MERGER AGREEMENT
This Agreement entered into as of the 21st day of November, 1997, by and
among Xxxxxxxx-Xxxx, Inc., a Delaware corporation (the "WHI"), Xxxxxxxx-Xxxx
Associates, Inc., a Nevada corporation and a wholly-owned subsidiary of WHI
(the "SUBSIDIARY"), Axis Consulting International, Inc., a California
corporation ("AXIS") and Xxxxx Xxxxxx and Xxxxxx Xxxxxx the shareholders of
Axis ("SHAREHOLDERS"). Axis, the Shareholders, WHI and the Shareholders are
referred to collectively herein as the "PARTIES."
WHEREAS, Axis is engaged in the business of marketing and selling the
services of computer software analysts, programmers, engineers and project
managers in the following product areas: SAP-TM- software products,
relational data bases, Synon software products, 2/E software products,
Obsidian software products, wide area networks, and Windows NT-TM- Back
Office product suite (all of the foregoing activities being collectively
referred to as the "BUSINESS"); and
WHEREAS, WHI desires to acquire all of the outstanding capital stock of
Axis through a merger of the Subsidiary with and into Axis pursuant to
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code; and
WHEREAS, the Shareholders own beneficially and of record all of the
outstanding shares of capital stock of Axis and desire to cause the
Subsidiary to merge with and into Axis;
NOW, therefore, in consideration of the premises and promises made
herein, the Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act and also includes any
descendants, ancestors, spouses or siblings of an individual.
"AGREEMENT OF MERGER" has the meaning set forth in Section 2.3 below.
"BUSINESS" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in Section 2.2 below.
"CLOSING DATE" has the meaning set forth in Section 2.2 below.
"CODE" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations promulgated thereunder.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Axis of a nature kept confidential by Axis under
its policies and procedures. Confidential Information shall not include
information that is generally known or available.
"DEARMOND LITIGATION" means DeArmond v. Thrifty Rent-A-Car, et al.
"DISPUTE NOTICE" has the meaning set forth in Section 2.7.
"EFFECTIVE TIME" has the meaning set forth in Section 2.4(a) below.
"GAAP" means United States generally accepted accounting principles as in
effect on the date hereof as consistently applied by Axis.
"IDENTIFIED LITIGATION" means the DeArmond Litigation and The Sapient
Group, Inc. v. Axis Consulting International, Inc.
"INDEPENDENT AUDITOR" has the meaning set forth in Section 2.7.
"KNOWLEDGE" means actual knowledge following review and participation in
preparation of SCHEDULE 3 to this Agreement, but no other independent
inquiry. Knowledge of Axis shall include knowledge of any of its officers or
directors.
"LAWS" means all laws, statutes, codes, rules, regulations, ordinances or
other requirements.
"MATERIAL ADVERSE EFFECT" means an adverse effect which is material to
the business or properties of Axis or WHI (as the case may be) as a whole.
"MATERIAL CONTRACT" has the meaning ascribed in Section 26 of SCHEDULE 3.
"MERGER" has the meaning set forth in Section 2.1 below.
"MERGER CONSIDERATION" has the meaning set forth in Section 2.4(d) below.
"1996 BALANCE SHEET" means the balance sheet of Axis at December 31, 1996
attached hereto as part of Section 14 of SCHEDULE 3.
"ORDINARY COURSE OR ORDINARY COURSE OF BUSINESS" means the ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency).
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"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, claim, charge or lien of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise.
"SEPTEMBER BALANCE SHEET" means the balance sheet of Axis at September
30, 1997 attached hereto as part of Section 13 of SCHEDULE 3.
"SHAREHOLDER INDEMNIFICATION AMOUNT" has the meaning set forth in Section
8.2 below.
"STOCK PRICE" means $30.25.
"STOCKHOLDERS EQUITY" means the stockholders equity of Axis determined in
accordance with GAAP.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1 below.
"WHI INDEMNIFICATION AMOUNT" has the meaning set forth in Section 8.3
below.
ARTICLE II
PLAN OF MERGER AND RELATED TRANSACTION
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
the Subsidiary will merge with and into Axis (the "Merger") at the Effective
Time. Axis shall be the corporation surviving the Merger (the "Surviving
Corporation").
2.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of XxXxxxxxx, Will
& Xxxxx in Chicago, Illinois, commencing at 9:00 a.m. local time on the third
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
or such other date as the Parties may mutually determine (the "Closing Date").
2.3 ACTIONS AT THE CLOSING. At the Closing, (a) Axis and each of the
Shareholders shall deliver to WHI and the Subsidiary the various
certificates, instruments and documents referred to in Section 6.1 below, (b)
WHI and the Subsidiary shall deliver to Axis the various certificates,
instruments and documents referred to in Section 6.2 below, (c) Axis and
Subsidiary shall file an Agreement of Merger with the California Secretary of
State and the Nevada Secretary of State in accordance with the California
General Corporation Law and the Nevada Business Corporation Act.
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2.4 EFFECT OF THE MERGER.
(a) GENERAL. The Merger shall become effective at the time (the
"Effective Time") that the California Secretary of State files the
Agreement of Merger in accordance with the California General Corporation
Law. The Merger shall have the effect set forth in the California General
Corporation Law and the Nevada Business Corporation Act. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf
of either Axis or the Subsidiary in order to (i) vest, perfect or confirm
in the Surviving Corporation title to and possession of any property or
right of Axis, or (ii) carry out and effectuate the transactions
contemplated by, and the intent of, this Agreement.
(b) ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation
of Axis shall be the Articles of Incorporation of the Surviving
Corporation, except as set forth below. The Bylaws of Axis shall be the
Bylaws the Surviving Corporation.
(c) DIRECTORS AND OFFICERS. The directors and officers of the
Subsidiary shall become the directors and officers of the Surviving
Corporation at and as of the Effective Time (retaining their respective
positions and terms of office).
(d) CONVERSION OF COMPANY SHARES; MERGER CONSIDERATION. At and as of
the Effective Time, all shares of Axis Capital Stock ("Axis Shares") owned
by the Shareholders shall be converted, in aggregate, into the right to
receive 1,575,078 shares ("Merger Consideration") of WHI's common stock
("WHI Shares"). Each Axis Share shall be exchanged for 1,575.078 WHI
Shares to be issued as the Merger Consideration, all as set forth on Part
4(d) of the Axis Disclosure Schedule (provided that no fractional shares
shall be issued, and the value of any fractional shares, valued at the
Stock Price shall be payable in cash).
No share of Axis capital stock shall be deemed to be outstanding or to
have any rights of any nature other than rights set forth in this Section
2.4(d) after the Effective Time.
(e) CONVERSION OF CAPITAL STOCK OF THE SUBSIDIARY. At and as of the
Effective Time, each share of capital stock of the Subsidiary shall be
converted into one share of capital stock of the Surviving Corporation,
without any action on the part of the holder thereof.
2.5 CLOSING OF TRANSFER RECORDS.
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(a) After the execution of this Agreement and prior to the close of
business on the Closing Date, transfers of shares of Axis capital stock
outstanding prior to the Effective Time shall not be made on its stock
transfer books. WHI shall hold 10% of each Shareholder's pro-rata share of
Merger Consideration ("Held Back Shares") after any Merger Consideration
Adjustment, with stock powers, to be surrendered to WHI (valued at the
Stock Price) in satisfaction of any WHI Indemnification Amount due within
one year following the Closing; provided, however, the Shareholders shall
pay any WHI Indemnification Amount related to the Identified Litigation in
cash without reduction of the Held Back Shares, and the Held Back Shares
will secure the Shareholders payment obligation. Any surrender of shares
under this clause shall be effected on a pro-rata basis, and any Held Back
Shares not required to be surrendered under this clause shall be delivered
to the Shareholders at the end of one year; provided, however, that if the
summary judgement ruling entered in favor of Axis with respect to the
DeArmond Litigation is reversed, the Held Back Shares shall continue to be
held subject to surrender to WHI for any WHI Indemnification Amount
incurred with respect to an ultimate adverse determination, not to be
delivered to the Shareholders until such time the DeArmond Litigation has
been settled by written agreement of the parties thereto or final court
judgement not subject to appeal ("Continued Holdback"). WHI shall permit
the Shareholders, in the event of a Continued Holdback, to sell the Held
Back Shares into the market and the proceeds of such sale shall continue to
be held under this Agreement as if such proceeds were "Held Back Shares,"
except that such proceeds shall be segregated and deposited in a separate
account identified as the property of the Shareholders over which WHI has
control only pursuant to the terms of this Agreement.
(b) WHI will hold and dispose of the Held Back Shares for WHI and the
Shareholders in regard of the indemnification obligations of Shareholders
under Article VIII hereof until the Held Back Shares are to be released
pursuant to the terms hereof. The Held Back Shares deposited by
Shareholders pursuant hereto shall, until released to WHI or the
Shareholders pursuant to the terms hereof, remain registered in the name of
such Shareholders, and such Shareholders shall be entitled to vote the same
and WHI will take all reasonable steps to allow and facilitate the exercise
of such rights. Except for tax-free dividends paid in stock declared with
respect to the Held Back Shares pursuant to Section 305(a) of the Code,
Shareholder shall be entitled to receive any cash dividends, dividends
payable in securities or distributions of any kind made in respect of the
Held Back Shares. In the event of any meeting of
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Stockholders of WHI during the period in which the Held Back Shares are
held by WHI pursuant hereto, WHI shall send to each Shareholder promptly
copies of any notices, proxies and proxy material in connection with such
meeting. Any claim made by WHI to any of the Held Back Shares may only
be made in good faith upon a reasonable basis in accordance with WHI's
rights under Section 8 of this Agreement. To make any claim to any of
the Held Back Shares, WHI must deliver to the Shareholders a written
notice specifying in reasonable detail the relevant facts upon which such
claim is based under this Agreement, the amount in dollars of such claim
and the number of Held Back Shares corresponding to such amount. Except
with respect to any Held Back Shares held with regard to the DeArmond
Litigation after the one year period, any such notice must be delivered
by WHI to the Shareholders prior to the date of the one-year anniversary
of the Closing. Any Held Back Shares that are not the subject of a
written notice so delivered shall not be in dispute. If there is no
dispute pending on the one-year anniversary of the Closing between WHI
and Shareholders with regard to any WHI Indemnification Amount, all Held
Back Shares will be promptly released by WHI to the Shareholders (other
than those held in connection with the DeArmond Litigation if still
unresolved). If there is a dispute pending on the one-year anniversary
of the Closing between WHI and Shareholders with regard to any WHI
Indemnification Amount due, no Held Back Shares will be released or
surrendered or cancelled with regard to the disputed amount until such
dispute is settled by written agreement of the parties hereto or final
court judgement not subject to appeal, and any Held Back Shares which do
not relate to the disputed amount shall be promptly released to the
Shareholders on the one-year anniversary of the Closing. In no event
shall any Held Back Shares be released by WHI in settlement of any WHI
Indemnification Amount alleged to be due unless and until such dispute is
settled by written agreement of WHI and the Shareholders or final court
judgement not subject to appeal.
