned, operated, used, leased or contracted for
by the Target Corporation, or otherwise in violation of any
Environmental Laws (as hereinafter defined) or which would require
remedial action under any Environmental Law. During the past five years
the Target Corporation has not received (a) notice of any such violation
with respect to any Hazardous Substance at or by any of such real
property, (b) notice from any governmental agency that the Target
Corporation, or any present or former owner, lessee or operator of such
real property, is a potentially responsible party for cleanup liability
with respect to the emission, discharge or release of any Hazardous
Substance or for any other matter arising under the Environmental Laws
or in any
20
litigation, administrative proceeding, finding, order, citation,
notice, investigation or complaint under any Environmental Law, or (c)
notice of violation, citation, complaint, request for information,
order, directive, compliance schedule, notice of claim, proceeding or
litigation from any party concerning the Target Corporation's
compliance with any Environmental Law. All sewage is discharged into a
public sanitary sewer system and no Hazardous Substances are emitted,
discharged or released, directly or indirectly, by the Target
Corporation into the atmosphere or any body of water. No permits,
licenses or other authorizations issued pursuant to the Environmental
Laws are required for the Target Corporation's use or occupancy of; or
the Target Corporation's present use or occupancy of; any such real
property. As used herein "Environmental Laws" means the Resource
Conservation Recovery Act, the Comprehensive Environmental
Responsibility Compensation and Liability Act, the Superfund
Amendments and Reauthorization Act, the Toxic Substances Control Act,
the Hazardous Materials Transportation Act, the Clean Air Act, the
Clean Water Act, and other similar federal, state and local laws, as
amended, together with all regulations issued or promulgated
thereunder, relating to pollution, the protection of the environment
or the health and safety of workers or the general public. As used
herein "Hazardous Substance" means any hazardous substance, hazardous
or toxic waste, hazardous material, pollutant or contaminant, as those
or similar terms are used in the Environmental Laws, including,
without limitation, asbestos and asbestos-related products,
chlorofluorocarbons, oils or petroleum derived compounds,
polychlorinated biphenyls, pesticides and radon.
4.23. STATUS OF XCD SHAREHOLDERS. None of the XCD Shareholders is a
"foreign person" within the meaning of Section 1445 of the Internal
Revenue Code.
4.24. TAX MATTERS. The Target Corporation has filed all federal,
state and local Tax returns and all information returns and reports
required to be filed by or with respect to it under the laws of the
United States or any state or other jurisdiction for all periods ending
on or prior to the date hereof and will timely file all such returns and
reports required to be filed from the date hereof through the Closing
Date. True and complete copies of such reports and returns filed within
three (3) years prior to the date hereof will be made available to
Purchaser for inspection and copying and true and complete copies of all
such returns and reports filed after the date hereof and on or before
the Closing Date will be furnished to Purchaser upon request. All such
reports and returns were or will be in all material respects accurately
prepared in accordance with all applicable statutes, rules and
regulations and are or will be correct as filed. The Target Corporation
has paid all Taxes (including, without limitation, Taxes for which the
Target Corporation is a collection agent - e.g., withholding, excise,
sales, use, Social Security and similar Taxes) which have become due or
payable (and will pay on or prior to the Closing Date all Taxes which
have become due or payable on or prior to the Closing Date). The Target
Corporation has never been included in a consolidated federal income tax
return or combined. The Target Corporation is not a party to or has not
been notified that it is the subject of any in pending, proposed or
threatened action, investigation, proceeding, audit, claim or assessment
by or before the Internal Revenue Service or any other governmental
authority, and no claim for assessment, deficiency or collection of
Taxes, or proposed assessment, deficiency or collection, for which the
Target Corporation may be liable, has been asserted or threatened
against it. The Target Corporation has not received any notice of
deficiency, assessment or collection or proposed deficiency, assessment
or collection from the Internal Revenue Service or any other
governmental authority which has not been satisfied, nor does the Target
Corporation have any reason to believe that any such notice will be
received in the future. Except as set forth in Schedule 4.24, neither
the Internal Revenue Service nor any state taxing authority has ever
audited any Tax return of the Target
21
Corporation. The charges, accruals and reserves shown in the
Historical Financial Statements of the Target Corporation in respect
of Taxes for all fiscal periods to date are adequate. There are no
material unpaid assessments or proposals for additional Taxes for
which the Target Corporation does not have adequate reserves, nor does
the Target Corporation know of any basis therefor for any such period.
To the best knowledge of the management of the Target Corporation and
the XCD Shareholders, there are no Tax rulings, requests for rulings
or closing agreements relating to the Target Corporation which could
affect its liability for Taxes for any period. No power of attorney
has been granted by the Target Corporation or any f its Affiliates
with respect to any matter relating to Taxes of the Target Corporation
which is currently in force. The Target Corporation has not executed
or filed with the Internal Revenue Service or any other governmental
authority any agreement which is still in effect waiving limitations
on, or extending, the period for assessment or collection of any Taxes.
4.25. NO SALE. The Target Corporation has not entered into any
contract to sell, mortgage, pledge or encumber, directly or indirectly,
any of its Assets (other than sales of Inventories in the ordinary
course of business, consistent with past practice, and with respect to
Liens disclosed in Schedule 4.7).
4.26. BROKERS AND FINDERS. Except as set forth on Schedule 4.26, all
negotiations on behalf of Target Corporation and the transaction
contemplated hereby have been carried out directly by the parties hereto
without the intervention of any broker, finder, investment banker or
other third party representing Target Corporation or the XCD
Shareholders. Neither Target Corporation nor any of the XCD Shareholders
have engaged or authorized any broker, finder, investment banker or
other party to act on their behalf, directly or indirectly, as a finder,
investment banker, or in any other capacity in connection with this
Agreement or the transactions contemplated hereby.
4.27. PURCHASE COMMITMENTS. No purchase commitment of or by which
the Target Corporation is bound which is not terminable on thirty (30)
days notice or less is in excess of the normal, ordinary and usual
requirements of the Business conducted by the Target Corporation or at
an excessive price. The Target Corporation has delivered to Purchaser a
true and complete list of the Target Corporation's purchase commitments
through the date of this Agreement.
4.28. CERTAIN REPORTS. The Target Corporation has filed all reports,
applications, documents, instruments and information required to be
filed by it pursuant to applicable rules and regulations or requests of
every regulatory body or other governmental authority having
jurisdiction over the Target Corporation, the Business conducted by it
or the use of the Assets owned or used by it.
4.29. CERTAIN PAYMENTS TO SHAREHOLDERS. Schedule 4.29 sets forth all
amounts and benefits which have been paid or provided to any XCD
Shareholder (or Affiliate or spouse or relative thereof) by the Target
Corporation (whether as dividend, distribution, loan, loan repayment,
salary, bonus or other payment or benefit) since January 1, 1998. No
stockholder of the Target Corporation has received during, or in respect
of; any period subsequent to September 30, 1998, any dividends or
distributions or extraordinary payments whatever except for salary and
bonuses at the respective compensation rates set forth in Schedule 4.15,
and except as permitted under Section 3.1.2.