2.6 REIMBURSEMENT BY SHAREHOLDERS FOR AXIS NET LIABILITIES.
(a) ADJUSTMENT TO MERGER CONSIDERATION. The Merger Consideration is
premised upon Stockholders Equity being at least $2,400,000 at the Closing
Date. In the event that Stockholders Equity on the Closing Date is less
than $2,400,000, then the Merger Consideration shall be reduced by a number
of WHI Shares equal to (x) the difference between the Stockholders Equity
on the Closing Date and $2,400,000 (y) divided by the Stock Price ("Merger
Consideration Adjustment")(or if any additional amount is later determined
to being owing under this SECTION 2.6, WHI shall be entitled to set off
against Held Back Shares).
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(b) CALCULATION OF STOCKHOLDERS EQUITY. On the Closing Date, the
Shareholders shall deliver to WHI a balance sheet of Axis as of the Closing
Date and a preliminary statement based thereon (the "Preliminary Settlement
Statement") setting forth their good faith estimate of the amount of
Stockholders Equity, which shall be the basis for any adjustment under
SECTION 2.6(a). If at any time thereafter (but not later than 30 days
after issuance of the audited statements of WHI for the year ended December
31, 1997), WHI believes in good faith that the Preliminary Settlement
Statement did not accurately describe the amount of the Stockholders Equity
and WHI reasonably believes in good faith that the accurate amount of
Stockholders Equity is less than $2,400,000, then WHI may deliver to the
Shareholders a statement (the "Adjustment Proposal") setting forth in
detail its proposed adjustments to Stockholders Equity. Such statement
shall be prepared in good faith and shall set forth all positive and
negative adjustments of which WHI is aware. WHI shall provide the
Shareholders with full access to all assets, records and work papers
necessary to compute and verify the accuracy of the Adjustment Proposal.
This Adjustment Proposal as delivered to the Shareholders shall be final
for purposes of this Agreement unless, within sixty (60) days after
delivery to the Shareholders, they shall deliver to WHI a notice setting
forth in detail their disagreement with the Adjustment Proposal ("Dispute
Notice"). After delivery of a Dispute Notice, WHI and the Shareholders
shall promptly negotiate in good faith with respect to the subject of the
Dispute Notice, and if they are unable to reach an agreement within fifteen
(15) days after receipt by WHI of the Dispute Notice, the dispute (but only
such disputed items) shall be submitted to the Independent Auditor. The
Independent Auditor shall not have authority to redetermine any matter
except those which are in dispute. The Independent Auditor shall be
directed to issue a final and binding decision within sixty (60) days of
submission of the Dispute Notice, as to the issues of disagreement referred
to in the Dispute Notice and not resolved by the parties. The Adjustment
Proposal, as so adjusted by agreement or by the Independent Auditor (if
required) shall be final and binding on the parties.
(c) PRELIMINARY SETTLEMENT STATEMENT, ADJUSTMENT PROPOSAL AND RELATED
PROCEDURES. The Preliminary Settlement Statement and Adjustment Proposal
shall be prepared in accordance with GAAP.
The "Independent Auditor" shall mean one of the "Big Six" public
accounting firms with no material relationship to either of the parties
chosen by agreement of the parties, or if they are unable to agree, shall
mean one of the "Big
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Six" firms with no such material relationship chosen by lot. The fees
and expenses of the Independent Auditor shall be equitably allocated by
the Independent Auditor based upon his decision. The decision of the
Independent Auditor with respect to the Adjustment Proposal shall be
final and binding on the parties. The full force and effect of the
representations and warranties shall in no way be diminished by the
Preliminary Settlement Statement, the Adjustment Proposal or the
determination of the Independent Auditor, provided that the Shareholders
shall not be liable for any breach of representation or warranty to the
extent that any liability giving rise to the breach is reflected in the
calculation of Stockholder Equity, as finally determined.
2.7 ACCOUNTING AND TAX TREATMENT. It is the intention of the Parties that
the transactions contemplated herein shall constitute for tax purposes a tax
deferred "reorganization" within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code and for accounting purposes a pooling of interests
business combination. The Parties agree to take no position at any time which
is inconsistent with such intention, except as otherwise required by law. It is
understood that none of the Parties warrant to any of the others that the
intended treatment will be obtained.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AXIS
Except as set forth on the Disclosure Schedule delivered in respect of
SCHEDULE 3 (the "Axis Disclosure Schedule"), Axis and the Shareholders severally
and not jointly represent and warrant to WHI and the Subsidiary the statements
made in SCHEDULE 3 as of the date of this Agreement. All references to "Part"
in SCHEDULE 3 are a reference to a Part of the Axis Disclosure Schedule. WHI
and the Subsidiary acknowledges that the detailed representations and warranties
by Axis and the Shareholders set forth in this Agreement have been carefully
negotiated and prepared by the parties. Axis and the Shareholders make no
representations or warranties with respect to any projections, forecasts or
forward-looking information provided to WHI. There is no assurance that any
projected or forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS
EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SCHEDULE 3
HEREOF, AXIS AND THE SHAREHOLDERS DISCLAIM ALL REPRESENTATIONS AND WARRANTIES,
WHETHER EXPRESSLY OR IMPLIED, AS TO ANY OTHER INFORMATION OR MATTERS. WHI and
the Subsidiary acknowledge that neither Axis, the Shareholders nor any other
person or entity has made any representation or warranty, express or implied, as
to the accuracy or completeness of any information which is not included or
referred to in this Agreement or the Axis Disclosure Schedule
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and neither Axis, the Shareholders nor any other person or entity will have
or be subject to any liability to WHI, any Affiliate thereof or any other
person or entity resulting from the distribution of any such information to,
or use of any such information by, WHI, any Affiliate thereof or any of their
agents, consultants, accountants, counsel or other representatives. Without
limitation of the foregoing, to the extent that any offering memoranda or
summaries prepared by Axis or the Shareholders or any of its respective
advisors or representatives are or have been provided to WHI, WHI
acknowledges and agrees that no representation or warranty is made as to the
completeness of accuracy of such memoranda or summaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WHI
WHI represents and warrants to Axis and the Shareholders the statements
contained in Schedule 4 as of the date of this Agreement.
ARTICLE V
COVENANTS
The Parties agree as follows with respect to the period from and after
the execution of this Agreement to the Closing.
5.1 GENERAL. Each of the Parties shall use all reasonable efforts to
take all action and to do, or to cause to be done, all things necessary or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.2 NOTICES AND CONSENTS. Axis and the Shareholders shall give any
required notices to third parties, and shall use reasonable efforts to obtain
any third-party consents necessary for the continued effectiveness of all
Material Contracts. Axis and the Shareholders shall obtain the prior
approval of WHI as to the form and content of each such notice and consent.
5.3 REGULATORY MATTERS AND APPROVALS. Each of the Parties will take any
action that may be necessary or advisable in connection with any other
notices to, filings with, and authorizations, consents and approvals of
governments and governmental agencies that it may be required to give, make
or obtain.
5.4 OPERATION OF BUSINESS. Except as specifically set forth below or
elsewhere in this Agreement or otherwise by written instrument countersigned
by WHI, Axis shall not engage in any practice, take any action, embark on any
course of inaction,
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or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing:
(a) Axis shall not authorize or effect any change in its charter
or bylaws;
(b) Axis shall not grant any options, warrants, or other rights
to purchase or obtain any of its capital stock or issue, sell, or
otherwise dispose of any of its capital stock;
(c) Axis shall not redeem, repurchase, or otherwise acquire any
of its capital stock (but may pay cash dividends) during the period
beginning upon the execution of this Agreement and ending upon the
earlier of (i) Closing or (ii) termination of this Agreement;
(d) Axis shall not create, incur, assume or guarantee any
indebtedness (including any capitalized lease obligation) or other
obligation or liability other than in the Ordinary Course of Business;
(e) Axis shall not impose or permit any Security Interest upon
any of its assets;
(f) Axis shall not make any capital investment in, make any loan
to, or acquire the securities or assets of any other person;
(g) Axis shall not make any change in employment terms for any of
its directors or officers or, other than in the ordinary course of
Business, its employees;
(h) Axis shall not enter into any agreement that requires the payment
of royalties or similar arrangements, or renew any existing arrangements in
each case other than in the ordinary course of business;
(i) Axis shall not commit to any of the foregoing; and
(j) Axis shall use all reasonable efforts to cause Axis to
preserve, protect and maintain the Business, maintain and keep in
effect all insurance on assets and property, preserve intact the
organization and reputation of the Business, keep available the
services of present executives, employees and agents of the Business,
and preserve the goodwill of suppliers, subcontractors, customers and
others having business relationships with the Business through the
Closing.
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5.5 FULL ACCESS. Axis shall permit representatives of WHI to have full
access to all premises, properties, books, records, contracts, tax records,
documents and third parties with relationships with Axis, all on reasonable
notice, provided, however, that WHI will only contact third parties after
receiving approval from the Shareholders of the manner, timing and form of any
contact, such approval not to be unreasonably withheld or delayed.
5.6 NOTICE OF DEVELOPMENTS. Axis shall give prompt written notice to WHI
and the Subsidiary of any material development adversely affecting the assets,
liabilities, business, financial condition, operations or results of Axis. Each
Party shall give prompt written notice to the others of any material development
affecting the ability of the Parties to consummate the transactions contemplated
by this Agreement.