4.30. BANK AND SECURITIES ACCOUNTS. Schedule 4.30 contains a true
and complete list of the names and addresses of (a) all bank, investment
and securities accounts of the Target Corporation, together with the
names of all Persons authorized to draw thereon or withdraw therefrom,
and (b) all Persons to whom powers of attorney have been granted by the
Target Corporation. The cash and securities
22
held in such accounts are not subject to restrictions or limitations
as to withdrawals, margin balances or compensating balances. Schedule
4.30 also includes all accounts, deposits or safe deposit boxes and
the names of all Persons authorized to draw on such accounts or
deposits or to have access to such safe deposit boxes. The books of
account of the Target Corporation show all checks and drafts
outstanding, and there are sufficient funds in the bank accounts
listed on Schedule 4.30 to pay any and all checks or drafts presented,
or outstanding, but not yet presented on said accounts.
4.31. CHARTER DOCUMENTS. The Target Corporation has heretofore
delivered to Purchaser true and complete copies of the Articles of
Incorporation (certified by the Secretary of State of the State of
California) and Bylaws of the Target Corporation as in effect on the
date hereof The corporate minute, stock and transfer books of the Target
Corporation (or copies thereof) have been made available to Purchaser
for its inspection and are true and complete.
4.32. CAPITALIZATION. The authorized capital stock of the Target
Corporation and the number of issued and outstanding shares of capital
stock of the Target Corporation, and the name of each stockholder
thereof (as it appears on its, his or her stock certificate for such
shares) as of the date hereof; together with the number of such shares
owned by such stockholder on the date hereof; and the number of shares
that will be owned by such stockholder on the Closing Date, are and will
be (as applicable) as set forth in Schedule 4.32, which is true, correct
and complete in all material respects, subject to amendment on or before
the Closing Date. All outstanding shares of capital stock of the Target
Corporation are (and will be at the Effective Time) duly authorized and
validly issued, are and will be fully paid and nonassessable and were
not and will not be issued in violation of any preemptive right, right
of first refusal or any other contractual or legal restriction of any
kind to which the Target Corporation is a party. Except as set forth in
Schedule 4.32, there are no outstanding or authorized (a) securities of
the Target Corporation convertible into or exchangeable for shares of
capital stock or voting securities of the Target Corporation or (b)
options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, calls, preemptive rights, rights of first
refusal or other contractual rights or commitments that would require or
obligate the Target Corporation to issue any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting. securities of the Target Corporation. Except as set
forth in Schedule 4.32, there are no outstanding obligations of the
Target Corporation to repurchase, redeem or otherwise acquire any
securities of the Target Corporation, and there are no outstanding or
authorized stock appreciation, phantom stock, profit participation or
similar rights with respect to the Target Corporation.
4.33. OFFICERS AND DIRECTORS. The officers and directors of the
Target Corporation on the date hereof are as set forth in Schedule 4.33.
4.34. DIVIDENDS. All dividends and distributions paid by the Target
Corporation have been legally and properly declared and paid in all
respects, and no dividends or distributions have been made since
December 31, 1997.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUBSIDIARY. As a
material inducement to Target Corporation and the XCD Shareholders to enter into
this Agreement, each of Purchaser and Merger Subsidiary represents and warrants
to the Target Corporation and the XCD Shareholders, which representations and
warranties shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, as follows:
23
5.1. ORGANIZATION. Purchaser and Merger Subsidiary are each
corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware.
5.2. AUTHORITY. Each has full corporate power and authority to
execute and deliver this Agreement and the other agreements and
instruments to be executed and delivered by it pursuant hereto and to
consummate the transactions contemplated hereby and thereby. All
proceedings required to be taken by or on the part of each to authorize
such execution, delivery and consummation have been or will be duly and
properly taken prior to the Closing Date. This Agreement has been duly
executed and delivered by each and (assuming due authorization,
execution and delivery by the Target Corporation and the XCD
Shareholders) this Agreement constitutes, and such other agreements and
instruments when duly executed and delivered will constitute, legal,
valid and binding obligations of each enforceable against Purchaser and
Merger Subsidiary in accordance with their respective terms. The
execution and delivery by each of this Agreement and such other
agreements and instruments and the consummation by each of the
transactions contemplated hereby and thereby will not violate any law,
or conflict with, result in any breach of; constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or result in the creation of a lien or encumbrance on any of the
properties or assets of Purchaser or Merger Subsidiary pursuant to, the
Certificate of Incorporation or Bylaws of either of them or any
indenture, mortgage, lease, agreement or other instrument to which
either of them is a party or by which either of them or any of their
respective properties or assets is or are bound. Other than the filing
of the Agreement of Merger with the Secretary of State and the
California Franchise Tax Clearance, no approval, authorization, consent
or other order or action of or filing with any court, administrative
agency or other governmental authority in the United States of America
is required for the execution and delivery by Purchaser or the Merger
Subsidiary of this Agreement and such other agreements and instruments
or the cosummation by any of them of the transactions contemplated
hereby or thereby.
5.3. LITIGATION. Except as set forth on Schedule 5.3, there is no
claim, legal action, counterclaim, suit, arbitration, governmental
investigation or other legal, administrative or tax proceeding, or any
order, decree, judgment, settlement agreement or order, in effect, in
progress or pending, or to the best of Purchaser's or Merger
Subsidiary's knowledge, threatened, against or relating to either of
them, nor does either of them know or have reason to be aware of any
basis for the same, which would individually or in the aggregate have a
material adverse effect on the transactions contemplated by this
Agreement, or the business, assets and properties of Purchaser or Merger
Subsidiary. There is outstanding no order, writ, injunction, judgment or
decree of any court, governmental agency or arbitration tribunal or any
settlement agreement or arrangement which would individually or in the
aggregate have a material adverse effect on the transactions
contemplated by this Agreement, or the business, assets and properties
of Purchaser or Merger Subsidiary.
5.4. TRUTHFULNESS. No statement, representation or warranty of
Purchaser or Merger Subsidiary in this Agreement or in any agreement,
written document or certificate delivered by or on behalf of any of them
pursuant to this Agreement contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein
not misleading.
5.5. CAPITALIZATION. The authorized capital stock of Purchaser
consists of fifty million (50,000,000) shares of common stock, $.01 par
value, and five million (5,000,000) shares of
24
preferred stock of which approximately seven million five hundred
(7,500,000) shares of common stock and zero (0) shares of preferred
stock are issued and outstanding as of the date of this Agreement. All
of the outstanding shares of Purchaser's common stock are duly
authorized, validly issued, fully paid and nonassessable. The Xxxx
Shares to be issued to the XCD Shareholders pursuant to this
Agreement, when issued and delivered in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable.
The authorized capital stock of Merger Subsidiary consists of 3,000
shares of common stock, having $.001 par value, of which one hundred
(100) shares are issued and outstanding as of the date of this
Agreement. All of the issued and outstanding shares of Merger
Subsidiary are owned by Purchaser and are duly authorized, validly
issued, fully paid and nonassessable shares of capital stock of such
Merger Subsidiary. Merger Subsidiary was organized by Purchaser on
October 16, 1998, and has not as of the date hereof engaged or
participated in any business activities other than as contemplated by
this Agreement.
5.6. MATERIAL CHANGES. Since January 1, 1998, there has not
occurred or arisen, other than as disclosed in this Agreement, (i) any
material adverse change in the assets or liabilities or in the
condition, financial or otherwise, or business, properties, earnings,
net worth or prospects of Purchaser and its subsidiaries viewed as a
whole, or (ii) any damage or destruction in the nature of a casualty or
loss, whether covered by insurance or not, materially and adversely
affecting any property or business of Purchaser and its subsidiaries
viewed as a whole.