5.7 EXCLUSIVITY. Neither Axis nor the Shareholders nor any person on their
behalf shall entertain, discuss, solicit or respond to any offer or inquiry to
purchase a significant portion of Axis's assets or capital stock, directly or
indirectly, or effect any business combination with Axis during the period
beginning upon the execution of this Agreement and ending upon the earlier of
(i) Closing or (ii) termination of this Agreement. Axis and the Shareholders
shall notify WHI immediately if any person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
5.8 TAX MATTERS. At or prior to the Closing, WHI and Axis shall execute
and deliver to Xxxxxx Godward LLP appropriate tax representation letters (which
will be used in connection with the legal opinion contemplated by SECTION
6.2(k)). WHI and the Subsidiary shall use all reasonable efforts to cause the
Merger to qualify as a tax-free reorganization under Section 368(a)(1) of the
Code.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF WHI AND THE SUBSIDIARY. The obligation of
each of WHI and the Subsidiary to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(a) Axis shall have procured all of the third party consents
specified in Section 5.2 above;
(b) the representations and warranties set forth in SCHEDULE 3
above (excluding any representation or warranty that refers
specifically to "the date of their Agreement," "the date hereof" or
any other date, other
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than the Closing Date) shall be accurate at and as of the Closing Date
(it being understood that, for purposes of determining the accuracy of
such representations and warranties as of the Closing Date (i) any
inaccuracy that results from or relates to general business, economic or
industry conditions shall be disregarded, and (ii) any inaccuracy that
results from or relates to the taking of any action contemplated or
permitted by this Agreement or the announcement or pendency of the Merger
shall be disregarded);
(c) Axis and the Shareholders shall have performed and complied
with their covenants hereunder through the Closing;
(d) no action, suit or proceeding shall be in effect, pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state or local jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (iii) affect
adversely the right of WHI to own, or control the Surviving
Corporation or benefit therefrom;
(e) the Parties shall have received all required authorizations,
consents and approvals of governments and governmental agencies;
(f) WHI and the Subsidiary shall have received from Xxxxxxxx
Xxxxxxx, counsel to Axis and the Shareholders, an opinion in the form
of EXHIBIT A attached hereto, addressed to WHI and the Subsidiary and
dated as of the Closing Date;
(g) WHI and the Subsidiary shall have received the resignations,
effective as of the Effective Time, of each director and officer of
Axis and a release from each officer and director in the form of
EXHIBIT B hereto (excluding a release of indemnification rights and
obligations of WHI arising hereunder);
(h) WHI shall have received resolutions, certified by the Secretary
of Axis, of it board of directors and the Shareholders, authorizing this
Agreement and the transactions contemplated hereby.
(i) all amounts owed to Axis by any Shareholders of Axis (or their
Affiliates) shall have been paid in full;
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(j) WHI shall have received the Inducement Agreement from the
Shareholders in the form of EXHIBIT C hereto;
(k) the key employees of Axis shall have executed Axis's standard
confidentiality agreement in exchange for sufficient consideration;
(l) WHI shall have received from management of Axis a letter,
dated the Closing Date, relating to "pooling of interests" criteria,
in form and substance satisfactory to WHI;
(m) each of the Shareholders shall have entered into an
Employment Agreement in the form attached hereto as EXHIBIT D with
WHI;
(n) No Material Adverse Effect on Axis shall have occurred since the
date of this agreement.
WHI and the Subsidiary may waive in writing any condition specified in this
Section 6.1.
6.2 CONDITIONS TO OBLIGATION OF AXIS. The obligation of Axis and the
Shareholders to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in SCHEDULE 3
above (excluding any representation or warranty that refers
specifically to "the date of their Agreement," "the date hereof" or
any other date, other than the Closing Date) shall be accurate at and
as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of
the Closing Date (i) any inaccuracy that results from or relates to
general business, economic or industry conditions shall be
disregarded, and (ii) any inaccuracy that results from or relates to
the taking of any action contemplated or permitted by this Agreement
or the announcement or pendency of the Merger shall be disregarded);
(b) each of WHI and the Subsidiary shall have performed and
complied with their covenants hereunder through the Closing;
(c) no action, suit or proceeding shall be in effect, pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state or local jurisdiction wherein an unfavorable
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judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (iii) affect
adversely the right of WHI to own, or control the Surviving
Corporation or benefit therefrom;
(d) the Parties shall have received all required authorizations,
consents and approvals of governments and governmental agencies;
(e) Axis shall have received from Xxxxx X. Xxxxxx, counsel to WHI
and the Subsidiary an opinion in the form of EXHIBIT E attached
hereto, addressed to Axis and the Shareholders and dated as of the
Closing Date;
(f) Axis and the Shareholders shall have received resolutions,
certified by the Secretaries of WHI and the Subsidiary of their respective
boards of directors and the stockholder of the Subsidiary, authorizing this
Agreement and the transactions contemplated hereby.
(g) WHI shall have entered into an Employment Agreement in the
form attached hereto as EXHIBIT D with each of the Shareholders;
(h) A registration statement on Form S-4 covering all of the Merger
Consideration shall be effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with
respect to such registration statement.
(i) There shall have been delivered to the Shareholders a legal
opinion of Xxxxxx Godward LLP, dated as of the Closing Date, to the effect
that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code; PROVIDED, HOWEVER, that if Xxxxxx Godward LLP does
not render such opinion or withdraw or modifies such opinion, this
condition shall nonetheless be deemed to be satisfied if XxXxxxxxx, Will &
Xxxxx renders such opinion to the Shareholders. In rendering such opinion,
such firm may rely on such representations, warranties and certificates as
it deems reasonable or appropriate under the circumstances.
(j) No Material Adverse Effect on WHI shall have occurred since the
date of this Agreement.
Axis and the Shareholders may waive in writing any condition specified in this
Section 6.2.
14
ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate this
Agreement as provided below:
(a) the Parties may terminate this Agreement by joint written
consent at any time prior to the Effective Time;
(b) WHI and the Subsidiary may terminate this Agreement by giving
written notice to Axis at any time prior to the Effective Time in the event
that Axis is in breach of any representation, warranty, covenant or
agreement contained in this Agreement in any material respect, Axis has
been notified of such breach and the breach has not been cured in all
material respects within forty-five (45) days of such notice; provided,
however, that neither WHI nor the Subsidiary may terminate this Agreement
pursuant to this SECTION 7.1(b) if either shall have wilfully and
materially breached this Agreement;
(c) WHI and the Subsidiary may terminate this Agreement by giving
written notice to Axis at any time prior to the Effective Time, if the
Closing shall not have occurred on or before November 30, 1997 by
reason of the failure of any condition precedent under Section 6.1
hereof (unless the failure results primarily from WHI or the
Subsidiary breaching any representation, warranty, covenant or
agreement contained in this Agreement); or
(d) Axis may terminate this Agreement by giving written notice to WHI
at any time prior to the Effective Time in the event that WHI is in breach
of any representation, warranty, covenant or agreement contained in this
Agreement in any material respect, WHI has been notified of such breach and
the breach has not been cured in all material respects within forty-five
(45) days of such notice; provided, however, that Axis may terminate this
Agreement pursuant to this SECTION 7.1(d) if it shall have wilfully and
materially breached this Agreement;
(e) Axis may terminate this Agreement by giving written notice to
WHI at any time prior to the Effective Time, if the Closing shall not
have occurred on or before November 30, 1997 by reason of the failure
of any condition precedent under Section 6.2 hereof (unless the
failure results primarily from Axis or the
15
Shareholders breaching any representation, warranty, covenant or agreement
contained in this Agreement).
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 7.1 above, all obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party, provided, that the
confidentiality provisions contained in those certain Confidentiality Agreements
between WHI and Axis dated August 29, 1997 (the "Confidentiality Agreements")
shall survive the termination of this Agreement.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be material and to have been
relied upon by the Parties hereto. All covenants and agreements shall survive
the Closing and shall be fully effective and enforceable until the covenant or
agreement has been fully performed. All representations and warranties (other
than with respect to the DeArmond Litigation) shall survive the Closing for a
period of 1 year; provided, however, that any representations and warranties
concerning tax liability shall survive until ninety days following the
expiration of any applicable statute of limitations and any representations and
warranties set forth in Section 34 of SCHEDULE 3 shall survive for two years.
Notwithstanding anything to the contrary contained herein, the representation,
and warranties contained in this Agreement shall not be affected by any
investigation, verification or examination by any Party or by anyone on behalf
of any such Party.
8.2 INDEMNIFICATION BY WHI. From and after the Closing, WHI shall
indemnify and hold Shareholders harmless from and against any and all loss,
cost, damage, expense (including court costs and attorneys' fees), caused by or
arising from any breach of representation or warranty contained in Schedule 4 or
breach of any covenant or agreement of WHI or the Subsidiary contained herein.
The amount to which the Shareholders shall be entitled hereunder which has not
been paid to the Shareholders shall be referred to as the "Shareholder
Indemnification Amount."
8.3 INDEMNIFICATION BY THE SHAREHOLDERS. From and after the Closing, the
Shareholders shall jointly and severally indemnify and hold WHI, the Subsidiary
and the Surviving Corporation harmless from and against any and all loss, cost,
damage, expense (including court costs and attorneys' fees) caused by or arising
from (i) any breach of representation or warranty contained in Schedule 4 or
breach of any covenant or agreement of Axis or the Shareholders contained
herein, (ii) any
16
liability or expense arising out of the Identified Litigation, (iii) any
liability or expense arising out of the matters disclosed in Parts 3.3, 3.25,
3.29 or 3.34 of the Axis Disclosure Schedule, and (iv) any undisclosed
indebtedness (contingent or absolute) voluntarily incurred by Axis in
connection with activities not related to the Business. The amount to which
WHI or the Surviving Corporation shall be entitled hereunder which has not
been paid to WHI or the Surviving Corporation shall be referred to as the
"WHI Indemnification Amount." In the case of WHI Shares withheld pursuant to
SECTION 2.5, they shall be valued at the Stock Price.
8.4 NOTICE OF CLAIMS. Should any claim be made against WHI or the
Surviving Corporation by a person not a party to this Agreement with respect
to any matter to which indemnity of any of the Shareholders set forth in
Article VIII applies, then WHI shall promptly give the Shareholders written
notice of any such claim, and, subject to this Article VIII, such
Shareholders shall thereafter have the option to defend or settle any such
claim, at their sole expense, on their own behalf and with counsel of their
own choosing, which counsel shall be reasonably satisfactory to WHI. If the
Shareholders fail to, or elect not to defend any such claim, WHI shall defend
such claim; provided, however, that the Shareholders' consent shall be
required for any settlement payment, which consent will not be unreasonably
withheld. In such defense or settlement of any claim, the non-defending
party shall cooperate with and assist the parties to the maximum extent
reasonably possible and may participate therein (at such party's expense)
with such party's own counsel, and such party's written consent shall be a
requirement to any settlement or disposition thereof, which consent shall not
be unreasonably withheld. Notwithstanding anything to the contrary contained
herein, if the Shareholders shall not consent to a settlement recommended by
WHI, the Shareholders shall be liable for any indemnification amount in
excess of the recommended settlement payment arising from the final
resolution of the proceedings plus any additional defense costs incurred by
WHI subsequent to the recommended settlement. Any payment resulting from
such defense or settlement, together with the total expense thereof, shall be
binding on the parties for the purposes of this Article VIII. Subject to the
limits for claims in SECTION 8.1, failure to give notice within a reasonable
period of time shall not constitute a defense, in whole or in part, to any
claim for indemnification by WHI, except only to the extent that such failure
by WHI or the Surviving Corporation shall result in a material prejudice to
the Shareholders.
8.5 DEDUCTIBLE. Notwithstanding anything to the contrary contained
herein,
(a) The Shareholders shall have not have any liability to WHI and the
Surviving Corporation for breaches of
17
representations or warranties until the total WHI Indemnification
Amount exceeds $350,000 plus the amount by which Stockholders Equity
exceeds $2,600,000 ("Total Deductible"), whereupon only the amount
in excess of the Total Deductible shall be payable;
(b) WHI shall have not have any liability to the Shareholders for
breaches of representations or warranties until the total Shareholder
Indemnification Amount exceeds $350,000, whereupon only the amount in
excess of $350,000 shall be payable.
8.6 LIMITATION OF LIABILITY.
(a) Neither WHI, the Subsidiary nor the Surviving Corporation will be
entitled to be indemnified or held harmless pursuant to this Article VIII;
(i) with respect to consequential damages, including, without
limitation, consequential damages consisting of business interruption or
lost profits, or with respect to punitive damages;
(ii) with respect to any obligation, liability or matter to the
extent reserves or accruals for such matter are reflected in the financial
statements of Axis;
(iii) to the extent any obligation or liability or matter,
including with respect to environmental remediation and clean-up, arise
under any Law or interpretations of any Law or interpretations of any Law
that arise or are promulgated or announced after the Closing Date;
(b) Any indemnification or recovery by WHI, the Subsidiary or the
Surviving Corporation under Article VIII of this Agreement, any agreement or
instrument contemplated hereby, any document relating hereto or thereto or any
Exhibit or Schedule to this Agreement or otherwise relating to the transactions
contemplated hereby shall not exceed $7,146,916.43, except for indemnification
regarding matters described in SECTION 8.3(ii) and (iii).
(c) The Shareholders shall not be obligated or liable for indemnities,
obligations or liabilities of and to the extent arising from any tax
determinations, allocations or positions of WHI or the Surviving Corporation
after the Closing that are different from those of Axis prior to the Closing
unless such position is required by law.
(d) Any recovery payable under Article VIII hereof shall be calculated
after giving effect to (A) any proceeds
18
received from insurance policies paid for by Axis prior to the Closing or for
which reimbursement of the premium amount is made by the Shareholders after
Closing covering the damage, loss, liability or expense that is the subject
to the claim for indemnity and (B) the actual realized tax benefit to WHI or
the Surviving Corporation resulting from the damage, loss, liability or
expense that is the subject of the indemnity; PROVIDED that to the extent
that any tax benefit is realized in a tax year other than the year in which
the indemnity is paid, WHI shall make a payment to the Shareholders in the
amount of such realized tax benefit in the year in which it is realized.
Axis shall purchase such insurance as requested by the Shareholders upon a
commitment for reimbursement from the Shareholders for any premium for such
insurance. For purposes of this Article VIII, an actual realized tax benefit
is an actual reduction in taxes payable net of lost tax benefits or a refund
of taxes previously paid net of lost tax benefits.
(e) No Shareholder shall be liable for any WHI Indemnification
Amount in excess of the amount thereto multiplied by his percentage ownership
of Axis on the date hereof.
(f) Except for any claim for indemnification relating to the
DeArmond Litigation, any claim by either party for indemnification hereunder
must be asserted in writing prior to the first anniversary of the Closing
Date, provided however, that any claims by WHI relating to breach of
representations or warranties concerning tax liability may be brought until
ninety days following the expiration of any applicable statute of limitations
and any claims relating to breach of the representations and warranties set
forth in Section 34 of SCHEDULE 3 may be brought until the second anniversary
of the Closing Date.
8.7 EXCLUSIVE REMEDY. The sole recourse and exclusive remedy of WHI, the
Subsidiary or the Surviving Corporation against Axis and the Shareholders (i)
prior to the Closing for the breach of any of the representations,
warranties, covenants and agreements contained in this Agreement shall be the
release, by terminating this Agreement, of WHI's obligations to complete the
transactions herein, and (ii) after the Closing for the breach of any
representations, warranties, covenants and agreements contained in this
Agreement, any agreement or instrument contemplated hereby, any document
relating hereto or thereto or any Exhibit or Schedule to this Agreement, or
otherwise arising from the transactions contemplated hereby, shall be to
assert a claim for indemnification under the provisions of this Article VIII.
The only legal action which may be asserted by WHI or the Surviving
Corporation against Axis or the Shareholders with respect to any matter which
is the subject of this Agreement shall be a contract action to enforce, or to
recover damages for the breach of, this Agreement, and any
19
recovery by WHI shall be limited as provided in this Article VIII. Without
limiting the generality of the foregoing, no legal action based upon
predecessor or successor liability, contribution, tort or strict liability
may be maintained by WHI, the Subsidiary or the Surviving Corporation against
Axis or the Shareholders with respect to any matter that is the subject of
this Agreement, any agreement or instrument contemplated hereby, any document
relating hereto or thereto or any Exhibit or Schedule to this Agreement, or
otherwise arising from the transactions contemplated hereby.
ARTICLE IX
SECURITIES LAW MATTERS; BENEFIT PLAN MATTERS
9.1 REGISTRATION STATEMENT. WHI shall use all reasonable efforts to
cause a Form S-4 registration statement covering the issuance of the Merger
Consideration to remain effective through the Closing and shall prepare and
cause to be filed with the SEC any other documents required by the Securities
Act or the Exchange Act in connection with the Merger. Each of WHI and Axis
shall promptly furnish to the other all information that may be required or
reasonably requested in connection with any action contemplated by this
SECTION 9.1. If any event relating to Axis or relating to WHI occurs, or if
Axis or WHI becomes aware of any information, that should be set forth in an
amendment or supplement to such S-4 Registration Statement then Axis or WHI
(as the case may be) shall promptly inform the other thereof and shall
cooperate with the other in filing such amendment or supplement with the SEC
and, if appropriate, in delivering such amendment or supplement to the
Shareholders.
9.2 PARENT PLANS AND BENEFIT ARRANGEMENTS. The Benefit Plans (as defined
in SCHEDULE 3) of Axis that provide non-discretionary, non-cash benefits to
employees of Axis and that are substantially similar to benefit plans and
benefit arrangements currently maintained by WHI shall, to the extent
practicable, be maintained in effect by the Surviving Corporation until the
Continuing Employees (as defined in this SECTION 9.2) are allowed to
participate in such similar benefit plans or benefit arrangements maintained
by WHI. As soon as practicable after the Effective Time, WHI's benefit plans
and benefit arrangements will provide benefits to the Continuing Employees
who are eligible for WHI's benefit plans and benefit arrangement that are
comparable to the non-discretionary, non-cash benefits provided to similarly
situated employees of WHI. If permitted by WHI's plans, any pre-existing
condition limitations contained in WHI's health plans and health benefit
arrangements for any Continuing Employee who would be deemed under WHI's
health plans and health benefit arrangements to have a disqualifying
pre-existing condition shall be waived by WHI and any provider under
20
any of its plans and arrangements, to the extent such condition was covered
by a Benefit Plan immediately prior to the Effective Time. If permitted by
WHI's plans, WHI's benefit plans and benefit arrangements shall give full
credit to each Continuing Employee for such Continuing Employee's period of
service with Axis prior to the Effective Time for all purposes for which such
service was recognized under the Benefit Plans prior to the Effective Time.
For purposes of this SECTION 9.2 "Continuing Employee" shall mean any
employee of Axis who continues as an employee of the Surviving Corporation or
WHI after the Effective Time.
9.3 NASDAQ QUOTATION. WHI shall cause the WHI Shares to be approved for
quotation on the Nasdaq National Market.
ARTICLE X
MISCELLANEOUS
10.1 PRESS RELEASES AND ANNOUNCEMENTS. During the period beginning upon
full execution of this Agreement and ending upon the earlier of (i) Closing
or (ii) termination of this Agreement, no Party shall issue any press
release, public announcement or public disclosure relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that the foregoing shall not prohibit disclosure
to a Party's attorneys, accountants, lenders or financial advisors (who shall
be bound by this provision), nor shall the foregoing prohibit WHI from making
any public disclosure it believes in good faith is required by Law (in which
case WHI will advise Axis prior to making the disclosure, which must be
approved in content by Axis, which approval cannot be unreasonably withheld
or delayed). After Closing, WHI shall be entitled to make the first public
disclosure regarding the subject matter of this Agreement and WHI's consent
shall be required prior to any public disclosures made by Axis and the
Shareholders not to be unreasonably withheld.
10.2 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
10.3 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements or representations by or among the
Parties, written or oral, that may have related in any way to the subject
matter hereof.