5.7. NO DEFAULT. Purchaser is not in default in any material
respect under any material agreement, lease or other document to which
it is a party, or received written notice of or is, to the knowledge of
any executive officer of Purchaser, a material violation of any law or
order, writ, injunction or decree of any court or Federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, applicable
environmental protection laws and regulations, equal employment and
civil rights laws and occupational health and safety laws) the effects
of which, individually or in the aggregate, would have a material
adverse effect on the financial condition, results of operations or
business of Purchaser and its subsidiaries viewed as a whole.
5.8. BOARD AND SHAREHOLDER ACTION. The respective Boards of
Directors and Shareholders of Purchaser and Merger Subsidiary, at duly
held meetings, or by written consent in lieu thereof; by requisite vote,
determined that the Merger is in the best interests of Purchaser and
Merger Subsidiary and their respective stockholders approved this
Agreement.
5.9. COMPLIANCE WITH LAWS GENERALLY. To the knowledge of its
executive officers, Purchaser is in compliance in all material respects
with all statutes, rules and regulations applicable to it, its
properties or its business operations, except where the failure so to
comply would not, as to individual failures or all failures in the
aggregate, have a material adverse effect on the financial condition,
results of operations or business of Purchaser. Without limiting the
generality of the foregoing, to the knowledge of its executive officers,
except where the failure so to comply would not, as to individual
failures or all failures in the aggregate, have a material adverse
effect on the financial condition, results of operations or business of
Purchaser. To the knowledge of its executive officers, Purchaser
maintains all licenses, permits and governmental authorizations
necessary or appropriate for the ownership of its properties and the
conduct of its business the failure of which to maintain same would have
a material adverse effect upon the assets or business of Purchaser and
its subsidiaries viewed as a whole.
25
5.10. FINANCIAL STATEMENTS. The financial statements, of Purchaser,
as reflected in Purchaser's Registration Statement, draft dated August
4, 1998, (a) were prepared in accordance with the books of account and
records of the Purchaser, (b) present fairly in all material respects
the financial position and results of operations of the Purchaser as of
the dates and for the periods indicated therein, (c) were prepared in
accordance with GAAP throughout the periods covered thereby (except that
the unaudited financial statements do not include notes which would
otherwise be required by GAAP), and (d) make full and adequate
disclosure of; and provision for, all material Liabilities of Purchaser
and have adequate reserves for all taxes as of the dates thereof which
are required to be disclosed by application of GAAP.
5.11. EMPLOYEE BENEFIT PLANS.
5.11.1. There has been made available to management of
Target Corporation each plan, program, policy, practice,
contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance award,
stock or stock-related award, fringe benefit or other employee
benefit of any kind, whether formal or informal, proposed or
final, funded or unfunded, and whether or not legally binding,
including, without limitation, each "employee benefit plan"
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), ("Employee
Plan") which is now, or ever has been, maintained, contributed
to, or required to be contributed to, for the benefit of any
employee on the same echelon of any subsidiary of Purchaser as
management of Target Corporation will be as an employee of
Merger Subsidiary. Upon request by management of Target
Corporation, Purchaser will provide to management of Target
Corporation prior to the Closing: true and complete copies of
all documents, if any, embodying each Employee Plan and
Employee Agreement, including all amendments thereto and
written interpretations thereof; the two most recent annual
reports, if any, filed with respect to each Employee Plan
required under ERISA and the most recent summary plan
description, if any, with respect to each Employee Plan
required under ERISA the most recent favorable determination
letter from the Internal Revenue Service, if applicable, with
respect to each Employee Plan.
5.11.2. The Purchaser has performed in all material respects
all obligations required to be performed under each Employee
Plan, and each Employee Plan has been established and
maintained in all material respects in accordance with its
terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to
ERISA and the Internal Revenue Code. No Employee Plan is a
defined benefit plan within the meaning of Section 3(3 5) of
ERISA. No Employee Plan is a multi-employer plan within the
meaning of Section 3(37) of ERISA. The Purchaser does not have
any liability with respect to any defined benefit plan or
multi-employer plan as a result of having been considered a
"single employer" within the meaning of Section 414(b), (c),
(m), (n) and (o) of the Internal Revenue Code, or otherwise,
and there is no basis for such liability being imposed. There
are no investigations, claims, suits or proceedings pending,
or, to the best of the Purchaser's knowledge, threatened or
anticipated (other than routine claims for benefits) against
any Employee Plan or the assets of any Employee Plan, and, to
the best of the Purchaser's knowledge, there are no facts that
could give rise to any liability in the event of any such
investigation, claim, suit or proceeding. All premiums
required by any Employee Plan have been paid thereunder. All
contributions due to, and payments from, the Employee Plans
that
26
may have been required to be made have been made. No
"prohibited transaction" within the meaning of Section 4975 of
the Internal Revenue Code or Section 406 of ERISA has occurred
with respect to any Employee Plan, and, to the best of the
Purchaser's, knowledge, no action or failure to act with
respect to any Employee Plan could subject Purchaser, the
Surviving Corporation or any Employee Plan to any tax, penalty
or other liability, for breach of fiduciary duty or otherwise,
under ERISA or any other applicable law, whether by way of
indemnity or otherwise.
5.11.3. With respect to any plan that, notwithstanding
Section 5.11.2 above, may be construed as a defined benefit
plan of the Purchaser, there has been no failure to make any
contribution or pay any amount due as required by Section 412
of the Internal Revenue Code, Section 302 of ERISA or the
terms of such defined benefit plan, and there has been no
request for or receipt of any funding waiver from the Internal
Revenue Service. No trust has been established in connection
with such defined benefit plan pursuant to Section 4049 of
ERISA (as in effect on December 17, 1987), and no liabilities
that would have a material adverse effect on the condition of
the business of the Purchaser have been asserted against the
Purchaser or any entity with which it would be considered a
"single employer" in connection with the Pension Plan by the
Pension Benefit Guaranty Corporation ('PBGC") or by a trustee
appointed pursuant to Section 4042(b) or (c) of ERISA, and no
Lien has been attached and neither the PBGC nor the Internal
Revenue Service has threatened to attach a Lien on any assets
of the Purchaser or any entity within which it would be
considered a "single employer" as a result of any failure to
comply with the Internal Revenue Code or the Treasury
regulations thereunder or ERISA. Neither the Purchaser nor any
entity with which it is or would be considered a "single
employer" has provided or is required to provide security to
any such defined benefit plan pursuant to Section 40 1(a) Of
the Internal Revenue Code. Neither the Purchaser nor any
entity with which it is or would be considered a "single
employer" has incurred or reasonably expects to incur any
Liabilities under Title IV of ERISA with respect to any such
defined benefit plan. Neither the Purchaser nor any entity
with which it is or would be considered a "single employer"
has transferred any assets or liabilities of such defined
benefit plan which had, at the date of such transfer,
"unfunded benefit liabilities" within the meaning of Section
400 1(a)(18) of ERISA. No "reportable event", within the
meaning of Section 4043(b) of ERISA, has occurred with respect
to any such defined benefit plan. As of September 30, 1998, no
such defined benefit plan had any amount of "unfunded benefit
liability", within the meaning of Section 4001(a)(18) of
ERISA, and termination of any such defined benefit plan has
not resulted and will not result in any liability to the
Purchaser or any entity with which it is or would be
considered a "single employer", or the Surviving Corporation.
5.11.4. Each "group health plan" within the meaning of
Section 4980B(g)(2) of the Internal Revenue Code maintained by
the Purchaser or any entity with which the Purchaser is or
would be considered a "single employer" has been administered
in good faith in compliance with the continuation coverage
requirements contained in the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), as set forth
at Section 4980B of the Internal Revenue Code and any
regulations promulgated or proposed thereunder (if such
proposed regulations constitute substantial authority within
the meaning of Section 6662 of the Internal Revenue Code and
any regulations promulgated thereunder).