10.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective heirs,
successors and permitted assigns.
21
Other than WHI and Subsidiary, no Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior
written approval of the other Parties; provided that in the event of an
assignment by WHI or Subsidiary, the assignor shall remain liable for all of
the obligations hereunder transferred to the Assignee. In no event shall any
assignment of this Agreement be made by WHI or Subsidiary prior to Closing to
a party other than an Affiliate of WHI.
10.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Any reference herein
to an agreement or contract shall be deemed to refer also to the other (such
terms being interchangeable) and shall include commitments and
understandings, whether written or oral, including all amendments thereto.
10.6 HEADINGS; MEANING. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement. The term "including" shall be
interpreted to mean "including without limitation."
10.7 NOTICES. All notices, requests, demands, claims and other
communications hereunder must be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then three (3) business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to Axis or the Shareholders:
Xxxxx Xxxxxx
0000 Xxxx Xxxxxx, Xxx. 000
Xxx Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxx
0000 Xxxxxxxx
Xxx Xxxxxxxxx, XX 00000
If to WHI or the Subsidiary:
Xxxxxxxx-Xxxx, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, President
Fax No.: (000) 000-0000
22
Copies to:
Xxxxxxxx-Xxxx, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000
AND
Xxxx X. Xxxxx, P.C.
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change its address by giving the other
Parties notice in the manner herein set forth.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Illinois.
10.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time. No amendment or
waiver of any provision of this Agreement shall be valid unless the same shall
be in writing and signed by the appropriate Parties. No waiver by any Party of
any misrepresentation or breach of warranty, covenant or agreement hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
misrepresentation or breach of warranty, covenant or agreement hereunder.
10.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term
23
or provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified.
10.11 EXPENSES. Except as otherwise specifically set forth herein, WHI
will bear the costs and expenses (including legal fees and expenses) of WHI
and Subsidiary incurred in connection with this Agreement and the
transactions contemplated hereby and Shareholders will bear the costs and
expenses (including legal fees and expenses) of Shareholders and Axis
incurred in connection with this Agreement and the transactions contemplated
hereby, and Axis shall bear none of such expenses except as set forth in the
next sentence. At Closing Axis shall pay in cash Axis's reasonable and
documented legal and accounting fees not to exceed $150,000 and WHI shall pay
in cash Axis's brokerage fees not to exceed two percent (2%) of the value of
the Merger Consideration, valued in accordance with the Sequoia Partners
engagement letter incurred in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, Axis may
pay any other expenses of Axis or the Shareholders incurred prior to the
Effective Time provided that any such expenses still outstanding at the
Effective Time are included in the Preliminary Settlement Statement and taken
into account in the calculation of Stockholders Equity but only to the extent
they exceed the foregoing amounts. Any such expenses falling within the
foregoing $150,000 limit shall not be included in the Preliminary Settlement
Statement regardless of whether GAAP would otherwise require their inclusion.
10.12 CIVIL LIABILITY UNDER RICO. The Parties hereby waive all
rights to pursue civil remedies to which they may be entitled or may become
entitled with respect to this Agreement and the transactions contemplated
hereby against the other parties hereto under the Racketeer Influenced and
Corrupt Organization Act of 1970, as amended, including specifically any
rights to treble damages which may be available to them pursuant to 18 U.S.C.
Section 1964(c).
10.13 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, WHI will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Axis
pursuant to (i) each indemnification agreement currently in effect between
the Company and each person who is or was a director or officer of Axis at or
prior to the Effective Time and (ii) any indemnification provision under
Axis's Articles of Incorporation or By-Laws as each is in effect on the date
hereof (the persons to be indemnified pursuant to the agreements or
provisions referred to in clauses (i) and (ii) of this SECTION 10.13 shall be
referred to as, collectively, the "Indemnified Parties"). The Articles of
Incorporation and By-
24
Laws of the Surviving Corporation shall contain the provisions with respect
to indemnification and exculpation from liability set forth in Axis's
Restated Articles of Incorporation and By-Laws on the date of this Agreement,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of any Indemnified Party.
(b) WHI and the Surviving Corporation jointly and severally agree to pay
all expenses, including attorneys' fees, that may be incurred by the
Indemnified Parties in enforcing the indemnity and other obligations provided
for in this SECTION 10.13.
(c) This SECTION 10.13 shall survive the consummation of the Merger and
the Effective Time, is intended to benefit and may be enforced by Axis, WHI,
the Surviving Corporation and the Indemnified Parties, and shall be binding
on all successors and assigns of WHI and the Surviving Corporation.
25
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
AXIS CONSULTING INTERNATIONAL, INC.
By:_________________________________
XXXXXXXX-XXXX, INC.
By:_________________________________
Xxxxxx X. Xxxxxxx, President
XXXXXXXX-XXXX ASSOCIATES, INC.
By:_________________________________
Xxxxxx X. Xxxxxxx, President
_________________________________
Xxxxx Xxxxxx
_________________________________
Xxxxxx Xxxxxx
AXIS AND SHAREHOLDER REPRESENTATIONS SCHEDULE 3
1. AUTHORITY AND NO CONFLICT. Axis has full right, power and
authority, without the consent of or filing with any other person (including any
governmental authority), to execute and deliver this Agreement and the
agreements contemplated hereby and to carry out the transactions contemplated
hereby and thereby. All corporate and other acts required to be taken by Axis
to authorize the execution, delivery and performance of this Agreement and all
agreements and transactions contemplated hereby have been properly taken.
Except as set forth in PART 3.1, such execution, delivery and performance will
not create any material encumbrance nor terminate nor accelerate any obligation
under any Material Contract, (A) will not violate or conflict with any provision
of (i) the charter or by-laws of Axis, (ii) any injunction, decree or judgment
of any court or governmental agency identifying Axis therein, or (iv) any Law
applicable to the Axis or the Business.
2. VALIDITY. This Agreement has been, and the agreements and other
documents to be delivered at Closing will be, duly executed and delivered and
constitute the valid and legally binding obligations of Axis, enforceable in
accordance with their respective terms. This Agreement has been, and the
agreements and other documents to be delivered at Closing will be, duly executed
and delivered and constitute the valid and legally binding obligations of the
Shareholders, enforceable in accordance with their respective terms. No
approval, registration, filing or other action by or with any person, including
any governmental authority, is required in connection for Axis to execute and
consummate this Agreement.
3. DUE ORGANIZATION. Axis is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Axis
has full power and authority and all requisite licenses and rights to carry on
the Business. PART 3.3 sets forth each state in which Axis is licensed or
qualified to do business, and there are no other states in which Axis is
required to be licensed or qualified by reason of the conduct of its Business or
the ownership of its assets. Axis has delivered to WHI correct and complete
copies of the charter and bylaws of Axis (as amended to date). The minute books
(containing all records of meetings of the shareholders, the board of directors,
and any committees of the board of directors) and the stock record books of Axis
as made available to WHI are accurate and complete. Axis is not is in default
under or in violation of any provision of its charter or bylaws.
4. CAPITALIZATION. The entire authorized capital stock of Axis
consists of an aggregate of 50,000 shares of Capital stock, no par value, of
which 1,000 shares are issued and outstanding and owned by the Shareholders free
and clear of liens, claims or encumbrances. No shares will be issued or
transferred in any manner by Axis after the date of this Agreement. All of the
issued and outstanding shares of Axis have been duly authorized and are validly
issued, fully paid, and nonassessable. All previously issued shares which are
not outstanding have been duly redeemed. There are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights or other agreements or commitments to which the Axis is a
party or which are binding upon Axis providing for the issuance, disposition or
acquisition of any of Axis's capital stock or rights thereto. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Axis or Axis shares.
No shares of Axis's capital stock were issued in violation of any
preemptive, subscription or other right of any person, including any right to
acquire securities of Axis. All shares of Axis's capital stock were issued and
sold in compliance with all Laws, including state and federal securities laws.
There are no voting trusts or other agreements, arrangements or understandings
applicable to the exercise of voting or any other rights with respect to any
Company Shares. No shares of Axis's capital stock have ever been redeemed or
otherwise reacquired by Axis.
5. SUBSIDIARIES. Axis does not own stock or have any equity
investment or other interest in, does not have the right to acquire any such
interest, and does not control, directly or indirectly, any corporation,
association, partnership, joint venture or other entity and has not had such an
ownership or control relationship with any such entity.
6. DIRECTORS AND OFFICERS. PART 3.6 sets forth a true and current
list of the officers and directors of Axis.
7. TRANSACTIONS WITH AFFILIATES. No Affiliate:
a. owns, directly or indirectly, any interest in any entity which
is a competitor, lessor, lessee, customer, licensor or supplier of
Axis;
b. has any cause of action or other claim against or owes any
amount to, or is owed any amount by, Axis or any licensor or supplier
of Axis; or
c. has any interest in or owns any assets, property, or rights
used in the conduct of the Business; or
d. is a party to any contract, lease, agreement, arrangement or
commitment used in the Business.
2
The term "Affiliate" shall mean:
(a) any corporation, partnership, trust or other entity (i) in
which Axis or any person listed in (b) or (c) below has, directly or
indirectly, a five percent (5%) or greater interest or (ii) which
controls, is controlled by, or is under common control with Axis, any
person listed in (b) or (c) below, any of the entities described in
the preceding clause (i) or any combination thereof;
(b) the Shareholders; and
(c) any descendant, ancestor, spouse, brother, sister or other
relation of any person described in (b) above.
8. BANKING RELATIONSHIPS AND INVESTMENTS. PART 3.8 sets forth an
accurate, list of all banks and financial institutions in which Axis has an
account, deposit, safe-deposit box or borrowing relationship, factoring
arrangement or other loan facility or relationship, including the names of all
persons authorized to draw on those accounts or deposits, or to borrow under
loan facilities, or to obtain access to such boxes. PART 3.8 sets forth an
accurate list of all certificates of deposit, debt or equity securities and
other investments owned, beneficially or of record, by Axis (the
"Investments"). Axis has good and legal title to all of the Investments.