27
5.11.5. The Purchaser (except to the extent that any of the
following noncompliance's, failures or liabilities would not,
either individually or in the aggregate, have a material
adverse effect on the Purchaser), the business or the assets
of the Purchaser: (i) is in material compliance with all
applicable federal and state laws, rules and regulations
respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case,
with respect to all employees of the Purchaser; (ii) has
withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to
Employees of the Purchaser; (iii) is not liable for any
arrearages of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) other than routine
payments to be made in the normal course of business and
consistent with past practice and reserved for on the
September 30, 1998 balance sheet included within the
Purchaser's financial statements, is not liable for any
payment to any trust or other fund or to any governmental or
administrative authority with respect to unemployment
compensation benefits, Social Security or other benefits for
employees of the Purchaser's said financial statements.
5.13. Neither the Purchaser nor any Affiliate of the Purchaser is
party to any collective bargaining agreement, written or oral, which
covers any Employees or which is binding upon the Purchaser. There have
been, and there are, no strikes, grievances, disputes or controversies
pending or, to the best of the Purchaser's knowledge, threatened between
the Purchaser and any of its employees or any union or other
organization claiming to represent such employees' interests. There is
no request for union representation pending or, to the best of the
Purchaser's knowledge, no present union organizing or election
activities in progress or threatened with respect to any employees of
the Purchaser. There is no unfair labor practice complaint pending
before the National Labor Relations Board or, to the best of the
Purchaser's knowledge, threatened against or relating to the Purchaser
or any of its employees.
5.14. TAX MATTERS. The Purchaser has filed all federal, state and
local tax returns and all information returns and reports required to be
filed by or with respect to it under the laws of the United States or
any state or other jurisdiction for all periods ending on or prior to
the date hereof and will timely file all such returns and reports
required to be filed from the date hereof through the Closing Date. All
such reports and returns were or will be in all material respects
accurately prepared in accordance with all applicable statutes, rules
and regulations and are or will be correct as filed. The Purchaser has
paid all taxes (including, without limitation, taxes for which the
Purchaser is a collection agent - e.g., withholding, excise, sales, use,
Social Security and similar taxes) which have become due or payable (and
will pay on or prior to the Closing Date all taxes which have become due
or payable on or prior to the Closing Date). The Purchaser is not a
party to or has not been notified that it is the subject of any pending,
proposed or threatened action, investigation, proceeding, claim or
assessment by or before the Internal Revenue Service or any other
governmental authority, and no claim for assessment, deficiency or
collection of taxes, or proposed assessment, deficiency or collection,
for which the Purchaser may be liable, and which is material to the
Purchaser, has been asserted or threatened against it. The Purchaser has
not received any notice of any material deficiency, assessment or
collection or proposed deficiency, assessment or collection from the
Internal Revenue Service or any other governmental authority which has
not been satisfied, nor does the Purchaser have any reason to believe
that any such notice will be received in the future. The charges,
accruals and reserves shown in the said Purchaser's financial statements
in respect of taxes for all fiscal periods to date are, adequate. There
are no material unpaid assessments or proposals for
28
additional taxes for which the Purchaser does not have adequate
reserves, nor does the Purchaser know of any basis therefor for any
such period. To the best knowledge of the management of the Purchaser
there are no tax rulings, requests for rulings or closing agreements
relating to the Purchaser which could affect its liability for taxes
for any period.
6. FURTHER COVENANTS AND AGREEMENTS.
6.1. CONDUCT OF BUSINESS. Without limiting in any way any rights of
Purchaser or Merger Subsidiary under Section 7, during the period from
the date of this Agreement to the Closing Date, or until this Agreement
has been canceled in accordance with its terms, except as (i) otherwise
consented to by Purchaser in writing, (ii) otherwise expressly permitted
or contemplated under this Agreement, or (iii) otherwise required by
law, the Target Corporation will:
6.1.1. carry on, and cause the Target Corporation to carry
on its Business in, and only in, the usual, regular and
ordinary course in the same manner as heretofore conducted
and, to the extent consistent with such Business, use best
efforts to preserve intact its present business organization
and relationships with customers, vendors, suppliers,
Employees and others having business relations with the Target
Corporation,
6.1.2. not, and ensure that the Target Corporation does
not, terminate or replace, or amend or modify' in any material
respect, any of the Material Contracts, or waive any material
obligation or right of any party under any such Material
Contract;
6.1.3. not, and ensure that the Target Corporation does
not, incur or increase any Indebtedness or Liabilities other
than in the ordinary course of business consistent with past
practice, or issue or sell any debt or equity securities, or
pay any amount or make any distribution or dividend to any
shareholder of the Target Corporation; provided however, the
payments specified in Section 3.1 are expressly permitted.
6.1.4. not, and ensure that the Target Corporation does
not, make any loan to any director, shareholder or Employee of
the Target Corporation or grant to any Employee of the Target
Corporation any unusual or non-routine increase in
compensation, bonus, or any severance or termination pay, or
enter into any new, or modify or amend any existing employment
agreement with any Employee;
6.1.5. not, and ensure that the Target Corporation does
not, adopt or amend in any material respect, any collective
bargaining, bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, or similar plan
for the benefit of Employees of the Target Corporation,'
6.1.6. not, and ensure that the Target Corporation does
not, fail to take any action required for the ordinary and
usual operation of the Business;
6.1.7. not, and ensure that the Target Corporation does
not, make any material change with respect to accounting
policies or procedures;
6.1.8. not, and ensure that the Target Corporation does
not, make any tax election of any kind;
29
6.1.9. not, and ensure that the Target Corporation does
not, sell, assign, pledge, dispose of or encumber any of the
Assets other than sales of Inventories to customers of the
Target Corporation in the ordinary course of business
consistent with past practice;
6.1.10. except as provided in Section 3.1, not, and ensure
that the Target Corporation does not, pay, discharge or
satisfy any claims, Liabilities, Indebtedness or obligations,
other than the payment, discharge or satisfaction thereof when
due and payable in the ordinary course of business consistent
with past practice, and does not make any capital expenditures
in excess of $10,000 in the aggregate (for the Target
Corporation);
6.1.11. comply, and ensure that the Target Corporation
complies, in all material respects, with its material
obligations under the Material Contracts;
6.1.12. after written notification to, and consultation
with, Purchaser, defend, initiate or proceed with, and cause
the Target Corporation to defend, initiate or proceed with, as
the case may be, any matter before any governmental,
regulatory or administrative authority that is necessary to
protect the Business or the Assets or any material part
thereof,
6.1.13. cause the Target Corporation to (i) maintain the
Assets in the same repair, order and condition as existed on
September 30, 1998, (ii) maintain insurance for the Assets
comparable in all material respects to that in effect on the
date hereof, and (iii) in the event of casualty, loss or
damage to any of the Assets prior to the Closing Date for
which the Target Corporation is insured, either repair or
replace such damaged assets with assets of industry grade
quality and usefulness or, at the option of Purchaser, retain
in the Target Corporation's bank account the proceeds of such
insurance;
6.1.14. comply, and cause the Target Corporation to comply,
with all legal and regulatory requirements applicable to the
Target Corporation, the Business or the Assets, except where
the failure to comply would not, individually or in the
aggregate with other failures, have a material adverse effect