9. INSURANCE. PART 3.9 sets forth an accurate list and summary
description of all binders, policies of insurance or fidelity bonds
("Insurance") maintained by Axis or in which Axis is a beneficiary or a named
insured. All Insurance has been issued under valid and enforceable policies or
binders for the benefit of Axis, and all such policies or binders are in such
types and full force and effect. There are no pending or currently asserted
claims against any Insurance as to which any insurer has denied liability, and
since December 31, 1995, there have been no claims under any Insurance that have
been disallowed or improperly filed. No notice of cancellation or nonrenewal
with respect to any Insurance has been received by Axis since December 31,
1995.
10. MOTOR VEHICLES. PART 3.10 sets forth an accurate list of all motor
vehicles used by Axis, whether owned or leased. All such vehicles are (a)
properly licensed and registered in accordance with applicable law; and (b)
insured as set forth in PART 3.10.
11. REAL ESTATE LEASES. Axis does not own any real property. Axis
does not lease any real property.
3
l2. PERSONAL PROPERTY LEASES. PART 3.12 sets forth an accurate list of
all leases of personal property used in the Business. Axis has been in
peaceable possession of the property covered by each such lease since the
commencement thereof. Axis has made available to WHI an accurate, correct and
complete copy of each such lease.
13. FINANCIAL STATEMENTS; RECEIVABLES. The financial statements of the
Business attached hereto as PART 3.14 from for the years ended December 31, 1995
and December 31, 1996 AND the balance sheet and income statement dated September
30, 1997 (collectively, the "Financial Statements") are (i) fair presentations
of the financial condition, results of operations and cash flows as of the dates
and for the periods indicated and (ii) prepared in accordance with generally
accepted accounting principles ("GAAP"). Axis is not subject to any liability
or obligation (whether absolute, accrued, contingent or otherwise, known or
unknown) of a nature required to be reported in the liabilities column of the
financial statements under GAAP which is not shown or provided for on the
Financial Statements or described in narrative form on PART 3.14, except for
performance obligations under contracts (A) entered into in the Ordinary Course
of Business not arising from breach and (B) otherwise identified in the Axis
Disclosure Schedule. All accounts receivable were generated in the Ordinary
Course of the Business. The net amount of accounts receivable of the Business
reflected on the Preliminary Settlement Statement will be collectible within
ninety (90) days of the Closing Date, PROVIDED, HOWEVER, such warranty of
collectibility does not apply to receivables which become uncollectible due to
(i) the debtor's inability to pay, which Axis and the Shareholders are unaware
of prior to Closing or (ii) a failure or defect in performance which occurs
after the Closing.
14. INTERIM CHANGE. From September 30, 1997 to the date of this
Agreement, Axis has operated the Business in the ordinary course, consistent
with past practice, and there has not been any of the following in connection
with the Business:
a. any event resulting in a Material Adverse Effect;
b. any material increase in the compensation, or benefits
payable or to become payable to or on account of employees other than
in the Ordinary Course of Business;
c. any work stoppage or labor dispute;
d. any material damage to, destruction of or claim against a
material asset, or any disposition of assets, other than sales in the
Ordinary Course of Business;
4
e. any change in credit or accounting practices;
f. any amendment to any Material Contract; or
g. any agreement to take any of the foregoing actions.
15. TITLE TO ASSETS. Except as set forth on PART 3.16(a), Axis is the
sole and exclusive legal and equitable owner of all right, title and interest in
and to all of the assets (excluding rented property, leased property,
intellectual property, or Software (as defined herein)) used in the Business or
shown on the Financial Statements, free and clear of the interests and rights of
any other party, including any lease, license, right, Security Interest (except
for any lien for current taxes not yet due and payable), restriction or royalty
arrangement of any kind or character, direct or indirect, whether accrued,
absolute, contingent or otherwise, and no person other than Axis has any
interest in any assets employed in the Business. PART 3.16(b) sets forth an
complete list of all the depreciable assets with a market value in excess of
$5,000.00. The tangible Axis assets are in good repair, order and condition
(reasonable wear and tear excepted), are suitable for the purposes for which
they are presently being used, and are adequate to meet all present requirements
of the Business. Axis's assets will continue to be available and will furnish
WHI with all of the rights to operate the Business in the same manner as
presently and historically operated by Axis.
16. INTELLECTUAL PROPERTY. PART 3.16 sets forth an accurate list and
summary description of all trademarks, trade names, service marks, patents,
copyrights and applications for any of the foregoing, owned by Axis (the "Axis
Intellectual Property"). There are no licenses or other agreements relating to
any Axis Intellectual Property. None of the Axis Intellectual Property is
subject to any extensions, renewals, taxes or fees due within 90 days after
Closing. With respect to the Axis Intellectual Property, (a) Axis has the sole
and exclusive right to use the Axis Intellectual Property free of rights or
claims of others; (b) no action, suit, proceeding or investigation is pending
or, to the Shareholders' Knowledge, threatened; (c) none of the Axis
Intellectual Property interferes with, infringes upon, conflicts with or
otherwise violates the rights of others, or is being interfered with or
infringed upon by others, and none is subject to any outstanding order, decree,
judgment, stipulation or charge; (d) there are no royalty, commission or similar
arrangements, and no licenses, sublicenses or agreements, pertaining to any of
5
the Axis Intellectual Property; (e) none of the Axis Intellectual Property, the
use thereof by Axis, or the activities of the Business infringe upon or violate
any copyrights, trademarks, patents, trade secrets or any other intellectual
property rights of others; and (f) Axis has not agreed to indemnify any person
for or against any infringement of or by the Axis Intellectual Property.
17. SOFTWARE AND INFORMATION SYSTEMS. For purposes of this Section,
the term "Software" means all computer software programs, program
specifications, charts, procedures, source codes (including annotations), object
codes, input data, diagnostic and other routines, data bases and report layouts
and formats, record file layouts, diagrams, functional specifications and
narrative descriptions and flow charts owned or used by Axis. For purposes of
this Section, the term "computer software programs" includes any set of
arithmetic and/or logical instructions meant to run on, or to control the
operation of, any computer (i) whether those instructions are a complete
program, a collection of programs making up a subsystem or system, or are merely
subroutines or meant to operate in conjunction with other software, and (ii)
whether such instructions must be run through another computer program before
being useable on a computer, whether such instructions can be used at execution
time only in conjunction with another computer program (i.e., an "interpreter")
or whether such instructions are in a form that can be run on a computer "as
is," except for any necessary interfaces with the computer's microcode,
operating system or reference-resolving routines.
PART 3.17 sets forth an accurate list and summary description of all
Software which is licensed to Axis by third parties but as to which Axis does
not have possession of the source code (other than Software generally available
for license fee of less than $5,000, "Third Party Software"); PART 3.17 also
identifies all licenses, contracts and other arrangements with respect to the
Third Party Software (collectively the "Third Party Licenses"). With respect to
the Software:
a. There is no (i) Software as to which the source code is owned
by Axis ("Owned Software") or (ii) Software which is licensed to Axis
by third parties and as to which Axis is in possession of the source
code;
b. Axis does not sell or license Software;
c. Axis has not copied or used any of the Software in violation
of the applicable license or otherwise violated any of its agreements
or the rights of others with respect thereto; and
d. Axis does not use any unlicensed Software for development
purposes.
6
18. CUSTOMERS AND SUPPLIERS. PART 3.18 sets forth a list of the ten
largest customers by revenues during the fiscal year ended December 31, 1996.
PART 3.18 sets forth an accurate list of all former or current customers of Axis
who, since January 1, 1995, have terminated or otherwise cancelled their
relationship with Axis or notified Axis that they may do so and were among the
twenty largest customers by revenues during either the fiscal year ended
December 31, 1995 or the fiscal year ended December 31, 1996.
19. EMPLOYEES; INDEPENDENT CONTRACTORS. PART 3.19 is an accurate list
containing:
a. a list of all employees (including name, title and position)
employed by Axis;
b. the employee's length of service and date of hire;
c. a list of all contracts, written or oral, with each
managerial employee regarding services to be rendered, terms and
conditions of employment, (with respect to such items listed on PART
3.19, accurate copies have been delivered to WHI);
d. the annual salary or hourly wage of each employee;
e. a summary of all current and other arrangements since January
1, 1995 with independent contractors that are individuals involving
amounts in excess of $5,000 on an annual basis.
All employees of Axis are "at will" employees and can be terminated without
notice. With respect to the employees of Axis, i) there are and have been no
actual or alleged violations of any Laws respecting the employment of any
employees; no employees are represented by any union or covered by any
collective bargaining agreement and there has been no question concerning
representation raised or threatened; ii) all employment-related books and
records have been prepared in the Ordinary Course of Business; iii) Axis is
in compliance with all contracts of employment; iv) there exists no
discrimination or harassment claims by any employees against Axis or the
Shareholders, and there are no circumstances which could give rise to any
claim or allegation in regard thereto.
20. EMPLOYEE BENEFIT PLANS. Except as disclosed in PART 3.20, there
are no "welfare benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), "employee pension
benefit plans" (as defined in Section 3(2) of ERISA), bonus, profit sharing,
7
deferred compensation, incentive or other compensation plans or agreements, and
other employee fringe benefit plans whether funded or unfunded, qualified or
unqualified (all the foregoing being herein called "Benefit Plans") maintained
or contributed to for the benefit of any of the employees of Axis.
21. COMPLIANCE WITH THE CODE AND ERISA. The Benefit Plans comply
currently, and have complied in the past, both as to form and operation, with
the provisions of ERISA and the Internal Revenue Code of 1986, as amended
("Code") (including Section 410(b) of the Code relating to coverage) and all
other applicable laws, rules and regulations.
22. ADMINISTRATION. The Benefit Plans have been administered to date
in compliance with the requirements of the Code and ERISA and in accordance with
their terms. All reports, returns and similar documents for the Benefit Plans
required to be filed with any government agency or distributed to any
participant have been duly and timely filed or distributed. There are no
investigations, proceedings or other claims (except claims for benefits payable
in the normal operation of either plan), against or involving any Benefit Plan
that could give rise to any material liability to such plan, nor, are there any
facts that could give rise to any material liability to any plan.
23. PROHIBITED TRANSACTIONS. No "prohibited transaction" (as defined
in Section 4975 of the Code or Section 406 of ERISA) has occurred which involves
the assets of the 401(k) Plan. Neither Axis nor any trustee, administrator or
other fiduciary of any Benefit Plan nor any agent of any of the foregoing has
engaged in any transaction or acted or failed to act in a manner which could be
expected to subject Axis to any liability for breach of fiduciary duty under
ERISA or any other applicable law.
24. MULTI-EMPLOYER PLANS. Axis has never been required to contribute
to any "multi-employer pension plan" (as defined in Section 3(37) of ERISA) with
respect to employees of the Business.
25. LICENSES AND PERMITS. PART 3.25 contains a complete list and
summary description of all permits, licenses, approvals, registrations and
authorizations issued by any governmental agency used or required for the
operation of the Business (the "Licenses and Permits"). Axis holds all the
Licenses and Permits in its name. The Licenses and Permits are valid and in
full force and effect, no violations exist in respect thereof and there are not
pending, or to the Knowledge of the Shareholders, threatened any proceedings or
circumstances which could result in the termination, revocation, limitation or
impairment of any License or Permit. The Merger will not adversely affect the
validity of the Licenses and Permits.
8
26. MATERIAL CONTRACTS. PART 3.26 sets forth a complete list of all,
written and oral contracts, including all amendments and supplements thereto to
which Axis is a party (i) which are material to the operations (as historically
conducted or presently conducted), assets, liabilities, condition (financial or
otherwise), or operations of the Business or (ii) which otherwise involve any of
the following types of contracts (the items in (i) and (ii) being collectively
referred to herein as the "Material Contracts"):
a. all purchase orders or contracts for the purchase of any
materials or services which were not entered into in the Ordinary
Course of Business;
b. any sales or service agreements;
c. any design, engineering, or distribution agreement;
d. all personal or real property leases involving an amount in
excess of $10,000;
e. any other contract, with a party who provided payments or
performance of a value which would have caused such party to have been
one of the 20 largest suppliers or customers of Axis in any one of the
past three fiscal years, which provides for payment or performance by
any party thereto having an aggregate value of $100,000 or more; and
f. any agreement not to compete or solicit clients or otherwise
restricting Axis's activities to conduct the Business in any specified
geographic area.
Accurate copies of each Material Contract (of the form of each such contract)
have been delivered to WHI. Each Material Contract is in full force and effect
and is valid, binding and enforceable in accordance with its terms. Axis has
complied with all material commitments and obligations on its part to be
performed or observed under each Material Contract. No event has occurred which
is or, after the giving of notice or passage of time, or both, would constitute
a material default under or a material breach of any Material Contract by Axis,
or, to the knowledge of the Axis, by any other party. The consummation of the
transactions contemplated hereby, without notice to or consent or approval of
any party, will not constitute a default under or a breach of any provision of
any Material Contract.
27. LEGAL PROCEEDINGS. Axis is not a party to or, to the knowledge of
the Shareholders, is threatened with any dispute, action, arbitration, suit or
other proceeding. No basis exists for any such proceeding which could have a
9
Material Adverse Effect. The Shareholders have no knowledge of any
investigation threatened or contemplated by any governmental or regulatory
authority. None of Axis, the Shareholders the Business or its assets is subject
to any judgment, order, writ, injunction, stipulation or decree of any court or
any governmental agency or any arbitrator identifying Axis by name therein.
28. COMPLIANCE WITH LAW. Axis complies in all material respects with
applicable laws thereto, and is not and will not be any material liability to
WHI arising from or related to any prior violations thereof. Axis has not
(a) made any unlawful political contributions, (b) made any payment to officials
in their individual capacities for the purpose of affecting their action or the
action of the body they represent or to obtain special concessions, or (c) made
payments to individuals or taken similar actions to obtain or retain business,
other than customary business gifts or entertainment.
29. TAXES.
a. Axis has filed all returns, and information returns and statements
(collectively, "Returns") required to be filed or sent with respect to all
foreign, federal, state, county, local and other taxes of every kind, including
income, gross receipts, excise, franchise, property, value added, import duties,
employment, payroll, sales and use taxes and any additions to tax and any
interest or penalties thereon (collectively, "Taxes") for any period ending on
or before the Closing Date or received proper extensions in respect thereof. As
of the time of filing, the Returns accurately reflected, and Returns not yet
filed as of the date hereof but filed before the Closing Date will accurately
reflect, the information required to be shown thereon. Axis has timely paid all
Taxes prior to the date hereof and will timely pay all Taxes that will be shown
as due and payable on its Returns required to be filed or sent after the date
hereof but filed before the Closing Date.
b. Axis has obtained all appropriate sales Tax exemption certificates
for all sales made without charging or remitting a sales Tax absent which such a
sales tax would be due. Axis has withheld amounts from employees and others as
required under applicable law.
c. No adjustment of or deficiency for any Tax or claim for
additional Taxes is in any written communication, proposed, threatened, asserted
or assessed against Axis or any other person for which Axis could be liable.
Axis has no dispute with any taxing authority as to Taxes of any nature. There
are no audit examinations being conducted or to the knowledge of the
10
Shareholders, proposed with respect to Taxes. Axis has not granted any
extension or waiver of any statute of limitations relating to the assessment or
collection of Taxes.
30. RECEIPT OF PROSPECTUS. Each Shareholder acknowledges receipt of
the prospectus of WHI dated May 7, 1997 together with a supplement dated
November 21, 1997.
31. BROKERS. Axis has not retained any broker, finder or agent or
incurred any liability or obligation for any brokerage fees, commissions or
finders fees with respect to this Agreement or the transactions contemplated
hereby and as to which WHI will incur any liability, and no fee will be owed to
a broker engaged by Axis with respect to any transaction by Axis after the
Closing.
32. CERTAIN ACCOUNTING MATTERS. None of Axis nor any of the
Shareholders, nor any of their Affiliates, has taken or agreed to take any
action that (without regard to any action taken or agreed to be taken by WHI or
any of its Affiliates) would prevent WHI from accounting for the transactions
contemplated hereby as pooling of interests business combinations in accordance
with GAAP, the criteria of Accounting Principles Board Opinion No. 16, and the
regulations of the SEC.
33. UNDISCLOSED LIABILITY. Except as disclosed on the Axis
Disclosure Schedule, as disclosed on the Preliminary Settlement Statement, or
for obligations to be performed in the future under disclosed Material Contracts
and under executory contracts which are not Material Contracts, Axis and the
Business are not subject to any liability or obligation (whether absolute,
accrued, or contingent, known or unknown).
34. IMMIGRATION. Axis has on file a valid Form I-9 for each employee
hired by Axis on or after November 7, 1986 and continuously employed after
November 6, 1986 or the applicable date of hire. All employees of Axis employed
in the U.S are (i) United States citizens, or lawful permanent residents of the
United States, (ii) aliens whose right to work in the United States is
unrestricted, (iii) aliens who have valid, unexpired work authorization issued
by the Attorney General of the United States (Immigration and Naturalization
Service) or (iv) aliens who have been continually employed by Axis since
November 6, 1986 or the applicable date of hire. Axis has not been (i) the
subject of an immigration compliance or employment visit from, (ii) assessed any
fine or penalty by, or (iii) the subject of any order or directive of, the
United States Department of Labor or the Attorney General of the United States
(Immigration and Naturalization Service).
11
SCHEDULE 4
Representations and Warranties of WHI
1. AUTHORITY. WHI has full right, power and authority, without the
consent of any other person, to execute and deliver this Agreement and to carry
out the transactions contemplated hereby. All corporate and other acts or
proceedings required to be taken by WHI to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have been
duly and properly taken.
2. VALIDITY; DUE ISSUANCE; REGISTRATION. This Agreement has been, and
the documents to be delivered at Closing will be, duly executed and delivered
and constitute lawful, valid and legally binding obligations of WHI, enforceable
in accordance with their respective terms. The shares of WHI's capital stock
issuable under this Agreement have been duly authorized and when issued in
accordance with this Agreement shall be validly issued, fully paid and
nonassessable. The issuance of the shares at the Closing is covered by a
registration statement under the Securities Act of 1933 on Form S-4 (Reg. No.
333-18059). The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in the creation of any
security interest or the termination or acceleration of any indebtedness or
other obligation of WHI and are not prohibited by, do not violate or conflict
with any provision of, and do not constitute a default under or a breach of (a)
the charter or by-laws of WHI, (b) any note, bond, Security Interest, indenture,
contract, agreement, permit, license or other instrument to which WHI is a party
or by which either or any of their respective assets is bound, (c) any order,
writ, injunction, decree or judgment of any court or governmental agency, or (d)
any Law, applicable to WHI. No approval, authorization, registration, consent,
order or other action of or filing with any person, including any court,
administrative agency or other governmental authority, is required for the
execution and delivery by WHI of this Agreement or the consummation by WHI of
the transactions contemplated hereby.
3. DUE ORGANIZATION. WHI is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware.
4. BROKERS. WHI does not have any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
1
5. SEC FILINGS; FINANCIAL STATEMENTS.
(a) WHI has delivered to Axis and the Shareholders accurate copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by WHI with the
Securities and Exchange Commission ("SEC") between January 1, 1996 and the date
of this Agreement (the "WHI SEC Documents"). As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), each of the WHI SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act of 1933 or the Exchange Act of 1934 as the case may be.
(b) The consolidated financial statements contained in the WHI SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statement and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to normal and recurring year-end audit
adjustments (which will not, individually or in the aggregate, be material in
magnitude); and (iii) fairly present the consolidated financial position of WHI
and its subsidiaries as for the respective dates thereof and the consolidated
results of operations of WHI and its subsidiaries for the periods covered
thereby.
6. REGISTRATION STATEMENT. WHI has made, and will have made as of
the Closing, all required registrations and filings with the submissions to the
SEC. All such registrations, filings and submissions were, are and will be, in
compliance with all Laws of the SEC and no material deficiencies have been
asserted by the SEC and no material deficiencies have been asserted by the SEC
with respect to such registrations, filings and submissions, and to WHI's
knowledge, no facts or circumstances exist which would indicate that a material
deficiency may be asserted by the SEC.