on the condition (financial or otherwise) of the Target
Corporation, the Business or the Assets;
6.1.15. not, and ensure that the Target Corporation does
not, enter into any Material Contract or become obligated to
enter into any Material Contract;
6.1.16. maintain, and cause the Target Corporation to
maintain, its Records in the usual, regular and ordinary
manner, and on a basis consistent with the Historical
Financial Statements;
6.1.17. obtain and maintain, and cause the Target
Corporation to obtain and maintain, all consents,
authorizations and approvals from all appropriate federal,
state and local governmental agencies or authorities which are
necessary or required for the operation of the Business as
presently or then conducted by it, as and when such consents,
authorizations and approvals are necessary or required;
6.1.18. comply, and cause the Target Corporation to comply,
with all applicable laws, rules, ordinances, regulations,
codes, orders, decrees, licenses and permits of all applicable
jurisdictions and governmental authorities or agencies
relating to it, its properties, the Assets
30
or the conduct of the Business, except where the failure to
comply would not, individually or in the aggregate with other
failures, have a material adverse effect on the condition
(financial or otherwise) of the Target Corporation, the
Business or the Assets;
6.1.19. use best efforts to cause the transactions
contemplated by this Agreement to be consummated in accordance
with the terms hereof and use best efforts to refrain from
taking any action which would result in any of the conditions
to Purchaser's or Merger Subsidiary's obligation to consummate
the transactions contemplated by this Agreement being
unsatisfied in accordance with the terms hereof,
6.1.20. collect, and cause the Target Corporation to
collect, the Receivables in the ordinary course of business
consistent with past practice, except to the extent it is in
the best interests of the Target Corporation to accelerate or
compromise (as the case may be) a Receivable;
6.1.21. pay, and cause the Target Corporation to pay, its
trade accounts payable in the ordinary course of business
consistent with past practice and not default under, or breach
any term or provision of, or fail in any material respect to
perform, or suffer or permit to exist any condition or event
which, after notice or lapse of time, or both, would
constitute a default under any Contract or any License,
consent or insurance policy;
6.1.22. if the Target Corporation receives or becomes aware
of any finding, order, complaint, citation or notice prior to
Closing which states that any aspect of the Business or its
operations or the condition of any of the Assets violates any
law, rule, regulation or code of any governmental authority
(each, an "Administrative Violation"), promptly notify
Purchaser of the Administrative Violation, and remove or
correct the Administrative Violation;
6.1.23. not directly or indirectly solicit or engage in
discussions or negotiations with, or provide any information
to or otherwise cooperate with, any other Person or entity
which seeks to, or expresses an interest in, acquiring all or
any substantial part of the Assets or the Business (either
directly or by purchase of capital stock of the Target
Corporation or merger), or directly or indirectly enter into
any agreement with or grant any option to any third person or
entity in connection with any transaction affecting the XCD
Shares, the Assets, the Business or which is inconsistent with
this Agreement;
6.1.24. not, and ensure that the Target Corporation does
not, amend in any respect or for any reason the Articles of
Incorporation or Bylaws of the Target Corporation or elect or
appoint any new or additional director or officer of the
Target Corporation or take any other action with respect to
the capital stock, corporate structure or management or
organic documents of the Target Corporation; and
6.1.25. pay, and cause to be paid, all Taxes payable by the
Target Corporation when due and payable.
The Target Corporation will promptly notify Purchaser of any material
adverse change in the financial condition, results of operations, properties,
Assets, or prospects of the Business. From the date hereof to the Closing,
neither the Target Corporation, nor any XCD Shareholder, will take any action or
31
engage in any transaction which would render any representation and warranty of
the Target Corporation inaccurate in any material respect as of the date hereof
or as of the Closing Date or as of any date between the date hereof and the
Closing Date.
6.2. THIRD PARTY CONSENTS.
6.2.1. The Target Corporation will use reasonable
commercial efforts to obtain at the earliest practicable date
and in any event before the Closing all consents, governmental
authorizations, approvals, estoppel certificates and filings
required to be obtained or made by either or which may be
necessary for the consummation of the transactions
contemplated by this Agreement to occur without causing
impairment to, or loss of any Contract or License, or which
are reasonably required by Purchaser or its counsel in
writing.
6.2.2. On or prior to the Closing Date, the Target
Corporation shall use reasonable commercial efforts to obtain
all such waivers and consents under any Contract to which the
Target Corporation is a party as are necessary to prevent a
breach or violation of, or acceleration of, or default under,
any such Contract as a result of the consummation of the
transactions contemplated by this Agreement.
6.3. ACCESS: INFORMATION. From the date hereof to and including the
Closing Date or, 'if Closing does not occur, termination of this
Agreement, the Target Corporation shall (a) afford to the officers,
employees, attorneys, accountants and other authorized representatives
of Purchaser reasonable access, during normal business hours, to the
offices, plants, properties, books and records of the Target Corporation
in order that Purchaser may have full opportunity to make such
operational, legal, financial, accounting and other reviews or
investigations of the Business and the Assets as Purchaser shall desire
to make, (b) permit, and cause the Target Corporation's independent
public accountants to permit, Purchaser's independent public accountants
to inspect its work papers and other records relating to the Business
and the Assets, and (c) furnish, and cause the officers and Employees of
the Target Corporation to furnish, to Purchaser and its authorized
representatives such additional financial and operating data and other
information regarding the Target Corporation's assets, properties,
contracts, goodwill and business including, without limitation, the
Assets and the Business, as Purchaser' shall from time to time
reasonably request including, without limitation, all interim financial
and operating reports relating to the Business prepared by or for
officers of the Target Corporation.
6.4. AUDITED FINANCIAL STATEMENTS. The Target Corporation has
caused to be prepared and delivered to Purchaser the Audited Financial
Statements prepared by independent certified public accountants (the
"Audit Accountants"). Purchaser acknowledges receipt of the Audited
Financial Statements. The Target Corporation confirms that it will cause
the Audit Accountants to provide to Purchaser and its auditors, upon
request, all schedules, accountant's work papers and notes, and a
detailed explanation of all assumptions used in conducting any prior
audits, examinations or reviews of the Target Corporation's books,
records and financial statements.
6.5. INTERIM FINANCIAL STATEMENTS AND OTHER FINANCIAL REPORTS. As
soon as they are prepared, but in all events no later than the thirtieth
day of the month following the end of the respective months to which
they relate (or, if applicable, the thirtieth day following the end of
the fiscal quarter to which they relate), the Target Corporation shall
deliver the applicable Interim Financial Statements to Purchaser, which
shall be complete and accurate in all material respects. In addition, no
later than the
32
business day preceding, and no earlier than the fifth business day
preceding, the Closing Date, the Target Corporation shall deliver to
Purchaser the following, each as of the then most recent practicable
date (but in all events as of a date no earlier than the tenth day
preceding the Closing Date), each of which shall be complete and
accurate in all material respects: (a) a list of its Inventories; (b)
a schedule of its accounts receivable showing aging on a 30, 60, 90
and over 90-day basis; (c) a schedule of its accounts payable showing
thereon any accounts payable which are 30, 60, 90 or more than 90-days
past due; and (d) a list of its purchase commitments.
6.6. INSURANCE PROCEEDS. If any Assets are destroyed or damaged or
taken in condemnation, the insurance proceeds or condemnation award with
respect thereto shall remain an Asset of the Business and the property
of the Target Corporation, and such proceeds shall not be withdrawn by,
or distributed to, any person.
6.7. CALIFORNIA FRANCHISE BOARD TAX CLEARANCE. On or promptly
following the execution and delivery of this Agreement, the appropriate
parties shall cause to be executed and filed all documents necessary to
obtain the California Franchise Tax Board Clearance.
6.8. FINANCING. Purchaser shall have received (i) a commitment to
borrow no less than the aggregate cash consideration required for this
transaction from it's principal lender, and (ii) the lender's consent to
this transaction, to enable Purchaser to consummate the transactions
contemplated hereby. To the knowledge of Purchaser, there is no reason
to believe such financing and consent will not be received.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND MERGER SUBSIDIARY.
All obligations of Purchaser and Merger Subsidiary under this Agreement are
subject to the satisfaction of the following conditions precedent on or before
the Closing Date, any of which may be waived in whole or in part at the sole
discretion of Purchaser:
7.1. OPINION OF COUNSEL. Purchaser shall have received an opinion
of Xxxxxxx Xxxxx, Esq., counsel to the Target Corporation and the XCD
Shareholders addressed to Purchaser and Merger Subsidiary and dated the
Closing Date, in form and content reasonably satisfactory to Purchaser
and its counsel.
7.2. PERFORMANCE BY TARGET CORPORATION AND XCD SHAREHOLDERS. All of
the terms, covenants, agreements and conditions of this Agreement to be
complied with and performed by the Target Corporation and the XCD
Shareholders on or before the Closing Date shall have been complied with
and performed in all material respects.
7.3. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Target Corporation and the XCD Shareholders in
this Agreement shall have been true and correct in all material respects
at the date hereof and as of the Closing Date with the same force and
effect as though all such representations and warranties had been again
made as of the Closing Date.
7.4. NO ACTIONS OR PROCEEDINGS. No action, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which may affect the right of Purchaser or the Merger
Subsidiary directly or indirectly to own, operate or control, after
Closing, the Target Corporation or the Business or any material portion
thereof or
33
which could have any material adverse effect on the Target Corporation,
the Business or the Assets or the value or prospects of any of them.
7.5. NO MATERIAL ADVERSE CHANGE. To the best knowledge of
management of XCD, Incorporated and the XCD Shareholders, since January
1, 1998: (a) there shall have occurred no material adverse change in (i)
the Business or Assets, the condition of the Target Corporation
(financial or otherwise), or the results of operations of the Target
Corporation or the Business, whether or not arising from transactions in
the ordinary course of business, or (ii) the Target Corporation's
prospects or its industry segment generally; (b)neither the Assets nor
the Business shall have been adversely affected in any material way by,
or sustained any material loss, whether or not insured, as a result of
any fire, flood, accident, explosion or other calamity or casualty or
any strike, labor disturbance, riot, act of God or the public enemy; and
(c) no condemnation proceedings affecting any of the real property
owned, Leaseholds or Improvements shall have been commenced and the
Target Corporation shall have not received notice of the proposed
commencement of any such proceedings.
7.6. OFFICER'S CERTIFICATE. Purchaser and Merger Subsidiary shall
have received from the Target Corporation and the XCD Shareholders, in
form and substance reasonably satisfactory to Purchaser and its counsel,
a certificate, dated the Closing Date, of the Target Corporation and the
XCD Shareholders, as to the satisfaction of the conditions set forth in
Sections 7.2, 7.3, 7.4 and 7.5, and as to such other matters as are
reasonably required by Purchaser or its counsel.
7.7. SATISFACTION OF COUNSEL. All corporate and other actions and
proceedings of the Target Corporation in connection with the
transactions contemplated hereby, all resolutions, documents and
instruments incidental thereto, and all other related legal matters,
shall be reasonably satisfactory in form and substance to Purchaser and
its counsel, and Purchaser shall have received all such resolutions,
documents and instruments, or copies thereof: certified if requested, as
its counsel shall have reasonably requested.
7.8. CONSENTS AND ESTOPPELS. All consents of third parties under
any Contract or License, and all consents, orders, approvals and
authorizations of; and registrations, qualifications and filings with,
any regulatory or governmental authority, required in connection with
the consummation of the transactions contemplated hereby (or of the kind
referred to in Section 6.2), and all estoppel letters from landlords and
lenders reasonably requested by Purchaser, shall have been obtained in
form and content reasonably satisfactory to Purchaser.
7.9. TITLE REPORTS. Lien, Judgment and Other Searches. Purchaser
shall have received true and complete copies of the results of searches
of appropriate title records, UCC filings, tax liens, fixture filings,
judgments and pending judicial proceedings in each state and county in
which the Target Corporation maintains (or has within the last five
years maintained) an office as of an effective search date no earlier
than 10 days prior to the Closing Date,, showing that there is on file
in such records no effective encumbrance, UCC financing statement or
federal, state or local Tax Lien, or other Lien, or judgment naming the
Target Corporation or any trade names used in the conduct of the
Business, except as described in Schedule 4.7 or otherwise disclosed to
Purchaser in writing prior to the date hereof
7.10. EMPLOYMENT AGREEMENTS. Certain of the Key Employees shall have
executed and delivered to the Surviving Corporation their Employment
Agreements, Exhibits "A-1" through "A-5" hereto, certain other employees
shall have released and waived any rights to options from XCD,
34
Incorporated and the consulting agreements between Advent Technology
Incorporated and Advent Research, Incorporated and XCD, Incorporated
shall have been canceled with no continuing liability or obligation to
XCD, Incorporated or Merger Subsidiary.
7.11. MERGER DOCUMENTS. XCD shall have executed and delivered to
Merger Subsidiary, in suitable form for filing, the Agreement of Merger,
Exhibit "B" hereto.
7.12. CALIFORNIA FRANCHISE TAX BOARD CLEARANCE. The California
Franchise Tax Board shall have issued a Tax Clearance Certificate for
XCD.
7.13. INVESTMENT LETTERS. Each XCD Shareholder shall have delivered
to Purchaser an investment letter in form and substance acceptable to
Purchaser and its counsel with respect to their acquisition of Xxxx
Shares hereunder containing, among other things, the restrictions
described in Sections 2.8 and 2.9 hereinabove.
7.14. FINANCING. Purchaser shall have actually received the
financing referred to in Section 6.8.
7.15. NO DISSENTERS. There shall be no XCD Shareholders who have
exercised their dissenter's rights under California law.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF XCD. All obligations of the
Target Corporation under this Agreement are subject to the satisfaction of the
following conditions precedent on or before the Closing Date, any of which may
be waived in whole or in part at the sole discretion of the Target Corporation.
8.1. OPINION OF COUNSEL. The Target Corporation and the XCD
Shareholders shall have received an opinion of Xxxxxxx X. Xxxxxxx, Esq.
or Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP, counsel to Purchaser and Merger
Subsidiary, addressed to the Target Corporation and dated the Closing
Date, in form and content reasonably satisfactory to the Target
Corporation, and its counsel.
8.2. PERFORMANCE BY PURCHASER. All the terms, covenants, agreements
and conditions of this Agreement to be complied with and performed by
Purchaser or Merger Subsidiary on or before the Closing Date shall have
been complied with and performed in all material respects.
8.3. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser and Merger Subsidiary in this Agreement
shall have been true and correct in all material respects at the date
hereof and as of the Closing Date with the same force and effect as
though all such representations and warranties had been again made as of
the Closing Date.
8.4. NO ACTIONS OR PROCEEDINGS. No action, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which may affect the right of Purchaser or the Merger
Subsidiary directly or indirectly to own, operate or control, after
Closing, the Target Corporation or the Business or any material portion
thereof; or which could have any material adverse effect on the
Purchaser, the Business or the Assets of the Purchaser or the value or
prospects of any of them.
8.5. OFFICER'S CERTIFICATE. The XCD Shareholders shall have
received from Purchaser and Merger Subsidiary, in form and substance
reasonably satisfactory to them, a certificate, dated the Closing Date,
of the President or any Vice President of each of Purchaser and Merger
Subsidiary, certifying
35
as to the satisfaction of the conditions set forth in Sections 8.2, 8.3
and 8.4 and as to such other matters as are reasonably required by
Target Corporation or its counsel.
8.6. EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered to the Employees the Employment Agreements
(Exhibits "A-1" through "A-5" hereto).
8.7. SATISFACTION OF COUNSEL. All corporate and other actions and
proceedings of Purchaser and Merger Subsidiary in connection with the
transactions contemplated hereby, all resolutions, documents and
instruments incidental thereto, and all other related legal matters,
shall be reasonably satisfactory in form and substance to the Target
Corporation and the XCD Shareholders and their counsel, and such parties
shall have received all such resolutions, documents and instruments, or
copies thereof; certified if requested, as its counsel shall have
reasonably requested.
8.8. MERGER DOCUMENTS. Merger Subsidiary shall have executed and
delivered to XCD, in suitable form for filing, the Agreement of Merger.
8.9. MERGER CONSIDERATION. The Merger Consideration shall have been
paid or reasonably satisfactory provisions for its payment shall have
been made.
8.10. The Target Corporation and the XCD Shareholders shall have
received the opinion from Xxxxxxxxxx & Xxxxxxxx LLP as to that portion
of the transaction which is tax free under Section 368 (a) (1) (A) of
the Internal Revenue Code of 1986. as amended.
8.11. The XCD Shareholders shall have received the Registration
Rights Agreement in the form of Exhibit "C" attached hereto, duly
executed by the Purchaser.
9. INDEMNIFICATION.
9.1. INDEMNITIES.
9.1.1. Purchaser and Merger Subsidiary jointly and
severally agree to indemnify and hold harmless the Target
Corporation and the XCD Shareholders from, against and in
respect of any and all Liabilities, losses, costs and expenses
(including reasonable attorneys' fees and costs incurred
before and at trial, at all tribunal levels, whether or not
suit is instituted, and in establishing this right to
indemnification) asserted against or suffered or incurred by
the Target Corporation or any of the XCD Shareholders to the
extent caused by or resulting from a breach by Purchaser or
Merger Subsidiary of any of its representations, warranties,
covenants or obligations herein contained.
9.1.2. The XCD Shareholders jointly and severally agree to
indemnify and hold harmless the Purchaser and Merger
Subsidiary from and against and in respect of any and all
Liabilities, losses, costs and expenses (including reasonable
attorneys' fees and costs incurred before and at trial, at all
tribunal levels, whether or not suit is instituted, and in
establishing this right to indemnification) asserted against,
suffered or incurred by Purchaser or Merger Subsidiary to the
extent caused by or resulting from (i) a breach by the Target
Corporation or the XCD Shareholders of any of their
representations, warranties, covenants or obligations herein
contained; (ii) any tax liabilities of the Target Corporation
accrued or incurred prior to the Closing; (iii) any liability
or obligation arising in any way from any product
36
manufactured or sole, or service rendered by the Target
Corporation prior to the Closing; and (iv) any claims made
by Employees or former Employees of the Target Corporation
pertaining to services rendered or actions of or conditions
at the Target Corporation prior to the Closing.
9.2. CLAIMS PROCEDURES.
9.2.1. In the event that any claim is asserted against the
Surviving Corporation, Purchaser shall prepare a proposed
statement of adjustment ("Statement of Adjustment") and
deliver the Statement of Adjustment to Agent who shall have
twenty (20) days to review and verify' the Statement of
Adjustment (the "Review Period"). If Agent does not object in
writing to the Statement of Adjustment within the Review
Period, then the Statement of Adjustment shall be final and
binding on all of the XCD Shareholders. If Agent does so
object within the Review Period, then the parties shall meet
as soon as practicable to attempt to resolve any such
objection of Agent. If the parties agree in writing on a
Statement of Adjustment, then the XCD Shareholders shall
immediately pay their pro rata share of the amount set forth
in the Statement of Adjustment.
9.2.2. If the parties cannot agree on a Statement of
Adjustment within twenty (20) days after the Review Period,
then the claim shall be settled by arbitration in accordance
with the Commercial Rules of the American Arbitration
Association then in effect. The decision of a sole arbitrator
shall, except for mistakes of law, be final and binding upon
the parties hereto, and judgment upon the award rendered by
the arbitrator, may be entered in any court having
jurisdiction thereof The arbitrator shall be an existing or
former judge of a court of record within the United States or
an attorney in good standing admitted to practice for a period
of at least ten (10) years within the United States. No
arbitration shall involve parties other than the parties
hereto and their respective successors and assigns or be in
any respect binding with respect to any such other parties.
The situs of the arbitration will be in the County of Orange,
State of California. The parties to any arbitration arising
hereunder shall have the right to take depositions and to
obtain discovery regarding the subject matter of the
arbitration and to use and exercise all of the same rights,
remedies and procedures, and be subject to all of the same
duties, liabilities, and obligations in the arbitration with
respect to the subject matter thereof; as if the subject
matter of the arbitration were pending in a civil action
before a court of highest jurisdiction in the state where the
arbitration is held. The arbitrator shall have the power to
enforce said discovery by imposition of same terms,
conditions, consequences, liabilities, sanctions and penalties
as can be or maybe imposed in like circumstances in a civil
action by a court of highest jurisdiction of the state in
which the arbitration is held, except the power to order the
arrest or imprisonment of a person. All costs of the
arbitration, including the cost of any record or transcripts
of the arbitration, administrative fees, the fee of the
arbitrator, and all other fees and costs, shall be borne
equaly by the parties.
9.2.3. In the event that any claim is asserted against the
Surviving Corporation, or the Surviving Corporation is made a
party defendant in any action or proceeding, and such claim,
action or proceeding involves a matter which is the subject of
indemnification under Section 9.1.2., then the Agent shall be
notified as promptly as possible. Agent shall have the right
to join in the defense of said claim, action or proceeding at
the Agent's (and the XCD
37
Shareholders') sole cost and expense. Unless the parties
otherwise agree in writing as to the manner in which the Agent
(or the XCD Shareholders) shall defend, compromise or settle
(exercising reasonable business judgment) such claim,
Purchaser and Merger Subsidiary shall be entitled to defend,
compromise or settle such claim, for the account and at the
risk of the Agent and the XCD Shareholders.
9.3. LIMITATIONS. The respective rights of the parties to
indemnification under this Agreement shall expire on, and shall be of no
further force and effect after, the applicable time set forth in Section
10.15. No indemnification shall be claimed or made until the party
claiming indemnification shall have incurred damages in the aggregate
amount of Twenty-Five Thousand Dollars ($25,000) and such
indemnification shall only apply to the amount by which such claims
exceed $25,000. Furthermore, the maximum amount indemnifiable shall be
limited to $500,000 and payable solely by return to the Purchaser of
unencumbered Xxxx Shares valued at $7.00 per share. The foregoing
limitations shall not apply to claims which result from any criminal or
fraudulent act or omission or any willful, intentional or knowing
misrepresentation, breach of warranty or breach of covenant.
10. MISCELLANEOUS.
10.1. ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement. or because of an alleged
dispute. breach, default or misrepresentation in connection with any of
the provisions of this Agreement. the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding in addition to any
other remedies to which it, he or they may be entitled at law or equity.
The rights and remedies granted herein are cumulative and not exclusive
of any other right or remedy granted herein or provided by law.
10.2. EXPENSES. Except as otherwise specifically provided in this
Agreement, each party will pay its own expenses incident to this
Agreement and the transactions contemplated hereby, including legal and
accounting fees and disbursements.
10.3. AMENDMENTS AND WAIVERS. The parties hereto may, by written
agreement signed by the parties, modify any of the covenants or
agreements or extend the time for the performance of any of the
obligations contained in this Agreement or in any document delivered
pursuant to this Agreement. My party hereto may waive, by written
instrument signed by such party, any inaccuracies in the representations
and warranties of another party or compliance by another party with any
of its obligations contained in this Agreement or in any document
delivered pursuant to this Agreement. This Agreement may be amended only
by written instrument signed by the parties hereto.
10.4. TRANSFERABILITY ASSIGNMENT. The rights and obligations of
Purchaser and Merger Subsidiary shall not be assignable. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors. Nothing herein expressed or implied is
intended to confer upon any person.. other than the parties hereto and
their respective successors any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.5. TERMINATION. In the event that the Closing cannot be held
because any of the conditions to the Closing cannot be fulfilled on or
prior to November 14, 1998, or any extended date for the Closing agreed
to by the parties hereto, none of the parties shall have any obligation
or liability of
38
any nature whatever to the other parties hereto, and all expenses
incurred by any party hereto shall be for its own account, except as
may otherwise be specifically provided in this Agreement; provided,
however, that no party hereto shall be deemed to have waived any
rights it may have arising from the breach or default of another party
of any of the latter's representations, warranties, covenants or
indemnities under this Agreement.
10.6. NOTICES. Any notice, request or other document to be given
hereunder to a party hereto shall be in writing and delivered in person
or sent by registered or certified mail, postage prepaid, return receipt
requested, or by facsimile or telex, or an overnight air courier
service, as follows:
If to Purchaser or Merger Subsidiary, addressed to it at:
Xxxx Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, C.E.O.
Telecopier No.: (000) 000-0000
With a copy to: Xxxxxxx X. Xxxxxxx, Esquire
c/x Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
If to the Target Corporation or to the XCD Shareholders (or any of them),
addressed to it or them at:
XCD INCORPORATED
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, President
Telecopier No.: (000) 000-0000
With a copy to: Xxxxxxx X Xxxxx. Esq.
000 Xxxxxxx Xxxxxx Xxxxx. Xxx. 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
All such notices, requests and other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; when answered back, if telexed; when receipt
confirmed, if sent by facsimile; and the next business day after timely delivery
to the courier, if sent by an overnight air courier service guaranteeing next
day delivery. Any party hereto may change its address for receiving notices,
requests and other documents by giving written notice of such change to the
other parties hereto.
39
10.7. GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware. Subject to the claims procedures set forth in Section 9.2
hereof which shall take precedence with respect to indemnification
matters covered by Section 9 hereof, the parties to this Agreement (and
each other agreement executed in connection herewith or pursuant hereto)
consent to jurisdiction for any action, suit or proceeding relating to
this Agreement (and any agreement executed in connection herewith or
pursuant hereto) in the courts of the United States of America sitting
in Orange County in the State of California, or, if such courts shall
not have jurisdiction over the subject matter thereof; in the courts of
the State of California sitting in Orange County and each such party
hereby irrevocably and unconditionally agrees to submit to the
jurisdiction of such courts for purposes of any such action, suit or
proceeding. Each party irrevocably waives any objection it may have to
the venue of any action, suit or proceeding brought in such courts or to
the convenience of the forum. Final judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of any party therein described.
10.8. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, and is not reformed by such court, such holding
shall not invalidate or render unenforceable any other provision hereof,
except if such holding materially adversely affects a party's ability to
realize the essential benefits of this Agreement.
10.9. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
10.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, or by the
execution and attachment of counterpart signature pages to one or more
counterparts, but all of which together shall constitute one and the
same instrument.
10.11. ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits and the agreements, certificates and instruments delivered
pursuant hereto or thereto, contain the entire agreement among the
parties hereto, and supersede all prior agreements and undertakings
between or among the parties hereto relating to the subject matter
hereof and thereof; including, without limitation, any letter of intent
or proposal executed or delivered by or on behalf of any of the parties
prior to the date hereof
10.12. PUBLIC ANNOUNCEMENTS. Neither party shall make any public
announcements concerning the transactions contemplated by this Agreement
or the consummation thereof without first obtaining the prior written
consent of the other as to the content, form and timing of any such
announcement (except that Purchaser may make such announcements, at such
times, as Purchaser, in its sole discretion, deems necessary or
appropriate to comply with applicable securities laws).
10.13. GENDER. With respect to the language of this Agreement, the
use of the masculine gender shall include the feminine and neuter, and
the use of the neuter shall include the masculine and/or feminine, in
each case, as the context reasonably requires.
10.14. NO WAIVER: CUMULATIVE REMEDIES. No failure on the part of any
party to exercise, and no delay in the exercise of, any right, power,
privilege or remedy of such party hereunder, or under any
40
other agreement or instrument executed in connection herewith or
pursuant hereto, or pursuit of any particular right, power, privilege
or remedy hereunder or thereunder at any particular time, singly or
together with others, or any partial exercise thereof; shall operate
as a waiver of, or preclude the exercise or availability of, any
right, power, privilege or remedy of such party under this Agreement
or any such other agreement or instrument executed in connection
herewith or pursuant hereto.
10.15. SURVIVAL. The representations, warranties, covenants and
agreements contained in this Agreement, and in any agreements,
certificates or other instruments delivered pursuant to this Agreement,
shall survive the Closing and the Merger and the consummation of the
transactions contemplated hereby, and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any
party or of the actual or constructive knowledge by any party of
inaccuracy or breach thereof Notwithstanding any of the foregoing to the
contrary, any claim asserting a breach of any of the representations and
warranties of the parties set forth in Sections 4 or 5, or of any of the
covenants of the parties set forth in Section 6, must be asserted in
writing to the breaching party no later than the end of the 12th full
month following the Closing Date, failing which such claim shall be
barred, except that such limitation shall not apply to any criminal or
fraudulent act or omission., or any willful, intentional or knowing
misrepresentation. breach of warranty or breach of covenant.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first above written.
"PURCHASER"
XXXX GROUP, INC.,
a Delaware corporation
By: /c/ Xxxxxxx X. Dirk
-----------------------------------------------------
Xxxxxxx X. Xxxx, Chairman and Chief Executive Officer
"MERGER SUBSIDIARY"
XXXX MERGER SUBSIDIARY, INC.
41
By: /s/ Xxxxxxx X. Xxxx
---------------------------------
Xxxxxxx X. Dirk,
Chairman and Chief Executive Officer
"TARGET CORPORATION"
XCD INCORPORATED., a California corporation
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Xxxxx Xxxxxxxx, President
"XCD SHAREHOLDERS"
/s/ Xxxxx Xxxxxxxx
---------------------------------
Xxxxx Xxxxxxxx
/s/ Xxx Xxxxxxxxx
---------------------------------
Xxx Xxxxxxxxx
/s/ Xxx Xxxxxxx
---------------------------------
Xxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
---------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxx Xxxxx
---------------------------------
Xxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx
42