2
INDUCEMENT AGREEMENT
This Inducement Agreement is made this 21 day of November, 1997 (the
"AGREEMENT") by and among Xxxxxxxx-Xxxx, Inc., a Delaware corporation (the
"WHI"), Xxxxxxxx-Xxxx Associates, Inc., a Nevada Corporation (the "SUBSIDIARY"),
Axis Consulting International, Inc., a California corporation ("AXIS") and Xxxxx
Xxxxxx and Xxxxxx Xxxxxx, the shareholders of Axis ("SHAREHOLDERS").
WHEREAS, pursuant to that certain Merger Agreement among the Axis,
Shareholders, Subsidiary and WHI, dated November 21, 1997 (the "MERGER
AGREEMENT") WHI is acquiring all of the outstanding capital stock of Axis as a
result of the merger of the Subsidiary with and into Axis contemplated thereby;
WHEREAS, the Shareholders will receive a substantial economic benefit
upon the consummation of the Merger Agreement and wishes to induce WHI to
consummate the transactions contemplated by the Merger Agreement; and
WHEREAS, one of the conditions to the obligations of WHI to complete
the Closing (as defined in the Merger Agreement) is that the Shareholders enter
into this Agreement.
Accordingly, the parties agree as follows:
1. NON-COMPETITION; CONFIDENTIALITY; RELATED COVENANTS.
1.1 SHAREHOLDER ACKNOWLEDGEMENTS. Each of the Shareholders
acknowledges the following:
(i) Axis is engaged in the business of marketing and selling the
services of computer software analysts, programmers, engineers and
project managers in the following product areas: SAP-TM- software
products, relational data bases, Synon software products, 2/E software
products, Obsidian software products, wide area networks, and Windows
NT-TM- Back Office product suite (all of the foregoing activities
being collectively referred to as the "BUSINESS").
(ii) he/she is one of the limited number of persons who
developed the Business;
(iii) Axis conducts the Business or markets the products of the
Business in each and every state of the United States, Canada and
other areas;
(iv) Axis has undertaken significant development of its products and
analysis in anticipation of marketing the products throughout the United
States, Canada and other areas, which activities are of great value to WHI;
(v) his/her work for Axis has provided him/her valuable,
confidential and proprietary information concerning the Business and
its future plans, much of which he/she participated in developing;
(vi) the agreements and covenants contained in this Agreement
are essential to protect the interests of WHI in connection with the
transactions contemplated by the Merger Agreement; and
(vii) WHI would not consummate the transactions contemplated by
the Merger Agreement but for such agreements and covenants.
1.1.1 AGREEMENT NOT TO COMPETE. For a period commencing on the
date hereof and terminating three (3) years from the date hereof (the
"RESTRICTED PERIOD"), none of the Shareholders shall, directly or
indirectly (as an owner (other than as a less than 5% owner of a
public company), employee, independent contractor, agent, consultant
or otherwise or through Affiliates), in any manner:
(a) market, maintain or support services of the nature currently
offered by or competitive with those offered by Axis to any customer of
Axis currently or within 24 months prior to the date hereof ("CUSTOMER");
(b) market, maintain or support services of the nature currently
offered by or competitive with those offered by Axis to any other person
within the "TERRITORY" (as hereinafter defined);
(c) engage in any portion of the Business within the Territory; or
(d) attempt in any way, directly or indirectly, to obtain for itself,
or others, or to divert from WHI or Subsidiary, any rights, benefits, sales
or profits arising out of or in connection with the Business;
(e) solicit to provide or provide to any Customer any business
competitive with that offered by Axis prior to the date hereof or cause any
Customer to curtail its relationship with WHI or Subsidiary.
-2-
Notwithstanding the above, a Shareholder shall not be deemed to be in
breach or violation of this Section 1.1.1 if the Shareholder is employed by
a business or enterprise that is engaged primarily in a business other than
the Business and the Shareholder does not apply his expertise at such
business or enterprise to that part of such business or enterprise that is
or could be competitive with the Business.
1.1.2 TERRITORY. The Territory shall be:
(a) California;
(b) A fifty mile radius of the cities in which Axis has customers;
(c) all states in which Axis has Customers;
(d) all other states of the United States not within the scope of
(a), (b) or (c);
1.1.3 CONFIDENTIAL INFORMATION. Each of the Shareholders
acknowledges that WHI and Subsidiary has a legitimate and continuing
proprietary interest in Axis's confidential and proprietary
information which Axis has expended great sums to develop and
maintain. None of the Shareholders shall use, exploit, publish or
disclose in any manner, and each of the Shareholders shall maintain in
the strictest confidence, all confidential or proprietary information
concerning the Business (including information regarding software,
development work, suppliers, customers, details of contracts, pricing
policies, market information, operational methods, technical processes
or future plans) and shall keep all such information confidential.
1.1.4 NONSOLICITATION. For a period commencing on the date
hereof and terminating four (4) years from the date hereof, none of
the Shareholders shall solicit the employment of, recruit or retain as
an independent contractor or otherwise, any current employee of Axis
or in any way induce any current or future employee of Axis or
independent contractor with whom Axis does business to terminate its
relationship with Axis.
1.2 RIGHTS AND REMEDIES UPON BREACH. Each of the Shareholders
acknowledges that any breach of this Agreement by him/her will result in
irreparable damage to WHI and Axis for which WHI and Axis will have no adequate
remedy at law. If any Shareholder breaches, or threatens to commit a breach of,
-3-
any of the provisions of Article 1 "NON-COMPETITION; CONFIDENTIALITY; RELATED
COVENANTS" (the "RESTRICTIVE COVENANTS"), WHI and Axis shall be entitled to, and
such Shareholder consents to, injunctive relief in addition to, and not in
limitation of, any other relief or rights to which WHI may be entitled at law or
in equity.
1.3 SEVERABILITY; BLUE PENCILING. The necessity of each of the
restrictions set forth above and the nature and scope of each such
restriction has been carefully considered, bargained for and agreed to by the
parties hereto. The parties hereby agree and acknowledge that the duration,
scope and geographic area applicable to each of the restrictions set forth in
this Agreement are fair, reasonable and necessary. The consideration
provided for in this Agreement is sufficient and adequate to compensate the
Shareholders for agreeing to each of the restrictions contained in this
Agreement. However, in the event that any portion of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable,
including by reason of its being extended over too great a period of time or
too large a geographic area or over too great a range of activities, it shall
be interpreted to extend only over the maximum period of time, geographic
area, or range of activities as to which it may be enforceable. Each
provision and part of a provision herein shall be deemed a separate and
severable covenant. It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction
in which such enforcement is sought. Accordingly, a court of competent
jurisdiction is directed to modify any provision to the extent necessary to
render such provision enforceable and if such cannot be lawfully done, then
to severe any such portion of a provision.
1.4 ENFORCEABILITY IN JURISDICTION. The parties confer
jurisdiction to enforce this Agreement upon the courts of each jurisdiction
within the Territory. If the courts of any jurisdiction hold any covenant to
be unenforceable, then it is the intention of the parties that such
determination not in any way affect the right of WHI, Subsidiary or Axis to
enforce the Agreement in the courts of any other jurisdiction as to breaches
within such other jurisdiction.
2. MISCELLANEOUS.
2.1 REPRESENTATIONS OF SHAREHOLDERS. Each of the Shareholders
represents and warrants that he has read and understands this Agreement, that he
has consulted with his legal counsel who has explained all of its terms and
provisions and that the agreed upon consideration for the undertakings made by
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him hereunder is adequate. Each Shareholder acknowledges and agrees that the
restrictions on competitive activities and the other undertakings made by him in
this Agreement will adversely effect his ability to obtain future employment and
to engage in other pursuits, and, nevertheless, that he intends to be bound by
all of the restrictions, undertakings, and other obligations required in this
Agreement.
2.2 AMENDMENTS AND WAIVER. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Any party's lack of
enforcement of any provision herein shall not be construed as a waiver and the
nonbreaching party may elect to enforce any such provision at any time in the
event of a past, repeated or continuing breach. The rights and remedies herein
are cumulative and exclusive of any rights or remedies that any party may
otherwise have at law or in equity. WHI and Subsidiary shall be entitled to
reimbursement from a Shareholder for the costs and expenses (including legal
fees) of enforcing this Agreement against such Shareholder.
2.3 NOTICES. All notices, requests, consents, demands and other
communications hereunder must be in writing and either (a) personally delivered
(with receipt), (b) sent by registered or certified mail, postage prepaid, (c)
sent by telecopier with verbal or electronic confirmation, or (d) sent by
prepaid courier service with receipt to the addresses indicated in the Merger
Agreement, or such other addresses as are provided in a subsequent notice.
2.4 GOVERNING LAW. This Agreement shall be construed, enforced and
interpreted in accordance with the substantive laws of the State of Illinois
applicable to contracts made and to be performed wholly within said State.
2.5 SUCCESSORS AND ASSIGNS. This Agreement, and the rights and
obligations of the parties hereunder, shall inure to and be binding on the
parties hereto and their respective successors and assigns. WHI and Axis may
assign their rights under this Agreement to any person. None of the
Shareholders may assign any rights, benefits, duties or obligations under this
Agreement.
2.6 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire agreement and understanding among the parties with
respect to the subject matter hereof.
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2.7 RULES OF CONSTRUCTION. The term "including" shall mean
including without limitation. The term "person" shall be broadly construed
to mean any individual, trust, partnership, corporation, limited liability
company, organization, joint venture or any other entity or body of any
nature. The Article, Section and other headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.8 EXPENSES. Each party to this Agreement shall pay its own costs
and expenses in connection with the transactions contemplated hereby.
2.9 INDEPENDENCE OF OBLIGATIONS. WHI, Axis and the Subsidiary agree
and acknowledge that each Shareholder is liable only for his own breach of
any obligation hereunder and not for any breach of any obligation of the
other Shareholder, and WHI, the Subsidiary and Axis covenant not to make any
claim against a Shareholder in respect of any breach of this Agreement by the
other Shareholder.
* * *
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IN WITNESS WHEREOF, the parties have executed this Inducement
Agreement as of the date first above written.
AXIS CONSULTING INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------
XXXXXXXX-XXXX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx, President
XXXXXXXX-XXXX ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx, President
/s/ Xxxxx Xxxxxx /s/ Xxxxxx Xxxxxx
------------------------- -------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxxx
