AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
XXXXX & XXXXXXX, INC.
a Delaware corporation;
MINIMUM ACQUISITION SUB, INC.,
a Delaware corporation;
MAXM SYSTEMS CORPORATION,
a Delaware corporation;
___________________________
Dated as of December 10, 1996
___________________________
TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION. . . . . . . . . . . . . . . . . . 1
1.1 Merger of Merger Sub into the Company. . . . . . . . . . . . 1
1.2 Effect of the Merger . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time. . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers 2
1.5 Conversion of Shares . . . . . . . . . . . . . . . . . . . . 2
1.6 Employee Stock Options and Warrants. . . . . . . . . . . . . 4
1.7 Closing of the Company's Transfer Books. . . . . . . . . . . 4
1.8 Exchange of Certificates . . . . . . . . . . . . . . . . . . 4
1.9 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . 6
1.10 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Accounting Treatment.. . . . . . . . . . . . . . . . . . . . 6
1.12 Further Action . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 7
2.1 Due Organization; Etc. . . . . . . . . . . . . . . . . . . . 7
2.2 Articles of Incorporation and Bylaws; Records. . . . . . . . 7
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . 8
2.4 Financial Statements.. . . . . . . . . . . . . . . . . . . . 9
2.5 Absence of Changes.. . . . . . . . . . . . . . . . . . . . . 10
2.6 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Bank Accounts; Receivables.. . . . . . . . . . . . . . . . . 12
2.8 Equipment; Leasehold.. . . . . . . . . . . . . . . . . . . . 12
2.9 Proprietary Assets.. . . . . . . . . . . . . . . . . . . . . 13
2.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.12 Compliance with Legal Requirements.. . . . . . . . . . . . . 19
2.13 Governmental Authorizations. . . . . . . . . . . . . . . . . 19
2.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.15 Employee and Labor Matters; Benefit Plans. . . . . . . . . . 21
2.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . 23
2.17 Sale of Products; Performance of Services. . . . . . . . . . 24
2.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.19 Related Party Transactions.. . . . . . . . . . . . . . . . . 24
2.20 Legal Proceedings; Orders. . . . . . . . . . . . . . . . . . 25
2.21 Authority; Binding Nature of Agreement.. . . . . . . . . . . 25
2.22 Non-Contravention; Consents. . . . . . . . . . . . . . . . . 25
2.23 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . 27
3.1 SEC Filings; Financial Statements. . . . . . . . . . . . . . 27
3.2 Authority; Binding Nature of Agreement.. . . . . . . . . . . 27
3.3 Valid Issuance.. . . . . . . . . . . . . . . . . . . . . . . 28
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TABLE OF CONTENTS
(continued)
PAGE
SECTION 4. CERTAIN COVENANTS OF THE COMPANY. . . . . . . . . . . . . . 28
4.1 Access and Investigation.. . . . . . . . . . . . . . . . . . 28
4.2 Operation of the Company's Business. . . . . . . . . . . . . 28
4.3 Notification; Updates to Disclosure Schedule.. . . . . . . . 30
4.4 No Negotiation.. . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . 31
5.1 Filings and Consents.. . . . . . . . . . . . . . . . . . . . 31
5.2 Information Statement. . . . . . . . . . . . . . . . . . . . 31
5.3 Company Shareholders' Meeting. . . . . . . . . . . . . . . . 32
5.4 Public Announcements . . . . . . . . . . . . . . . . . . . . 32
5.5 Pooling of Interests . . . . . . . . . . . . . . . . . . . . 32
5.6 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . 33
5.7 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Termination of Agreements. . . . . . . . . . . . . . . . . . 33
5.9 FIRPTA Matters.. . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11 Termination of Employee Plans. . . . . . . . . . . . . . . . 33
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND
MERGER SUB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Accuracy of Representations. . . . . . . . . . . . . . . . . 34
6.2 Performance of Covenants . . . . . . . . . . . . . . . . . . 34
6.3 Shareholder Approval . . . . . . . . . . . . . . . . . . . . 34
6.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Agreements and Documents . . . . . . . . . . . . . . . . . . 34
6.6 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . . . . 36
6.7 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 No Legal Proceedings.. . . . . . . . . . . . . . . . . . . . 36
6.9 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.10 Termination of Employee Plans. . . . . . . . . . . . . . . . 36
6.11 No Material Adverse Change.. . . . . . . . . . . . . . . . . 36
6.12 Rule 506.. . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.13 Waiver of Dissenters Rights. . . . . . . . . . . . . . . . . 37
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. . . . . 37
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . 37
7.2 Performance of Covenants . . . . . . . . . . . . . . . . . . 37
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TABLE OF CONTENTS
(continued)
PAGE
7.3 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Termination Events.. . . . . . . . . . . . . . . . . . . . . 37
8.2 Termination Procedures.. . . . . . . . . . . . . . . . . . . 38
8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . 38
SECTION 9. INDEMNIFICATION, ETC. . . . . . . . . . . . . . . . . . . . 39
9.1 Survival of Representations, Etc.. . . . . . . . . . . . . . 39
9.2 Indemnification by Shareholders. . . . . . . . . . . . . . . 39
9.3 Limitation of Parent Claims. . . . . . . . . . . . . . . . . 40
9.4 Exclusive Remedy.. . . . . . . . . . . . . . . . . . . . . . 40
9.5 No Contribution. . . . . . . . . . . . . . . . . . . . . . . 41
9.6 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.7 Defense of Third Party Claims. . . . . . . . . . . . . . . . 41
9.8 Exercise of Remedies by Indemnitees Other Than Parent. . . . 41
SECTION 10. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 42
10.1 Indemnitors' Agent.. . . . . . . . . . . . . . . . . . . . . 42
10.2 Further Assurances.. . . . . . . . . . . . . . . . . . . . . 42
10.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . 42
10.4 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 43
10.7 Time of the Essence. . . . . . . . . . . . . . . . . . . . . 44
10.8 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.9 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . 44
10.11 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 44
10.12 Remedies Cumulative; Specific Performance.. . . . . . . . . . 44
10.13 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.14 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.15 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 45
10.16 Parties in Interest.. . . . . . . . . . . . . . . . . . . . . 45
10.17 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 45
10.18 Construction. . . . . . . . . . . . . . . . . . . . . . . . . 45
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EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Shareholder Agreement
Exhibit C - Form of Amended and Restated Articles of Incorporation of
Surviving Corporation
Exhibit D - Directors and Officers of Surviving Corporation
Exhibit E - Escrow Agreement
Exhibit F - Current Shareholder List
Exhibit G - Bonuses to be paid during Pre-Closing Period
Exhibit H - Shareholder Investment Certifications
Exhibit I-1 - Affiliate Agreement
Exhibit I-2 - Persons to execute Affiliate Agreements
Exhibit J - Persons to sign Release
Exhibit K - Form of Release
Exhibit L - Registration Rights Agreement
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of December 10, 1996, by and among: XXXXX &
BABBAGE, INC., a Delaware corporation ("Parent"); MINIMUM ACQUISITION SUB,
INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"); and MAXM SYSTEMS CORPORATION, a Delaware corporation (the "Company").
Certain other capitalized terms used in this Agreement are defined in
Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company in accordance with this Agreement and the
Delaware General Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. The Merger is intended to constitute a transaction which is taxable
to the Company's Shareholders. For accounting purposes, it is intended that
the Merger be treated as a "pooling of interests."
C. This Agreement has been adopted and approved by the respective
boards of directors of Parent, Merger Sub and the Company.
D. Contemporaneously with the execution and delivery of this
Agreement, certain shareholders holding voting capital stock in the Company
are executing and delivering to Parent a shareholder agreement (a
"Shareholder Agreement") of even date herewith substantially in the form of
Exhibit B.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company
will continue as the surviving corporation in the Merger (the "Surviving
Corporation").
1
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Xxxxxx Godward LLP at 10:00 a.m. on January 22, 1997, or at such
other time and date during the period from January 1, 1997 through February
28, 1997 as Parent may designate upon not less than five days' prior notice
to the Company (the "Scheduled Closing Time"). (The date on which the
Closing actually takes place is referred to in this Agreement as the "Closing
Date.") Contemporaneously with or as promptly as practicable after the
Closing, a certificate of merger shall be filed with the Secretary of State
of the State of Delaware in conformity with the requirements of Sections 103
and 251 of the Delaware General Corporation Law. The Merger shall become
effective at the time such certificate of merger is filed with and accepted
by the Secretary of State of the State of Delaware (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent and the Company prior to the Effective
Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to Exhibit C;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit D.
1.5 CONVERSION OF SHARES. Subject to Sections 1.8(c) and 1.9, at the
Effective Time, by virtue of the Merger and without any further action on the
part of Parent, Merger Sub, the Company or any shareholder of the Company,
each outstanding preferred and common share of the Company (the "Company
Shares") will be converted into the voting common stock of the Parent (the
"Parent Common Stock") as follows:
(a) The board of directors of the Company will determine the
aggregate value of the common stock of the Parent (the "Parent Common Stock")
to be received in consideration of the Merger (the "Merger Shares") by
multiplying the aggregate number of the Merger Shares by the average closing
price on the Nasdaq National Market for the shares of the Parent Common Stock
for the 5 trading days ending two days prior to the Effective Time (the
"Parent Common Share Market Value"). The aggregate number of Merger Shares to
be issued at the Effective Time shall be up to (a) 1,189,654 if the
guaranteed amounts payable to Micromuse Plc pursuant to the agreement
referenced in Section 5.9(b) below are reduced to zero by December 30, 1996
or (b) 1,137,930 if such amounts are not reduced to zero by December 30,
1996, such number of Merger Shares in both cases having taken into account
the 3 for 2 stock split of the Parent Common Stock consummated on December
10, 1996.
2
(b) Each share of the Company's Class A preferred stock ("Class A
Preferred Stock"), par value $.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into a fraction of
a share of Parent Common Stock determined by dividing $3.305 plus dividends
accrued from December 31, 1996 to the Effective Time by the Parent Common
Share Market Value.
(c) Each share of the Company's Class B preferred stock ("Class B
Preferred Stock"), par value $.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into a fraction of
a share of Parent Common Stock determined by dividing $3.810 plus dividends
accrued from December 31, 1996 to the Effective Time by the Parent Common
Share Market Value.
(d) Each share of the Company's Class C preferred stock ("Class C
Preferred Stock"), par value $.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into a fraction of
a share of Parent Common Stock determined by dividing $5.077 plus dividends
accrued from December 31, 1996 to the Effective Time by the Parent Common
Share Market Value.
(e) Each share of the Company's common stock issued and
outstanding immediately prior to the Effective Time shall be converted into
such fraction of a share of Parent Common Stock as is equal to (x) the Merger
Shares reduced by the aggregate number of shares allocated pursuant to
subsections (b), (c) and (d) above, divided by (y) the number of the shares
of the Company's common stock outstanding immediately prior to the Effective
Time.
(f) A portion of the Merger Shares shall be delivered into escrow and
held as specified in Section 1.8 hereof.
(g) If any shares of the Company's voting capital stock (the
"Company Shares") outstanding immediately prior to the Closing Date are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase agreement or other
agreement with the Company, then the shares of Parent Common Stock issued in
exchange for such Company Shares will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may accordingly
be marked with appropriate legends.
(h) The number of shares of Parent Common Stock set forth in this
Section 1.5 take into account the 3 for 2 stock split of the Parent Common
Stock consummated on December 10, 1996. In the event the Parent at any time
or from time to time declares or pays any dividend on Parent Common Stock
payable in Parent Common Stock or in any right to acquire Parent Common
Stock, or shall effect a further subdivision of the outstanding shares of
Parent Common Stock into a greater number of shares of Parent Common Stock
(by stock dividends, combinations, splits, recapitalizations and the like),
or in the event the outstanding shares of Parent Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Parent Common Stock, then the aggregate number of Merger
Shares to be issued at the Effective Time shall be proportionately decreased
or increased, as appropriate.
3
1.6 EMPLOYEE STOCK OPTIONS AND WARRANTS. At the Effective Time, (a)
each stock option (a "Company Option") that is then vested and outstanding
under the Company's 1988 Stock Option Plan and 1990 Stock Option Plan (the
"Company Stock Plans"), may at the holder's option be exercised and (b) each
unvested Company Option that is then outstanding under the Company Stock
Plans which is entitled to acceleration shall be accelerated and may be
exercised at the holder's option, in each case in accordance with the terms
of, and to the extent permitted by, the relevant Company Stock Plan and the
stock option agreement by which such Company Option is evidenced. In
addition, each company warrant (a "Company Warrant") that is then outstanding
and entitled to be exercised may be exercised in accordance with and to the
extent permitted by the warrant agreement by which such Company warrant is
evidenced. All remaining outstanding unexercised vested and unvested Company
Options and Warrants shall be canceled in accordance with the Company Stock
Plans and relevant warrant agreements.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock
that were outstanding immediately prior to the Effective Time shall cease to
have any rights as shareholders of the Company, and the stock transfer books
of the Company shall be closed with respect to all shares of such capital
stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of the Company's capital stock shall be made on
such stock transfer books after the Effective Time. If, after the Effective
Time, a valid certificate previously representing any of such shares of the
Company's capital stock (a "Company Stock Certificate") is presented to the
Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) At or promptly after the Effective Time, Parent shall cause
its transfer agent to prepare two certificates for each holder of Company
Shares who, taking into account Section 1.8(c) below, will receive Merger
Shares, such certificates together representing the total number of shares of
Parent Common Stock issuable pursuant to the Merger in respect of Company
Shares held by such holder (the "Share Amount"), as follows: (a) one
certificate (the "Escrow Certificate") shall represent ten percent of such
holder's Share Amount (rounded up to the nearest whole number of shares of
Parent Stock), shall be in the name of State Street Bank and Trust Company of
California, N.A., as escrow agent (the "Escrow Agent"), and shall be delivered
to the Escrow Agent as security for such holder's indemnity obligations under
Section 9 hereof and (b) one certificate (the "Balance Certificate") shall
represent the balance of such holder's Share Amount after deducting therefrom
the shares of Parent Common Stock being placed in escrow hereunder. At the
Escrow Agent's request, one certificate may be issued in the name of the
Escrow Agent for deposit in escrow in lieu of separate Escrow Certificates.
At and after the Effective Time, each holder shall be entitled to receive
such holder's Balance Certificate upon delivery to Parent of a certificate or
certificates representing the full number of Company Shares held by such holder
immediately prior to the Effective Time, together with a properly completed
transmittal letter. The Escrow Agent shall hold and administer the shares of
Parent Common Stock delivered to it hereunder in accordance with the terms of
an escrow agreement dated as of the Effective Date among Parent, the
Shareholder Representatives (as defined there) and the Escrow Agent (the
"Escrow Agreement"), such Escrow Agreement to be substantially in the form of
4
Exhibit E attached hereto. Until surrendered as contemplated by this Section
1.8, each Company Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive upon such surrender a
certificate representing shares of Parent Common Stock (and cash in lieu of
any fractional share of Parent Common Stock) as contemplated by this Section
1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the
owner of such lost, stolen or destroyed Company Stock Certificate to provide
an appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of any fractional share shall be paid to any such
holder, until such holder surrenders such Company Stock Certificate in
accordance with this Section 1.8 (at which time such holder shall be entitled
to receive all such dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued, provided that fractional shares resulting from the
conversion of each class of shares held by holders of more than one class of
shares of the Company will be aggregated before determining whether a
fractional share remains. In lieu of such fractional shares, any holder of
capital stock of the Company who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock issuable to such holder) shall, upon surrender
of such holder's Company Stock Certificate(s), be paid in cash the dollar
amount (rounded to the nearest whole cent), without interest, determined by
multiplying such fraction by the Parent Common Share Market Price.
(d) The shares of Parent Common Stock to be issued in the Merger
shall be characterized as "restricted securities" for purposes of Rule 144
under the Securities Act, and each certificate representing any of such
shares shall, until such time that the shares are not so restricted under the
Securities Act, bear a legend identical or similar in effect to the following
legend (together with any other legend or legends required by applicable
state securities laws or otherwise, if any):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
(e) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable
to any holder or former holder
5
of capital stock of the Company pursuant to this Agreement such amounts as
Parent or the Surviving Corporation may be required to deduct or withhold
therefrom under the Code or under any provision of state, local or foreign
tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable
to any holder or former holder of capital stock of the Company for any shares
of Parent Common Stock (or dividends or distributions with respect thereto),
or for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the
Effective Time, are or may become entitled to appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law shall not be converted
into or represent the right to receive Parent Common Stock in accordance with
Section 1.5 (or cash in lieu of fractional shares in accordance with Section
1.8(c)), and the holder or holders of such shares shall be entitled only to
such rights as may be granted to such holder or holders by Section 262 of the
Delaware General Corporation Law; PROVIDED, HOWEVER, that if the appraisal
right associated with such shares shall not be perfected, or if any such
shares shall lose their appraisal rights then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss
of such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in accordance with
Section 1.5 (and cash in lieu of fractional shares in accordance with Section
1.8(c)).
(b) The Company shall give Parent (i) prompt written notice of any
notice received by the Company prior to the Effective Time of a shareholder's
intent to demand payment for such shareholder's Company Shares pursuant to
Section 262 of the Delaware General Corporation Law and of any other demand,
notice or instrument delivered to the Company prior to the Effective Time
pursuant to the Delaware General Corporation Law, and (ii) the opportunity
to participate in all negotiations and proceedings with respect to any such
demand, notice or instrument. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a transaction which is taxable to the Company's
shareholders.
1.11 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.12 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all
6
rights and property of Merger Sub and the Company, the officers and directors
of the Surviving Corporation and Parent shall be fully authorized (in the
name of Merger Sub, in the name of the Company and otherwise) to take such
action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, to and for the benefit of the
Indemnitees, as follows:
2.1 DUE ORGANIZATION; ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its
assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the Disclosure Schedule,
the Company has not conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade name
or other name, other than the name "MAXM Systems Corporation."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of
the Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Material
Adverse Effect on the Company. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1(c) of the
Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets forth
(i) the names of the members of the Company's board of directors, (ii) the
names of the members of each committee of the Company's board of directors,
and (iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any
Entity except those listed in Part 2.1(e)(i) of the Disclosure Schedule and,
except for the equity interests identified in Part 2.1(e)(i) of the
Disclosure Schedule, the Company has never owned, beneficially or otherwise,
any shares or other securities of, or any direct or indirect equity interest
in, any Entity. The Company has not agreed and is not obligated to make any
future investment in or capital contribution to any Entity. Except as
identified in Part 2.1(e)(i) of the Disclosure Schedule, the Company has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's articles
of incorporation and
7
bylaws, including all amendments thereto; (2) the stock records of the
Company; and (3) except as set forth in Part 2.2 of the Disclosure Schedule,
the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a
meeting) of the shareholders of the Company, the board of directors of the
Company and any minutes and other records of the committees of the board of
directors of the Company. There have been no formal meetings or other
proceedings of the shareholders of the Company or the board of directors of
the Company or any committee of the board of directors of the Company that
are not fully reflected in such minutes or other records. There has not been
any violation of any of the provisions of the Company's articles of
incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of
the Company's board of directors. The books of account, stock records,
minute books and other records of the Company are accurate, up-to-date and
complete in all material respects, and have been maintained in accordance
with prudent business practices and all applicable Legal Requirements.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
12,000,000 shares of Common Stock (with $.01 par value), of which 1,301,646
shares have been issued and are outstanding as of the date of this Agreement;
(ii) 38,254,470 shares of Class A Preferred Stock (with $.01 par value), of
which 38,210,648 shares have been issued and are outstanding as of the date
of this Agreement; (iii) 5,180,000 shares of Class B Preferred Stock (with
$.01 par value), of which 5,000,000 shares have been issued and are
outstanding; and 4,250,000 shares of Class C Preferred Stock (with $.01 par
value), of which 4,171,846 shares have been issued and are outstanding.
Every ten outstanding shares of Class A Preferred Stock and Class B Preferred
Stock are convertible into one share of Company Common Stock. Each
outstanding share of Class C Preferred Stock is convertible into one share of
Company Common Stock. All of the outstanding shares of Company Common Stock,
Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock
have been duly authorized and validly issued, and are fully paid and
non-assessable, and none of the shares is subject to any repurchase option or
restriction on transfer, except for the repurchase option held by Xxxx X.
Xxxxx, III and restrictions on transfer imposed by virtue of applicable
federal and state securities laws.
(b) Under the Company Stock Plans, options to purchase 1,483,040
shares, which number includes 11,230 Class B warrants, are outstanding as of
the date of this Agreement. Part 2.3(b) of the Disclosure Schedule
accurately sets forth, with respect to each Company Option that is
outstanding as of the date of this Agreement: (i) the name of the holder of
such Company Option; (ii) the total number of shares of the Company's common
stock (the "Company Common Stock") that is subject to such Company Option and
the number of shares of Company Common Stock with respect to which such
Company Option is immediately exercisable; (iii) the term of such Company
Option; (iv) the vesting schedule for such Company Option; (v) the exercise
price per share of Company Common Stock purchasable under such Company
Option; and (vi) whether such Company Option is subject to acceleration on or
before the Effective Time. Except as set forth in Part 2.3(b) of the
Disclosure Schedule, there is no: (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable)
8
to acquire any shares of the capital stock or other securities of the
Company; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock
or other securities of the Company; (iii) Contract under which the Company
is or may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities; or (iv) to the best of the knowledge
of the Company, condition or circumstance that may give rise to or provide a
basis for the assertion of a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of the Company.
(c) All outstanding shares of Company Common Stock, Class A
Preferred Stock, Class B Preferred Stock and Class C Preferred Stock and all
outstanding Company Options and Company Warrants, have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(d) Except as set forth in Part 2.3(d) of the Disclosure Schedule,
the Company has never repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the Delaware General Corporation Law and all other
applicable Legal Requirements, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other applicable
Contracts.
(e) Except as set forth in Part 2.3(e) of the Disclosure Schedule,
the Company has not issued dividends, redeemed any stock or made any other
distribution, or carried out a stock split, recapitalization or stock
issuance of any kind since the Company's last audited financial statements.
(f) Attached hereto as Exhibit F is a true and correct list of the
names, addresses and number of shares owned by each of the holders of record
of every class and series of capital stock of the Company as of the most
recent practicable date.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited balance sheets of the Company as of September
30, 1995 and 1994, and the related audited income statements, statements of
shareholders' equity and statements of cash flows of the Company for the
years then ended, together with the notes thereto and the unqualified
report and opinion of Coopers & Xxxxxxx LLP relating thereto; and
(ii) the unaudited balance sheet of the Company as of September
30, 1996 (the "Unaudited Interim Balance Sheet"), and the related unaudited
income statement of the Company for the twelve months then ended.
9
(b) The Company Financial Statements are accurate and complete in
all material respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of operations and
(in the case of the financial statements referred to in Section 2.4(a)(i))
cash flows of the Company for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except that the financial statements referred to in Section
2.4(a)(ii) do 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).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since September 30, 1996:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance
or prospects, and, to the best of the Company's knowledge, no event has
occurred that will, or could reasonably be expected to, have a Material
Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets
(whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security (except for Company Common Stock
issued upon the exercise of outstanding Company Options), (ii) any option
or right to acquire any capital stock or any other security (except for
Company Options described in Part 2.3 of the Disclosure Schedule), or (iii)
any instrument convertible into or exchangeable for any capital stock or
other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of the
Company Stock Plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase
agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party
to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
10
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since
September 30, 1996, exceeds $150,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii)
amended or prematurely terminated, or waived any material right or remedy
under, any such Contract;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of
business and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary
course of business), or (ii) incurred or guaranteed any indebtedness for
borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of
its directors, officers or employees, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
11
2.6 TITLE TO ASSETS
(a) The Company owns, and has good, valid and marketable title to,
all assets except for assets which are not individually or collectively
material purported to be owned by it, including: (i) all assets reflected
on the Unaudited Interim Balance Sheet; (ii) all assets referred to in
Parts 2.7(b) and 2.9 of the Disclosure Schedule and all of the Company's
rights under the Contracts identified in Part 2.10 of the Disclosure
Schedule; and (iii) all other assets reflected in the Company's books and
records as being owned by the Company. Except as set forth in Part 2.6(a) of
the Disclosure Schedule, all of said assets are owned by the Company free and
clear of any liens or other Encumbrances, except for (x) any lien for current
taxes not yet due and payable, and (y) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets
that are material to the business of the Company and that are being leased or
licensed to the Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate
and complete breakdown and aging of all accounts receivable, notes receivable
and other receivables of the Company as of September 30, 1996. Except as set
forth in Part 2.7(b) of the Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts receivable reflected on
the Unaudited Interim Balance Sheet that have not yet been collected and
those accounts receivable that have arisen since September 30, 1996 and have
not yet been collected) (i) represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary
course of business, (ii) are current and will be collected in full when due,
without any counterclaim or set off (net of an allowance for doubtful
accounts not to exceed $389,000 in the aggregate).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
12
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body,
(i) a brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company.
Part 2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of
less than $5,000 per license, per copy), and identifies the license agreement
under which such Proprietary Asset is being licensed to the Company. Except
as set forth in Part 2.9(a)(iv) of the Disclosure Schedule, the Company has
good, valid and marketable title to all of the Company Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Disclosure Schedule, free
and clear of all liens and other Encumbrances, and has a valid right to use
all Proprietary Assets identified in Part 2.9(a)(iii) of the Disclosure
Schedule. Except as set forth in Part 2.9(a)(v) of the Disclosure Schedule,
the Company is not obligated to make any payment to any Person for the use of
any Company Proprietary Asset. Except as set forth in Part 2.9(a)(vi) of the
Disclosure Schedule, the Company has not developed jointly with any other
Person any Company Proprietary Asset with respect to which such other Person
has any rights.
(b) The Company has taken all measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the
value of all Company Proprietary Assets. Except as set forth in Part 2.9(b)
of the Disclosure Schedule, the Company has not (other than pursuant to
license agreements identified in Part 2.10 of the Disclosure Schedule)
disclosed or delivered to any Person, or permitted the disclosure or delivery
to any Person of, (i) the source code, or any portion or aspect of the source
code, of any Company Proprietary Asset, or (ii) the object code, or any
portion or aspect of the object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. The Company is
not infringing, misappropriating or making any unlawful use of, and the
Company has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by
any other Person. To the best of the Company's knowledge, no other Person is
infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts
with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or on
behalf of the Company; and (ii) there has not been any claim by any customer
13
or other Person alleging that any Company Proprietary Asset (including each
version thereof that has ever been licensed or otherwise made available by
the Company to any Person) does not conform in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided by or on behalf of the Company, and, to the best
of the Company's knowledge, there is no basis for any such claim. The
Company has established adequate reserves on the Unaudited Interim Balance
Sheet to cover all costs associated with any obligations that the Company may
have with respect to the correction or repair of programming errors or other
defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner
in which such business has been and is being conducted. Except as set forth
in Part 2.9(e) of the Disclosure Schedule, (i) the Company has not licensed
any of the Company Proprietary Assets to any Person on an exclusive basis,
and (ii) the Company has not entered into any covenant not to compete or
Contract limiting its ability to exploit fully any of its Proprietary Assets
or to transact business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule,
(i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is substantially identical to
the form of Invention and Non-Disclosure Agreement previously delivered to
Parent, and (ii) all current and former consultants and independent
contractors to the Company have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Invention and
Non-Disclosure Agreement previously delivered to Parent.
(g) Except as set forth in Part 2.9(g) of the Disclosure Schedule,
the Company has not entered into and is not bound by any Contract under which
any Person has the right to distribute or license, on a commercial basis, any
Company Proprietary Asset including source code, object code, or any
versions, modifications or derivative works of source code or object code in
any Company Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent
contractor;
(ii) each Company Contract relating to the acquisition, transfer,
use, development, sharing or license of any technology or any Proprietary
Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person,
to sell any product or other asset to or
14
perform any services for any other Person or to transact business or deal
in any other manner with any other Person, or (C) develop or distribute
any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or
any surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.19);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside the
ordinary course of business or was inconsistent with the Company's past
practices;
(xii) any other Company Contract that has a term of more than 60
days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company; and
(xiii) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $25,000 in the aggregate, or (B) the
performance of services having a value in excess of $25,000 in the
aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written Contracts identified in Part 2.10 of the Disclosure
Schedule, including all amendments thereto. Part 2.10 of the Disclosure
Schedule provides an accurate description of the terms of each Company
Contract that is not in written form. Each Contract identified in Part 2.10
of the Disclosure Schedule is valid and in full force and effect, and, to the
best of the Company's
15
knowledge, is enforceable by the Company in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Company Contract, and, to the best of the Company's
knowledge, no other Person has violated or breached, or committed any
default under, any Company Contract;
(ii) to the best of the Company's knowledge, no event has
occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or could reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any Company
Contract, (B) give any Person the right to declare a default or exercise
any remedy under any Company Contract, (C) give any Person the right to
accelerate the maturity or performance of any Company Contract, or (D) give
any Person the right to cancel, terminate or modify any Company Contract;
(iii) since December 31, 1993, the Company has not received
any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Company Contract which, to
the best of the Company's knowledge, has not been resolved to the
satisfaction of all parties, except to the extent such violations, breaches
or defects are not material, either individually or in the aggregate; and
(iv) the Company has not waived any of its material rights under
any Company Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Company Contract to renegotiate, any amount paid or payable to
the Company under any Company Contract or any other material term or
provision of any Company Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure
Schedule constitute all of the Contracts necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted, either individually or collectively with other Contracts.
(f) Part 2.10 of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer,
award, written proposal, term sheet or similar document has been submitted or
received by the Company since January 1, 1996 and which may still be accepted.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
16
(h) Except as set forth in Part 2.10(h) of the Disclosure Schedule:
(i) the Company has not had any determination of noncompliance,
entered into any consent order or undertaken any internal investigation
relating directly or indirectly to any Government Contract or Government
Bid;
(ii) the Company has complied in all material respects with all
Legal Requirements with respect to all Government Contracts and Government
Bids;
(iii) the Company has not, in obtaining or performing any
Government Contract, violated (A) the Truth in Negotiations Act of 1962, as
amended, (B) the Service Contract Act of 1963, as amended, (C) the Contract
Disputes Act of 1978, as amended, (D) the Office of Federal Procurement
Policy Act, as amended, (E) the Federal Acquisition Regulations (the "FAR")
or any applicable agency supplement thereto, (F) the Cost Accounting
Standards, (G) the Defense Industrial Security Manual (DOD 5220.22-M), (H)
the Defense Industrial Security Regulation (DOD 5220.22-R) or any related
security regulations, or (I) any other applicable procurement law or
regulation or other Legal Requirement;
(iv) all facts set forth in or acknowledged by the Company in any
certification, representation or disclosure statement submitted by the
Company with respect to any Government Contract or Government Bid were
current, accurate and complete as of the date of submission;
(v) neither the Company nor any of its employees has been
debarred or suspended from doing business with any Governmental Body, and,
to the best of the Company's knowledge, no circumstances exist that would
warrant the institution of debarment or suspension proceedings against the
Company or any employee of the Company;
(vi) no negative determinations of responsibility have been
issued against the Company in connection with any Government Contract or
Government Bid;
(vii) no direct or indirect costs incurred by the Company
have been questioned or disallowed as a result of a finding or
determination of any kind by any Governmental Body;
(viii) no Governmental Body, and no prime contractor or
higher-tier subcontractor of any Governmental Body, has withheld or set
off, or threatened to withhold or set off, any material amount due to the
Company under any Government Contract;
(ix) to the best of the Company's knowledge, there are not and
have not been any irregularities, misstatements or omissions relating to
any Government Contract or Government Bid that have led to or could
reasonably be expected to lead to (A) any administrative, civil, criminal
or other investigation, Legal Proceeding or indictment
17
involving the Company or any of its employees, (B) the questioning or
disallowance of any costs submitted for payment by the Company, (C) the
recoupment of any payments previously made to the Company, (D) a finding
or claim of fraud, defective pricing, mischarging or improper payments on
the part of the Company, or (E) the assessment of any penalties or
damages of any kind against the Company;
(x) there is not and has not been any (A) outstanding claim
against the Company by, or dispute involving the Company with, any prime
contractor, subcontractor, vendor or other Person arising under or relating
to the award or performance of any Government Contract, (B) fact known by
the Company upon which any such claim could reasonably be expected to be
based or which may give rise to any such dispute, (C) final decision of any
Governmental Body against the Company;
(xi) the Company is not undergoing and has not undergone any
audit, and the Company has no knowledge of any basis for any impending
audit, arising under or relating to any Government Contract (other than
normal routine audits conducted in the ordinary course of business);
(xii) the Company has not entered into any financing
arrangement or assignment of proceeds with respect to the performance of
any Government Contract;
(xiii) no payment has been made by the Company or by any
Person acting on the Company's behalf to any Person (other than to any bona
fide employee or agent (as defined in subpart 3.4 of the FAR) of the
Company) which is or was contingent upon the award of any Government
Contract or which would otherwise be in violation of any applicable
procurement law or regulation or any other Legal Requirement;
(xiv) the Company has complied with all applicable
regulations and other Legal Requirements and with all applicable
contractual requirements relating to the placement of legends or
restrictive markings on material technical data, computer software and
other Proprietary Assets;
(xv) in each case in which the Company has delivered or otherwise
provided any technical data, computer software or Company Proprietary Asset
to any Governmental Body in connection with any Government Contract, the
Company has marked such technical data, computer software or Company
Proprietary Asset with all markings and legends (including any "restricted
rights" legend and any "government purpose license rights" legend)
necessary (under the FAR or other applicable Legal Requirements) to ensure
that no Governmental Body or other Person is able to acquire any unlimited
rights with respect to such technical data, computer software or Company
Proprietary Asset;
(xvi) the Company has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement;
18
(xvii) the Company is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any
Governmental Body under or in connection with any Government Contract or
Government Bid as a result of or by virtue of (A) the execution, delivery
of performance of this Agreement or any of the other agreements referred to
in this Agreement, or (B) the consummation of the Merger or any of the
other transactions contemplated by this Agreement.
2.11 LIABILITIES. The Company has no material accrued, contingent or
other liabilities of any nature, either matured or unmatured (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles, and whether due or to become due), except
for: (a) liabilities identified as such in the "liabilities" column of the
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries
that have been incurred by the Company since September 30, 1996 in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in Part 2.10 of the
Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Company Contracts; and (d) the liabilities identified in Part 2.11 of the
Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since December 31, 1993 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company.
Except as set forth in Part 2.12 of the Disclosure Schedule, since December
31, 1993, the Company has not received any notice or other communication from
any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and
the Company has delivered to Parent accurate and complete copies of all
Governmental Authorizations identified in Part 2.13 of the Disclosure
Schedule. The Governmental Authorizations identified in Part 2.13 of the
Disclosure Schedule are valid and in full force and effect, and collectively
constitute all Governmental Authorizations necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted. The Company is, and at all times since December 31, 1993 has
been, in substantial compliance with the terms and requirements of the
respective Governmental Authorizations identified in Part 2.13 of the
Disclosure Schedule. Since December 31, 1993, the Company has not received
any notice or other communication from any Governmental Body regarding (a)
any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification
of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been or will be
filed on or before the applicable due date
19
(including any extensions of such due date), and (ii) have been, or will be
when filed, accurately and completely prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Closing Date have been or will be
paid on or before the Closing Date.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles.
The Company will establish, in the ordinary course of business and consistent
with its past practices, reserves adequate for the payment of all Taxes for
the period from September 30, 1996 through the Closing Date, and the Company
will disclose the dollar amount of such reserves to Parent on or prior to the
Closing Date.
(c) Except as set forth in Part 2.14(c) of the Disclosure
Schedule, there have been no examinations or audits of any Company Return.
The Company has delivered to Parent accurate and complete copies of all audit
reports and similar documents (to which the Company has access) relating to
the Company Returns. Except as set forth in Part 2.14(c) of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any
of the Company Returns has been granted (by the Company or any other Person),
and no such extension or waiver has been requested from the Company.
(d) Except as set forth in Part 2.14(d) of the Disclosure
Schedule, no claim or Proceeding is pending or has been threatened against or
with respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax
and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by the Company with respect to any
Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Company and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of the
Company except liens for current Taxes not yet due and payable. The Company
has not entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code. The Company has not been, and the Company will
not be, required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or
any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to
the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code. The Company is not, and has never been, a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
(f) Except as set forth in Part 2.14(f) of the Disclosure Schedule,
since December 31, 1990, (i) no Governmental Body has asserted any claim or
otherwise made any allegation that the Company has failed or may have failed to
pay any sales tax, use tax or similar
20
Tax, and (ii) the Company has not engaged in any discussions or negotiations
with any Governmental Body, and has not sent any written communication to or
received any written communication from any Governmental Body, in connection
with any possible failure on the part of the Company to pay any sales tax,
use tax or similar Tax.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life
or other insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program or agreement (collectively, the "Plans")
sponsored, maintained, contributed to or required to be contributed to by the
Company for the benefit of any employee of the Company ("Employee"), except
for Plans which would not require the Company to make payments or provide
benefits having a value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to
the best of the Company's knowledge, has not at any time in the six year
period before the Closing maintained, sponsored or contributed to, any
employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Disclosure Schedule (the "Welfare Plans"), none of which is a
multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two
years;
(iii) an accurate and complete copy of the most recent
summary plan description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate
and complete copies the most recent financial statements thereof;
21
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and
recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under
Section 401(a) of the Code).
(e) The Company is not required to be, and, to the best of the
Company's knowledge, has never been required to be, treated as a single
employer with any other Person under Section 4001(b)(1) of ERISA or Section
414(b), (c), (m) or (o) of the Code. The Company has never been a member of
an "affiliated service group" within the meaning of Section 414(m) of the
Code. To the best of the Company's knowledge, the Company has never made a
complete or partial withdrawal from a multiemployer plan, as such term is
defined in Section 3(37) of ERISA, resulting in "withdrawal liability," as
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable
law) in a manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether
or not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated
by applicable law, including coverage provided pursuant to Section 4980B of
the Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
(h) To the best of the Company's knowledge, with respect to each
of the Welfare Plans constituting a group health plan within the meaning of
Section 4980B(g)(2) of the Code, the provisions of Section 4980B of the Code
("COBRA") have been complied with in all material respects.
(i) To the best of the Company's knowledge, each of the Plans has
been operated and administered in all material respects in accordance with
applicable Legal Requirements, including but not limited to ERISA and the
Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and the Company is not aware of any reason why any such
determination letter should be revoked.
22
(k) Except as set forth in Part 2.15(k) of the Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any
bonus, golden parachute or severance payment) to any current or former
Employee or director of the Company (whether or not under any Plan), or
materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to
bonus, deferred compensation or commission arrangements), their dates of
employment and their positions. The Company is not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
Employees. All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date
of return to full service.
(n) To the best of the Company's knowledge, the Company is in
compliance in all material respects with all applicable Legal Requirements
and Contracts relating to employment, employment practices, wages, bonuses
and terms and conditions of employment, including employee compensation
matters.
(o) Except as set forth in Part 2.15(o) of the Disclosure
Schedule, the Company has good labor relations, and the Company has no reason
to believe that (i) the consummation of the Merger or any of the other
transactions contemplated by this Agreement will have a material adverse
effect on the Company's labor relations, or (ii) any of the Company's
employees intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by the Company of all permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof. The Company has not received any
notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
the Company is not in compliance with any Environmental Law, and, to the best
of the Company's knowledge, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the best of the Company's knowledge, no current or prior owner of
any property leased or controlled by the Company has received any notice or
other communication (in writing or otherwise), whether from a Government
Body, citizens group, employee or otherwise, that alleges that such current
or prior owner or the Company is not in compliance with any Environmental
Law. All Governmental Authorizations currently held by the Company pursuant
to Environmental Laws are identified in Part 2.16 of the Disclosure Schedule.
(For purposes of this Section 2.16: (i) "Environmental Law" means any
federal, state,
23
local or foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance
that is now or hereafter regulated by any Environmental Law or that is
otherwise a danger to health, reproduction or the environment.)
2.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) The Company will not incur or otherwise become subject to any
material liability arising from (i) any product, system, program, Proprietary
Asset or other asset designed, developed, manufactured, assembled, sold,
supplied, installed, repaired, licensed or made available by the Company on
or prior to the Closing Date, or (ii) any consulting services, installation
services, programming services, repair services, maintenance services,
training services, support services or other services performed by the
Company on or prior to the Closing Date.
(b) Except as set forth in Part 2.17(b) of the Disclosure
Schedule, no customer or other Person has, at any time since December 31,
1993, asserted or threatened to assert any claim against the Company (other
than claims that have been resolved satisfactorily at no material cost to the
Company) under or based upon (i) any warranty provided by or on behalf of the
Company, or (ii) any services performed by the Company.
2.18 INSURANCE. Part 2.18 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company
has delivered to Parent accurate and complete copies of the insurance
policies identified on Part 2.18 of the Disclosure Schedule. Each of the
insurance policies identified in Part 2.18 of the Disclosure Schedule is in
full force and effect. Since December 31, 1992, the Company has not received
any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c)
material adjustment in the amount of the premiums payable with respect to any
insurance policy.
2.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.19 of
the Disclosure Schedule: (a) no Related Party has, and no Related Party has
at any time since December 31, 1993 had, any direct or indirect interest in
any material asset used in or otherwise relating to the business of the
Company; (b) no Related Party is, or has at any time since December 31, 1993
been, indebted to the Company; (c) since December 31, 1993, no Related Party
has entered into, or has had any direct or indirect financial interest in,
any material Contract, transaction or business dealing involving the Company;
(d) no Related Party is competing, or has at any time since December 31, 1993
competed, directly or indirectly, with the Company; and (e) no Related Party
has any claim or right against the Company (other than rights under company
Options and rights to receive compensation for services performed as an
employee of the
24
Company). (For purposes of the Section 2.19 each of the following shall be
deemed to be a "Related Party": (i) each individual who is, or who has at
any time since December 31, 1993 been, an officer of the Company; (ii) each
member of the immediate family of each of the individuals referred to in
clause "(i)" above; and (iii) any trust or other Entity (other than the
Company) in which any one of the individuals referred to in clauses "(i)" and
"(ii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary
or equity interest.)
2.20 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.20 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the Company's
knowledge) no Person has threatened to commence any Legal Proceeding: (i)
that involves the Company or any of the assets owned or used by the Company
or any Person whose liability the Company has or may have retained or
assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the Company's
knowledge, except as set forth in Part 2.20(a) of the Disclosure Schedule, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.20(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the best of the Company's knowledge, no officer or other
employee of the Company is subject to any order, writ, injunction, judgment
or decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to the Company's
business.
2.21 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and
performance by the Company of this Agreement have been duly authorized by all
necessary action on the part of the Company and its board of directors. This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.22 of
the Disclosure Schedule, neither (1) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
25
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or
(ii) any resolution adopted by the Company's shareholders, the Company's
board of directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets
owned or used by the Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
Company's business or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that
is or would constitute a Material Contract, or give any Person the right
to (i) declare a default or exercise any remedy under any such Company
Contract, (ii) accelerate the maturity or performance of any such Company
Contract, or (iii) cancel, terminate or modify any such Company Contract;
or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or
materially impair the operations of the Company).
Except as set forth in Part 2.22 of the Disclosure Schedule and by the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, the Company is not and
will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any
of the other transactions contemplated by this Agreement.
2.23 FULL DISCLOSURE.
(a) This Agreement (including the Disclosure Schedule) does not,
and the closing certificate to be delivered by the Company upon the day of
the Closing (the "Closing Certificate") will not, (i) contain any
representation, warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any material fact or
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
26
(b) The information supplied by the Company for inclusion in the
Information Statement (as defined in Section 5.2) will not, as of the date of
the Information Statement or as of the date of the Company Shareholders'
Meeting (as defined in Section 5.3), (i) contain any statement that is
inaccurate or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make such information (in the
light of the circumstances under which it is provided) not false or
misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement
(on a form other than Form S-8) and definitive proxy statement filed by
Parent with the SEC between September 30, 1995 and the date of this Agreement
(the "Parent 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): (i) each of the Parent SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); (ii) none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (iii) since the date of the
Parent's last Quarterly Report on Form 10-Q, no event has occurred which
would have a material adverse effect on Parent's business, condition, assets,
liability, operations, financial performance or prospects.
(b) The consolidated financial statements contained in the Parent
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 statements 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
year-end audit adjustments; and (iii) fairly present the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of Parent and its
subsidiaries for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. No vote of Parent's
27
stockholders is needed to approve the Merger. This Agreement constitutes the
legal, valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
3.3 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock to
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and
Parent's Representatives with reasonable access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company; and (b) provide Parent and Parent's Representatives with copies of
such existing books, records, Tax Returns, work papers and other documents
and information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.18 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but in
no event less frequently than weekly) to Parent concerning the status of
the Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares
of capital stock or other securities or purchase or acquire for cash any of
its options or warrants;
28
(f) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to
acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security
(except that the Company shall be permitted to issue Company Common Stock
to employees upon the exercise of outstanding Company Options and to issue
shares of Company Common Stock upon the conversion of shares of Class A
Preferred Stock, Class B Preferred Stock or Class C Preferred Stock);
(g) the Company shall not amend or waive any of its rights under, or,
except as described in Part 4.2(g) of the Disclosure Schedule, permit the
acceleration of vesting under, (i) any provision of the Company Stock
Plans, (ii) any provision of any agreement evidencing any outstanding
Company Option, or (iii) any provision of any restricted stock purchase
agreement;
(h) the Company shall not amend or permit the adoption of any
amendment to the Company's articles of incorporation or bylaws, or effect
or permit the Company to become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction (except that the Company may issue shares of
Company Common Stock upon the conversion of shares of Class A Preferred
Stock, Class B Preferred Stock and Class C Preferred Stock);
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
the purchase of items requiring capital expenditures of no more than $1000;
(k) the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Contract that is or would
constitute a Material Contract, or (ii) amend or prematurely terminate, or
waive any material right or remedy under, any such Contract;
(l) the Company shall not except in the ordinary course of business
(i) acquire, lease or license any right or other asset from any other
Person, (ii) sell or otherwise dispose of, or lease or license, any right
or other asset to any other Person, or (iii) waive or relinquish any right,
except for assets acquired, leased, licensed or disposed of by the Company
pursuant to Contracts that are not Material Contracts;
(m) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary
course of business and may, consistent with its past practices, allow
employees to acquire Company Common Stock in exchange for promissory notes
upon exercise of Company Options), or (ii) incur or guarantee any
indebtedness for borrowed money (except that the Company may make routine
borrowings in the ordinary course of business under its line of credit with
Silicon Valley Bank);
29
(n) except for the period after the Closing and as set forth in
Exhibit G, the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, or
(iii) hire any new employee;
(o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld (it being understood that Parent's withholding of consent to any action
will not be deemed unreasonable if Parent determines in good faith that the
taking of such action would not be in the best interests of Parent or would not
be in the best interests of the Company).
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty
made by the Company in this Agreement if (A) such representation or
warranty had been made as of the time of the occurrence, existence or
discovery of such event, condition, fact or circumstance, or (B) such
event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the
Company; and
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(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company in
this Agreement, or (ii) determining whether any of the conditions set forth in
Section 6 has been satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, the Company shall not,
directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other
than Parent) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to
any applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Merger and the other transactions contemplated by this
Agreement. The Company shall (upon request) promptly deliver to Parent a
copy of each such filing made, each such notice given and each such Consent
obtained by the Company during the Pre-Closing Period.
5.2 INFORMATION STATEMENT. As promptly as practicable after the
execution of this Agreement, the Company and Parent shall jointly prepare an
Information Statement relating to
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the approval of the Merger by the Company's shareholders and the exercise of
appraisal rights in connection therewith (the "Information Statement"). The
Company shall provide and include in the Information Statement such
information relating to the Company and its shareholders as may be required
pursuant to Rule 502 under the Securities Act.
5.3 COMPANY SHAREHOLDERS' MEETING. The Company shall, in accordance
with its articles of incorporation and bylaws and the applicable requirements
of the Delaware General Corporation Law, call and hold a special meeting of
its shareholders as promptly as practicable for the purpose of permitting
them to consider and to vote upon and approve the Merger and this Agreement
(the "Company Shareholders' Meeting"). The Company shall cause a copy of the
Information Statement to be delivered to each shareholder of the Company who
is entitled to vote at the Company Shareholders' Meeting. As promptly as
practicable after the delivery of copies of the Information Statement to all
shareholders entitled to vote at the Company Shareholders' Meeting, the
Company shall use its best efforts (i) to solicit from each of such
shareholders a proxy in favor of the approval of the Merger and this
Agreement, (ii) to cause each of such shareholders to identify in writing a
person reasonably acceptable to Parent as his or her "purchaser
representative" (as defined in Rule 501 under the Securities Act) in
connection with evaluating the merits and risks of investing in Parent Common
Stock, and (iii) to cause each of such shareholders to execute and deliver to
Parent a Shareholder Investment Certification in the form of Exhibit H.
Without limiting the generality or the effect of anything contained in the
Shareholder Agreements being executed and delivered to Parent by certain
Company shareholders contemporaneously with the execution and delivery of
this Agreement, each such shareholder shall cause all shares of the capital
stock of the Company that are owned, beneficially or of record, by such
shareholder on the record date for the Company Shareholders' meeting to be
voted in favor of the Merger and this Agreement at such meeting.
Notwithstanding the foregoing, the Shareholders may approve the Merger and
this Agreement by a written consent in lieu of a Shareholders' Meeting in
accordance with Section 228 of the Delaware General Corporation Law.
5.4 PUBLIC ANNOUNCEMENTS.
(a) During the Pre-Closing Period, the Company shall not (and the
Company shall not permit any of its Representatives to) issue any press
release or make any public statement regarding this Agreement or the Merger,
or regarding any of the other transactions contemplated by this Agreement,
without Parent's prior written consent.
(b) During the Pre-Closing Period, Parent will consult with the
Company prior to issuing any press release or making any public statement
regarding the Merger (unless Parent reasonably determines that Parent is
required, by virtue of any applicable Legal Requirement, to issue any such
press release or make any such public statement under the circumstances that
make it infeasible or impractical to consult with the Company).
5.5 POOLING OF INTERESTS. During the Pre-Closing Period, no party to this
Agreement shall take any action that could reasonably be expected to have an
adverse effect on the ability of Parent to account for the Merger as a "pooling
of interests."
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5.6 AFFILIATE AGREEMENTS. The Company shall use all commercially
reasonable efforts to cause each other Person identified on Exhibit I-2 (and
any other Person that could reasonably be deemed to be an "affiliate" of the
Company for purposes of the Securities Act), to execute and deliver to
Parent, as promptly as practicable after the execution of this Agreement, an
Affiliate Agreement in the form of Exhibit I-1.
5.7 BEST EFFORTS. During the Pre-Closing Period, (a) the Company shall
use its best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis, and (b) Parent and Merger Sub shall use their
best efforts to cause the conditions set forth in Section 7 to be satisfied
on a timely basis.
5.8 TERMINATION OF AGREEMENTS. Prior to the Closing:
(a) the Company shall obtain waivers of the right of redemption in
respect of the Class A, B and C Preferred Stock by the holders thereof in
the event of a reorganization of the Company as contemplated herein, from
all of the holders thereof.
(b) the Company shall use all commercially reasonable efforts to
cause Micromuse Plc to enter into an agreement with the Company, reasonably
satisfactory in form and content to Parent (and conditioned and effective
upon the Closing), terminating all of the rights of Micromuse Plc under the
Value Added Reseller Agreement dated as of April 28, 1996 between the
Company and Micromuse Plc.
5.9 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasure Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 -
0(x)(0) xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.10 RELEASE. At the Closing, each of the shareholders listed in
Exhibit J shall execute and deliver to the Company a Release in the form of
Exhibit K.
5.11 TERMINATION OF EMPLOYEE PLANS. At the Closing, the Company shall
terminate the Company Stock Plans, and shall ensure that no employee or
former employee of the Company has any rights under any of such Plans and
that any liabilities of the Company under such Plans (including any such
liabilities relating to services performed prior to the Closing) are fully
extinguished at no cost to the Company.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
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6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in this Agreement and in each of the other
agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Scheduled Closing Time as if made at the
Scheduled Closing Time (without giving effect to any update to the Disclosure
Schedule other than the Special Disclosure Schedule Amendment, and without
giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
with which the Company is required to comply or required to perform at or
prior to the Closing shall have been complied with and performed in all
respects.
6.3 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote, or written consent in lieu
thereof, of (a) at least a majority of the shares of Company Common Stock and
Class A, Class B and Class C Preferred Stock entitled to vote with respect
thereto (which preferred stock is entitled to cast the number of votes each
to the number of whole shares of the Company Common Stock into which the
shares of preferred stock are convertible), voting together with the Company
Common Stock as a single class; (b) at least a majority of the shares of
Class A, Class B and Class C Preferred Stock entitled to vote with respect
thereto, voting together as a single class; and (c) at least a majority of
the shares of Class C Preferred Stock entitled to vote with respect thereto.
6.4 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement
(including the Consents identified in Part 2.22 of the Disclosure Schedule)
shall have been obtained and shall be in full force and effect.
6.5 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have
received the following agreements and documents, each of which shall be in
full force and effect:
(a) Shareholder Investment Certifications in the form of Exhibit H,
each dated as of the date of the Company Shareholders' Meeting or as of an
earlier date, executed by each of the Company's shareholders;
(b) Affiliate Agreements in the form of Exhibit I-1, executed by the
Persons identified on Exhibit I-2 and by any other Person who could
reasonably be deemed to be an "affiliate" of the Company for purposes of
the Securities Act;
(c) a Release in the form of Exhibit K, executed by the shareholders
listed in Exhibit J;
(d) the waivers referred to in Section 5.9(a), executed by each of
the relevant shareholders;
34
(e) the agreement, if any, referred to in Section 5.9(b), executed by
Micromuse Plc;
(f) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees and
former employees of the Company and by all consultants and independent
contractors and former consultants and former independent contractors to
the Company who have not already signed such agreements (including the
individuals identified in Part 2.9(f) of the Disclosure Schedule);
(g) the statement referred to in Section 5.9(a), executed by the
Company;
(h) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to
Parent, executed by X.X. Xxxx Real Estate Investment Trust;
(i) a legal opinion of Piper & Marbury L.L.P., dated as of the
Closing Date, in a form to be agreed;
(j) a legal opinion of Piper & Marbury, L.L.P., reasonably
satisfactory in form and content to Parent, to the effect that the
execution, delivery and performance of this Agreement and the consummation
of the Merger and the other transactions contemplated by this Agreement do
not and will not contravene, conflict with or result in a violation of, or
give any Governmental Body the right to exercise any remedy or to obtain
any relief under, any Government Contract to which the Company is a party
or under which the Company has any rights or obligations;
(k) a letter from Ernst & Young LLP, dated as of the Closing Date,
regarding concurrence with Parent's management's conclusion regarding the
appropriateness of pooling of interests accounting treatment for the Merger
under APB Opinion No. 16 if consummated in accordance with this Agreement,
in a form customary in scope and substance for letters delivered by
independent public accountants in connection with transactions of this
type;
(l) a letter from Coopers & Xxxxxxx LLP, dated as of the Closing
Date, confirming that no transaction entered into by the Company, and no
other fact or circumstance relating to the Company, will prevent Parent
from accounting for the Merger as a "pooling of interests" in accordance
with generally accepted principles, Accounting Principles Board Opinion No.
16 and all published rules, regulations and policies of the SEC;
(m) a certificate executed by the Company and containing the
representation and warranty of the Company that each of the representations
and warranties set forth in Section 2 is accurate in all respects as of the
Closing Date as if made on the Closing Date and that the conditions set
forth in Sections 6.1, 6.2 and 6.3 have been duly satisfied (the "Closing
Certificate");
35
(n) written resignations of all directors of the Company, effective
as of the Effective Time; and
(o) an Escrow Agreement substantially in the form of Exhibit E
executed by the Parent and the Company.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.9(b).
6.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to
prohibit or limit the exercise by Parent of any material right pertaining to
its ownership of stock of the Surviving Corporation.
6.9 LEGENDS. The Company shall have provided Parent with evidence,
reasonably satisfactory to Parent, that all technical data, computer software
and Company Proprietary Assets delivered or otherwise provided or made
available by or on behalf of the Company to Governmental Bodies in connection
with Government Contracts have been marked with all markings and legends
(including any "restricted rights" legend and any "government purpose license
rights" legend) appropriate (under the FAR, under other applicable Legal
Requirements or otherwise) to ensure that no Governmental Body or other
Person is able to acquire any unlimited rights with respect to any of such
technical data, computer software or Company Proprietary Assets and to ensure
that the Company has not lost or relinquished and will not lose or relinquish
any material rights with respect thereto.
6.10 TERMINATION OF EMPLOYEE PLANS. The Company shall have provided
Parent with evidence, reasonably satisfactory to Parent, as to the
termination of the benefit plans referred to in Section 5.12.
6.11 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business, condition, assets, liabilities,
operations, financial performance or prospects since the date of this
Agreement; PROVIDED, HOWEVER, that changes in projected revenues of the
Company resulting from the failure of the Company to execute agreements with
potential new customers after announcement of the execution of this Agreement
shall not be considered a material adverse change pursuant to this Section 6.
6.12 RULE 506. All applicable requirements of Rule 506 under the
Securities Act shall have been satisfied.
36
6.13 WAIVER OF DISSENTERS RIGHTS. Shareholders representing the right
to receive 95% of the Merger Shares shall have delivered Waivers of their
appraisal rights under Section 262 of the Delaware General Corporation Law.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material
respects as of the Scheduled Closing Time as if made at the Scheduled Closing
Time (without giving effect to any materiality or similar qualifications
contained in such representations and warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that Parent and Merger Sub are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all
respects.
7.3 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing
Date, in a form to be agreed; and
(b) a Registration Rights Agreement substantially in the form of
Exhibit L executed by the Parent.
7.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub
to comply with or perform any covenant or obligation of Parent or Merger
Sub set forth in this Agreement);
37
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the
Company to comply with or perform any covenant or obligation set forth in
this Agreement or in any other agreement or instrument delivered to
Parent);
(c) by Parent at or after the Scheduled Closing Time if any condition
set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(d) by the Company at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled
Closing Time;
(e) by Parent if the Closing has not taken place on or before
February 28, 1997 (other than as a result of any failure on the part of
Parent to comply with or perform any covenant or obligation of Parent set
forth in this Agreement);
(f) by the Company if the Closing has not taken place on or before
February 28, 1997 (other than as a result of the failure on the part of the
Company to comply with or perform any covenant or obligation set forth in
this Agreement or in any other agreement or instrument delivered to
Parent); or
(g) by the mutual consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Parent shall deliver to the Company a written notice stating that Parent is
terminating this Agreement and setting forth a brief description of the basis
on which Parent is terminating this Agreement. If the Company wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or
Section 8.1(f), the Company shall deliver to Parent a written notice stating
that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement
shall terminate; PROVIDED, HOWEVER, that: (a) neither the Company nor Parent
shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10.6; and (c) the Company shall, in all
events, remain bound by and continue to be subject to Section 5.4.
38
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Company
(including the representations and warranties set forth in Section 2 and the
representations and warranties set forth in the Closing Certificate) shall
survive the Closing and shall expire on the first anniversary of the Closing
Date; PROVIDED, HOWEVER, that if, at any time prior to the first anniversary
of the Closing Date, any Indemnitee (acting in good faith) delivers to any of
the Indemnitors (as defined below) a written notice alleging the existence of
a material inaccuracy in or a material breach of any of the representations
and warranties made by the Company (and setting forth in reasonable detail
the basis for such Indemnitee's belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under Section 9.2 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the first anniversary of the Closing until such time as such claim is
fully and finally resolved. All representations and warranties made by
Parent and Merger Sub shall terminate and expire as of the Effective Time,
and any liability of Parent or Merger Sub with respect to such
representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of
the Company, and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of
any information furnished to, or any investigation made by or knowledge of,
any of the Indemnitees or any of their Representatives, except to the extent
such information is included in the Disclosure Schedule or any update to the
Disclosure Schedule.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made
by the Company.
9.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section
9.1(a)), the holders of Company Shares who shall have received, or are
entitled to receive, Parent Common Stock pursuant to Section 1 above (the
"Indemnitors"), severally, but not jointly and severally, shall hold harmless
and indemnify each of the Indemnitees from and against, and shall compensate
and reimburse each of the Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of
the Indemnitees may otherwise become subject (regardless of whether or not
such Damages relate to any third-party claim) and which arise from or as a
result of, or are directly or indirectly connected with: (i) any material
inaccuracy in or material breach of any representation or warranty set forth
in Section 2 or in the Closing Certificate (without giving effect to any
"Material Adverse Effect" or other materiality qualification or any similar
qualification contained or incorporated directly or indirectly in such
representation or warranty, but giving effect to any update to the Disclosure
Schedule delivered by the Company and received by Parent prior to 5:00 pm EST
on January 9, 1997); (ii) any material breach of any covenant or obligation
of the Company (including the
39
covenants set forth in Sections 4 and 5); or (iii) any Legal Proceeding
relating to any inaccuracy or breach of the type referred to in clause "(i)"
or "(ii)" above (including any Legal Proceeding commenced by any Indemnitee
for the purpose of enforcing any of its rights under this Section 9).
(b) The Indemnitors acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation such as would be subject to
indemnification in Section 9.2(a), then (without limiting any of the rights
of the Surviving Corporation as an Indemnitee) Parent shall also be deemed,
by virtue of its ownership of the stock of the Surviving Corporation, to have
incurred Damages as a result of and in connection with such inaccuracy or
breach.
9.3 LIMITATION OF PARENT CLAIMS. The obligations and liabilities of
the Indemnitors hereunder with respect to indemnification for Damages shall
be subject to the following limitations:
(a) No indemnification shall be required to be made by the
Indemnitors hereunder unless the amount of Damages exceeds $100,000 in the
aggregate, in which case the Stockholders' indemnification obligations shall
apply to the amount of such Parent Claims in excess of $100,000.
(b) All claims for indemnification pursuant to Section 9.2 hereof
shall be brought and recovered by the Indemnitees solely by the return to
Parent of property from the Escrow Fund. Without limiting the generality of
the foregoing, Parent shall not have any recourse against any Indemnitors
individually, or any Indemnitor's assets or property, for Damages, except for
recovery against the Escrow Fund pursuant to the terms of this Agreement and
the Escrow Agreement.
(c) For purposes of determining the amount of property recoverable
from the Escrow Fund sufficient to satisfy any claim subject to
indemnification hereunder, the value of a share of Parent Stock shall be
equal to the average closing price on the Nasdaq National Market for the
shares of the Parent Common Stock for the five trading days ending; two days
prior to the Effective Time.
(d) The Indemnitors and the Indemnitees acknowledge and agree that
any distribution of property from the Escrow Fund to satisfy a claim
hereunder shall be done so as to reduce each Indemnitor's interest in the
Parent Common Stock in the Escrow Fund in a pro rata manner based on the
Indemnitors' respective ownership interests in the Parent Common Stock in the
Escrow Fund.
9.4 EXCLUSIVE REMEDY. The indemnification provided in this Article 9
shall be the Indemnitees' exclusive remedy for any breach by the Company of a
representation or warranty contained in this Agreement or any certificate or
other writing delivered by the Company pursuant hereto or in connection
herewith. Notwithstanding the foregoing, nothing contained
40
herein shall limit a party's rights or remedies with respect to claims
resulting from or arising out of or willful misconduct or fraud.
9.5 NO CONTRIBUTION. Each Indemnitor waives, and acknowledges and
agrees that he shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become
subject under or in connection with this Agreement or the Closing Certificate.
9.6 INTEREST. Any Indemnitor who is required to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9
with respect to any Damages shall also be liable to such Indemnitee for
interest on the amount of such Damages (for the period commencing as of the
date on which such Indemnitor first received notice of a claim for recovery
by such Indemnitee and ending on the date on which the liability of such
Indemnitor to such Indemnitee is fully satisfied by such Indemnitor) at a
floating rate equal to the rate of interest publicly announced by Bank of
Boston from time to time as its prime, base or reference rate.
9.7 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Parent or against any other Person) with
respect to which the Indemnitors may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9,
Parent shall have the right, at its election, to proceed with the defense of
such claim or Legal Proceeding on its own. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Indemnitors out
of the Escrow Fund;
(b) each Indemnitor shall make available to Parent any documents and
materials in his possession or control, if any, that may be necessary to
the defense of such claim or Legal Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Indemnitors' Agent (as
defined in Section 10.1); PROVIDED, HOWEVER, that such consent shall not be
unreasonably withheld.
Parent shall give the Indemnitors' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent or the Surviving Corporation;
PROVIDED, HOWEVER, that any failure on the part of Parent to so notify the
Indemnitors' Agent shall not limit any of the obligations of the Indemnitors
under this Section 9 (except to the extent such failure materially prejudices
the defense of such Legal Proceeding).
9.8 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any
41
indemnification claim or exercise any other remedy under this Agreement
unless Parent (or any successor thereto or assign thereof) shall have
consented to the assertion of such indemnification claim or the exercise of
such other remedy.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 INDEMNITORS' AGENT. The Indemnitors hereby irrevocably appoint
Xxxxxxx Xxxxx as their agent for purposes of Section 9 (the "Indemnitors'
Agent"), and Xxxxxxx Xxxxx hereby accepts his appointment as the Indemnitors'
Agent. Parent shall be entitled to deal exclusively with the Indemnitors'
Agent on all matters relating to Section 9, and shall be entitled to rely
conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Indemnitor by
the Indemnitors' Agent, and on any other action taken or purported to be
taken on behalf of any Indemnitor by the Indemnitors' Agent, as fully binding
upon such Indemnitor. If the Indemnitors' Agent shall die, become disabled
or otherwise be unable to fulfill his responsibilities as agent of the
Indemnitors, then the Indemnitors shall, within ten days after such death or
disability, appoint a successor agent and, promptly thereafter, shall notify
Parent of the identity of such successor. Any such successor shall become the
"Indemnitors' Agent" for purposes of Section 9 and this Section 10.1. If for
any reason there is no Indemnitors' Agent at any time, all references herein
to the Indemnitors' Agent shall be deemed to refer to the Indemnitors.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to
Parent and its Representatives in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule) and all agreements, certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the transactions contemplated by this Agreement, (c) the
preparation and submission of any filing or notice required to be made or
given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, and (d) the consummation of the
Merger.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
42
10.5 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other parties hereto):
IF TO PARENT:
Xxxxx & Xxxxxxx, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxx X.X. Black
WITH A COPY TO:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
IF TO THE COMPANY:
MAXM Systems Corporation
0000 Xxxxxxxxxx Xxxxx, 0xx Xx.
XxXxxx, XX 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxx Xxxxxxx
WITH A COPY TO:
Piper & Marbury L.L.P.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Tel. (000) 000-0000
Fax. (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Xx., Esq.
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, the
Company shall keep confidential, and
43
shall not use or disclose to any other Person, any non-public document or
other non-public information in the Company's possession that relates to the
business of the Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
10.10 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the
State of Delaware (without giving effect to principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
the Company and its successors and assigns (if any); Parent and its
successors and assigns (if any); and Merger Sub and its successors and
assigns (if any). This Agreement shall inure to the benefit of: the Company;
the Company's shareholders (to the extent set forth in Section 1.5); the
holders of assumed Company Options (to the extent set forth in Section 1.6);
Parent; Merger Sub; the other Indemnitees (subject to Section 9); and the
respective successors and assigns (if any) of the foregoing. Parent may
freely assign any or all of its rights under this Agreement (including its
indemnification rights under Section 9), in whole or in part, to any other
Person without obtaining the consent or approval of any other party hereto or
of any other Person.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative).
The parties to this Agreement agree that, in the event of any breach or
threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other
party to this Agreement, such other party shall be entitled (in addition to
any other remedy that may be available to it) to (a) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
44
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have
any effect except in the specific instance in which it is given.
10.14 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable,
shall not be impaired or otherwise affected and shall continue to be valid
and enforceable to the fullest extent permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections
1.5, 1.6 and 9, none of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than the parties hereto
and their respective successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof; PROVIDED, HOWEVER, that the
confidentiality provisions agreed to in the letter of intent dated November
25, 1996 executed on behalf of Parent and the Company shall remain in effect
in accordance with its terms until the earlier of (a) the Effective Time, or
(b) the date on which such agreement is terminated in accordance with its
terms.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
45
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
46
The parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.
XXXXX & BABBAGE, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
MINIMUM ACQUISITION SUB, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx, Xx.
------------------------------------------
MAXM SYSTEMS CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock issued
to employees of the Company, upon exercise of Company Options or otherwise,
in routine transactions in accordance with the Company's past practices),
(ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock or other equity security of the
Company (other than stock options granted to employees of the Company in
routine transactions in accordance with the Company's past practices), or
(iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock or other equity
security of the Company; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets
is or may become bound or under which the Company has, or may become subject
to, any obligation; or (c) under which the Company has or may acquire any
right or interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
material Proprietary Asset owned by or licensed to the Company or otherwise
used by the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental
Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking
of any nature.
A-1
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including reasonable attorneys' fees),
charge, cost (including costs of investigation) or expense of any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to Parent on behalf of the
Company.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security
or other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor
or higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body
or any such prime contractor or subcontractor otherwise has or may acquire
any right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with
any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal).
A-2
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a)
Parent; (b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to
in clauses "(a)" and "(b)" above; and (d) the respective successors and
assigns of the Persons referred to in clauses "(a)", "(b)" and "(c)" above;
PROVIDED, HOWEVER, that the Indemnitors shall not be deemed to be
"Indemnitees."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or
any arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
MATERIAL. With respect to determining whether any item or other thing
is "material," such materiality shall be judged both individually and in the
aggregate.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
or in the Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications,
in such representations and warranties) would have a material adverse effect
on the Company's business, condition, assets, liabilities, operations,
financial performance or prospects.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or
other intellectual property right or intangible asset; or (b) right to use or
exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
A-3
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
A-4
EXHIBIT B
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT ("Agreement") is being executed and delivered
as of December ____, 1996 by the undersigned (the "Shareholder") in favor of
and for the benefit of XXXXX & XXXXXXX, INC., a Delaware corporation
("Parent"), and MAXM SYSTEMS CORPORATION, a Delaware corporation (the
"Company").
RECITALS
A. Shareholder owns the number and class of shares of the Company
shown on the attached Exhibit A. Said shares, including any shares into which
the shares shown on Exhibit A are converted or exchanged and any Company
shares subsequently acquired by shareholder, are referred to in this
Agreement as the "Shares."
B. Parent, MINIMUM ACQUISITION SUB., INC., a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub") and the Company are
entering into an Agreement and Plan of Merger and Reorganization of even date
herewith (the "Reorganization Agreement"), providing for the merger of Merger
Sub and the Company (the "Merger").
C. Parent has required, as a condition to entering into the
Reorganization Agreement, that Shareholder execute and deliver this Agreement.
AGREEMENT
In order to induce Parent to enter into the Reorganization Agreement,
and for other good and valuable consideration, Shareholder hereby agrees as
follows:
1. REPRESENTATIONS AND WARRANTIES. Shareholder represents and
warrants to Parent as follows:
(a) Shareholder is the holder and beneficial owner of the Shares
and has good and valid title to the Shares as his separate property, free and
clear of any liens, pledges, security interests, adverse claims, equities,
options, proxies, community property interests, charges, encumbrances or
restrictions of any nature. The Shares are the only shares of the capital
stock of the Company held by Shareholder. Subject to Section 3 of this
Agreement, Shareholder has (and at all times through the date of consummation
of the Merger will have) the ability to vote all of the Shares in accordance
with Section 2 of this Agreement. Except as provided in Section 3 of this
Agreement, Shareholder has not appointed or granted any proxy or entered into
any agreement, contract, commitment or understanding with respect to any of
the Shares.
(b) Shareholder has the absolute and unrestricted right, power and
capacity to execute, deliver and perform all of his obligations under this
Agreement, the Proxy (as defined below) and all other agreements and
documents executed and delivered or to be executed and delivered by
Shareholder in connection with the transactions contemplated by the
Reorganization Agreement, this Agreement, the Proxy and such other agreements
and documents being referred to collectively in this Agreement as the
"Transactional Agreements"). Each of the Transactional Agreements (i) has
been (or will when executed by Shareholder be) duly and validly executed by
Shareholder, and (ii) constitutes (or will when executed by Shareholder
constitute) a valid and binding obligation of Shareholder, enforceable
against Shareholder in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
to rules of law governing specific performance, injunctive relief and other
equitable remedies.
(c) Neither the execution, delivery or performance of any of the
Transactional Agreements, nor the consummation of the Merger or any of the
other transactions contemplated by the Reorganization Agreement, will
directly or indirectly: (i) result in any violation or breach of any
agreement or other instrument to which Shareholder is a party or by which
Shareholder or any of the Shares is bound; or (ii) result in a violation of
any law, rule, regulation, order, judgment or decree to which Shareholder or
any of the Shares is subject. No authorization, instruction, consent or
approval of any person or entity is required to be obtained by Shareholder in
connection with the execution, delivery or performance of any of the
Transactional Agreements.
(d) There is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the best
of the knowledge of Shareholder, threatened against Shareholder that
challenges or would challenge the execution and delivery of any of the
Transactional Agreements or the taking of any of the actions required to be
taken by Shareholder under any of the Transactional Agreements.
(e) Shareholder is aware (i) that the common stock of Parent
("Parent Common Stock") to be issued in the Merger will not be registered and
will not be issued pursuant to a registration statement under the Securities
Act of 1933, as amended (the "Act"), but will instead be issued in reliance
on the exemption from registration set forth in Section 4(2) of the Act and
in Rule 506 under the Act, and (ii) that the neither the Merger nor the
issuance of such Parent Common Stock has been approved or reviewed by the
Securities and Exchange Commission or by any other governmental agency.
(f) Shareholder is aware that, because the Parent Common Stock to
be issued in the Merger will not be registered under the Act, such Parent
Common Stock must be held indefinitely and such Parent Common Stock can not
be resold unless such Parent Common Stock is registered under the Act or
unless an exemption from registration is available. Shareholder
is also aware that: (i) except as expressly provided in the Reorganization
Agreement and the Registration Rights Agreement executed and delivered or to
be executed and delivered by the Company in connection with the Merger,
Parent is under no obligation to file a registration statement with respect
to such Parent Common Stock to be issued to him in the Merger; and (ii) the
provisions of Rule 144 under the Act will permit resale of the Parent Common
Stock to be issued to him in the Merger only under limited circumstances and
that such Parent Common Stock must be held by him at least two years before
it can be sold pursuant to Rule 144. Shareholder is further aware that any
transfer of the Parent Common Stock he is receiving in the Merger may also be
subject to (1) the restrictions contained in the Affiliate Agreement to be
executed by certain Shareholders in favor of the Company.
(g) The Parent Common Stock to be issued Shareholder in the Merger
will be acquired by him for investment and for his own account, and not with
a view to, or for resale in connection with, any unregistered distribution
thereof.
(h) Shareholder has requested and received, reviewed and
considered all the information Shareholder considers necessary to enable him
to make an informed decision to invest in Parent Common Stock, including: (i)
a copy of Parent's report on Form 10-K for 1995; (ii) a copy of Parent's 1995
Annual Report to Stockholders; and (iii) a copy of Parent's reports on Form
10-Q for the last quarter of 1995 and the first two quarters of 1996 (the
documents referred to in clauses "(i)," "(ii)," and "(iii)" of this Section
l(h) being referred to collectively in this Agreement as the "Disclosure
Documents").
(i) Shareholder confirms that he and his representatives and
advisors have been given the opportunity: (i) to ask questions of, and to
receive answers from, persons acting on behalf of the Company and Parent
concerning the terms and conditions of the Merger and the contemplated
issuance of Parent Common Stock in the Merger, and the business, properties,
prospects and financial condition of the Company and Parent; and (ii) to
obtain any additional information (to the extent the Company or Parent
possesses such information or is able to acquire it without unreasonable
effort or expense and without breach of confidentiality obligations)
necessary to verify the accuracy of the information set forth in the
Disclosure Documents.
(j) Shareholder is an "accredited investor" within the meaning of
Rule 501(a) under the Act.
(k) Shareholder is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
securities presenting investment decisions like that involved in
Shareholder's contemplated investment in the Parent Common Stock to be issued
in the Merger. Shareholder understands and has fully considered the risks of
acquiring and owning Parent Common Stock and further understands that: (i) an
investment in Parent Common Stock is a speculative investment which involves
a high degree of risk and is suitable only for an investor who is able to
bear the economic consequences of losing his entire
B-3
investment; and (ii) there are substantial restrictions on the
transferability of the Parent Common Stock to be issued in the Merger, and,
accordingly, it may not be possible for Shareholder to liquidate his
investment in such Parent Common Stock (in whole or in part) in the case of
emergency. Shareholder is able: (1) to hold the Parent Common Stock for a
substantial period of time; and (2) to afford a complete loss of his
investment in such Parent Common Stock.
(l) Shareholder understands that stop transfer instructions will
be given to Parent's transfer agent with respect to the Parent Common Stock
to be issued to Shareholder in the Merger, and that there will be placed on
the certificate or certificates representing such Parent Common Stock the
following legend (together with any other legend or legends required by
applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
(m) The representations and warranties contained in this Agreement
are accurate in all respects as of the date of this Agreement, will be accurate
in all respects at all times through the consummation of the Merger and will be
accurate in all respects as of the date of the consummation of the Merger as if
made on that date.
2. AGREEMENT TO VOTE SHARES. Shareholder shall vote all of the Shares at
every meeting of the shareholders of the Company (and every adjournment or
postponement of each such meeting), and (to the extent requested by Parent) by
executing a written consent in lieu of such a meeting or otherwise):
(a) in favor of approval of the Reorganization Agreement, the Merger,
and the other transactions contemplated by the Reorganization Agreement;
and
(b) against (i) any proposal made in opposition to or in competition
with the consummation of the Merger, (ii) any proposal contemplating any
transaction involving: (A) the sale, license, disposition or acquisition of
all or a material portion of the Company's business or assets; (B) the
issuance, disposition or acquisition of (1) any capital stock or other
equity security of the Company, (2) any option, call, warrant or right
(whether or not immediately exercisable) to acquire, or otherwise relating
to, any capital stock or other equity security of the Company, or (3) any
security, instrument or obligation that is or may become convertible into
or exchangeable for any capital stock or other equity security of the
Company; or (C) any merger (other than the Merger), consolidation, business
combination, share exchange, reorganization or similar transaction
involving the Company; and (iii) any other action or agreement that could
B-4
reasonably be expected to result in a breach of any representation,
warranty, covenant or obligation of the Company or Shareholder under any of
the Transactional Agreements or that could reasonably be expected to result
in any of the conditions to the Company's or Parent's obligations under the
Reorganization Agreement not being satisfied.
Shareholder further agrees not to take any action, whether at a meeting of
shareholders, by written consent in lieu of a meeting or otherwise: (x) to
modify or rescind any prior action approving the Reorganization Agreement,
the Merger or any of the other transactions contemplated by the
Reorganization Agreement; (y) that is inconsistent with the Reorganization
Agreement or any of the transactions contemplated thereby; or (z) that could
reasonably be expected to result in the breach of any representation,
warranty, covenant or obligation of the Company or Shareholder under any of
the Transactional Agreements or that could reasonably be expected to result
in any of the conditions to the Company's or Parent's obligations under the
Reorganization Agreement not being satisfied.
3. IRREVOCABLE PROXY. Concurrently with the execution of this
Agreement, Shareholder shall deliver to Parent a proxy in the form attached
hereto as Exhibit B (the "Proxy"), which shall be deemed to be coupled with
an interest and shall be irrevocable to the extent provided in Section 212 of
the Delaware General Corporation Law. Shareholder understands and agrees that
such proxy shall be used by Parent in the event that Shareholder fails or is
unable to vote the Shares in accordance with Section 2 of this Agreement.
4. AGREEMENT TO WAIVE REDEMPTION RIGHT. Shareholder agrees not to
redeem all or any part of the Shares or accumulated and unpaid dividends
associated with the Shares, as permitted by the Company's Certificate of
Incorporation.
5. AGREEMENT TO CONVERT SHARES; APPOINTMENT OF ATTORNEY-IN-FACT TO
ACCOMPLISH CONVERSION. Shareholder agrees to convert the number of shares of
each class of Preferred Stock of the Company held or controlled by the
Shareholder, as indicated on Exhibit C, to Common Stock of the Company (the
"Conversion") as of the close of business on the record date established by
the Board of Directors of the Company for the shareholders' meeting to
approve the Merger (the "Conversion Date"); PROVIDED THAT, if The UpData
Group, Inc., as financial advisor to the Company, concludes in writing to the
Shareholder that, as of the Conversion Date and as a result of a change in
value of the shares of Parent to be received as consideration in the Merger,
that a revised number of shares of each class of Preferred Stock held or
controlled by the Shareholder, as indicated in such writing, should be
converted to Common Stock (the "Revised Conversion"), Shareholder hereby
agrees to convert such number of shares of each class of Preferred Stock as
indicated in the Revised Conversion. Furthermore, Shareholder does hereby
irrevocably appoint Xxxxxxx Xxxxx as attorney-in-fact, with full power of
substitution and resubstitution, to act on behalf of Shareholder to take any
and all actions and to execute any and all documents in the name of and on
behalf of Shareholder as such attorney-in-fact determines to be necessary to
accomplish and complete the Conversion or the Revised Conversion. The
appointment of the attorney-in-fact is coupled with an interest and will
B-5
terminate on the same terms and conditions, and at the same time, as the
Irrevocable Proxy attached hereto as Exhibit B.
The Shareholder acknowledges and agrees that the Conversion and Revised
Conversion are for allocating Parent Common Stock among the holders of the
Company's capital stock following the Merger and that the total number of
shares of Parent Common Stock to be issued to all holders in respect of the
Merger will be the same regardless of whether the Conversion or Revised
Conversion is applied to the shares.
6. CONSENT TO ESCROW OF MERGER PROCEEDS; APPOINTMENT OF SHAREHOLDERS'
REPRESENTATIVE. Shareholder hereby acknowledges and consents to the escrow of
ten percent of the consideration to be received in connection with the Merger
(the "Escrow") on the terms and conditions set forth in the Escrow Agreement
to be executed in connection with the Merger, which escrow is being
established for the purpose of providing recourse by Parent in the event of
claims for indemnification pursuant to the Reorganization Agreement.
Shareholder does hereby appoint Xxxxxxx Xxxxx representative
("Representative"), with full power of substitution, to act on behalf of
Shareholder to take any and all actions in connection with the Escrow,
including but not limited to contesting or compromising any matters in
connection with, or claims for, or related to, the indemnification of Parent
arising under the Merger Agreement. Shareholder hereby agrees to indemnify
and hold Representative harmless in connection with any and all actions of
Representative related to the Escrow, provided that Representative acted in
good faith and such actions did not constitute willful malfeasance, fraud or
gross negligence.
7. TRANSFER AND ENCUMBRANCE. Shareholder agrees not to transfer, sell
or otherwise dispose of or to pledge or otherwise encumber any of the Shares
or to make any offer or agreement relating thereto until such time, if ever,
as the Merger shall have occurred or the Reorganization Agreement shall have
been validly terminated in accordance with its terms.
8. ADDITIONAL PURCHASES. Shareholder agrees that any shares of the
capital stock of the Company acquired by Shareholder on or after the date of
this Agreement shall be subject to the terms of this Agreement to the same
extent as if they constituted Shares.
9. SPECIFIC PERFORMANCE. Shareholder agrees that in the event of any
breach or threatened breach by Shareholder of any covenant, obligation or
other provision contained in this Agreement, Parent shall be entitled (in
addition to any other remedy that may be available to Parent) to (i) a decree
or order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such breach or threatened breach.
10. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to Parent, Shareholder shall hold harmless and
indemnify Parent and Parent's affiliates from and against, and shall
compensate and reimburse Parent and Parent's affiliates
B-6
for, any loss, damage, injury, decline in value, lost opportunity, liability,
exposure, claim, demand, settlement, judgment, award, fine, penalty, tax,
fee, charge, cost or expense of any nature (whether or not relating to a
third-party claim) which is suffered or incurred at any time by Parent or any
of Parent's affiliates or to which Parent or any of Parent's affiliates
otherwise becomes subject and that arises from any breach of any
representation, warranty, covenant or obligation contained in this Agreement.
11. OTHER AGREEMENTS. Nothing in this Agreement shall limit
Shareholder's obligations or the rights and remedies of Parent under any of
the other Transactional Agreements, and nothing in any of the other
Transactional Agreements shall limit Shareholder's obligations or the rights
and remedies of Parent under this Agreement.
12. NOTICES. Any notice or other communication required or permitted
to be delivered to Shareholder or Parent under this Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other party hereto):
if to Parent: Xxxxx & Xxxxxxx, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Chief Financial
Officer
and Secretary
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
if to Shareholder: At the address shown in the Company's records
B-7
13. SEVERABILITY. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction. then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to
the fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c)
the invalidity or unenforceability of such provision or part thereof shall
not affect the validity or enforceability of the remainder of such provision
or the validity or enforceability of any other provision of the Agreement.
Each provision of the Agreement is separable from every other provision of
the Agreement, and each part of each provision of the Agreement is separable
from every other part of such provision.
14. GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of Delaware
(without giving effect to principles of conflicts of laws).
15. WAIVER. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
Parent in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy. Parent shall not be deemed to have
waived any claim arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
16. CAPTIONS. The captions contained in this Agreement' are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
17. FURTHER ASSURANCES. Shareholder shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
18. ENTIRE AGREEMENT. This Agreement and the other Transactional
Agreements set forth the entire understanding of Parent and Shareholder
relating to the subject matter hereof and thereof and supersede all other
prior agreements and understandings between Parent and Shareholder relating
to the subject matter hereof and thereof.
B-8
19. NON-EXCLUSIVITY. The rights and remedies of Parent hereunder are
not exclusive of or limited by any other rights or remedies which Parent may
have, whether at law, in equity, by contract or otherwise, all of which shall
be cumulative (and not alternative).
20. AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent and Shareholder.
21. ASSIGNMENT. This Agreement and all obligations hereunder are
personal to Shareholder and may not be transferred or delegated by
Shareholder at any time. Parent may freely assign any or all of its rights
under this Agreement (including its indemnification rights under Section 8),
in whole or in part, to any other person or entity without obtaining the
consent or approval of Shareholder.
22. BINDING NATURE. Subject to Section 21, this Agreement will inure
to the benefit of Parent and the Company and their respective successors and
assigns and will be binding upon Shareholder and his representatives,
executors, administrators, estate, heirs, successors and assigns. Without
limiting the generality of anything contained in Section 7, if any person or
entity shall acquire any of the Shares from Shareholder in any manner,
whether by operation of law or otherwise, such Shares shall be held subject
to all the terms and provisions of this Agreement, and by taking and holding
such Shares, such person or entity shall be conclusively deemed to have
agreed to be bound and to comply with all the terms and provisions of this
Agreement. Without limiting the generality of the foregoing, Shareholder
agrees that the obligations of Shareholder hereunder shall not be terminated
by the death or incapacity of Shareholder or otherwise by operation of law.
23. ATTORNEYS' FEES AND EXPENSES. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement is
brought against Shareholder, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to
any other relief to which the prevailing party may be entitled).
24. TERMINATION; SURVIVAL. This Agreement shall terminate at such time
(if ever) as the Reorganization Agreement shall have been validly terminated
in accordance with its terms. Each of the representations, warranties,
covenants and obligations contained in this Agreement shall survive the
consummation of the Merger.
25. CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa.
(b) Shareholder agrees that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction
B-9
or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" are intended to refer to Sections of this Agreement.
Shareholder has executed and delivered this Agreement as of the date first
above written.
--------------------------------------
(Signature)
--------------------------------------
(Name, printed)
B-10
EXHIBIT A TO SHAREHOLDERS AGREEMENT
MAXM SYSTEMS CORPORATION SHAREHOLDER LIST
This exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request.
EXHIBIT B TO SHAREHOLDER AGREEMENT
IRREVOCABLE PROXY
The undersigned ("Shareholder"), a shareholder of MAXM Systems
Corporation, a Delaware corporation (the "Company"), hereby irrevocably
appoints Xxxxx & Xxxxxxx, Inc., a Delaware corporation ("Parent"), and
Minimum Acquisition Sub., Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and each of them, the attorneys and
proxies of the undersigned, with full power of substitution and
resubstitution, to vote the shares of voting capital stock of the Company
owned of record by Shareholder as shown on Exhibit A of the Shareholders
Agreement executed by the Shareholder on even date herewith, or any shares
into which the shares shown on Exhibit A are converted or exchanged or any
Company shares subsequently acquired by Shareholder (the "Shares") with
respect to the following matters (the "Identified Matters"):
(a) the Reorganization Agreement (as herein defined), the Merger (as
herein defined), and the other transactions contemplated by the
Reorganization Agreement;
(b) any proposal made in opposition to or in competition with the
consummation of the Merger;
(c) any proposal contemplating any transaction involving: (i) the
sale, license, disposition or acquisition of all or a material portion of
the Company's business or assets; or (ii) the issuance, disposition or
acquisition of (A) any capital stock or other equity security of the
Company, (B) any option, call, warrant or right (whether or not immediately
exercisable) to acquire, or otherwise relating to, any capital stock or
other equity security of the Company, or (C) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(d) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company; and
(e) any other action or agreement that could reasonably be expected
to result in (i) a breach of any representation, warranty covenant or
obligation of any party under the Reorganization Agreement, or under any
other agreement executed on behalf of the Company or Shareholder, or (ii)
any of the conditions to the Company's or Parent's obligations under the
Reorganization Agreement not being satisfied.
This Proxy shall terminate at such time (if ever) as that certain Agreement
and Plan of Merger and Reorganization (the "Reorganization Agreement") among
Parent, Merger Sub, the Company, providing for the merger of Merger Sub and the
Company (the "Merger"), shall have
been validly terminated in accordance with its terms. Upon the execution
hereof, all prior proxies given by Shareholder with respect to the Shares are
hereby revoked, and no subsequent proxies will be given. This Proxy is
irrevocable and is coupled with an interest and is granted in connection with
that certain Shareholder Agreement dated of even date herewith, executed by
Shareholder in favor of Parent and the Company, and is granted in
consideration of Parent entering into the Reorganization Agreement. The
attorneys and proxies appointed pursuant to this Proxy will be empowered (at
all times prior to the termination of the Reorganization Agreement) to
exercise (in their discretion and in such manner as they may deem
appropriate) all voting and other rights of Shareholder with respect to the
Shares (including, without limitation, the power to execute and deliver
written consents with respect to the Shares), with respect to the Identified
Matters, at every meeting of the shareholders of the Company (and every
adjournment or postponement thereof) or by written consent in lieu of such a
meeting, or otherwise.
This Proxy shall be binding upon the Shareholder and his personal
representatives, executors, administrators, estates, heirs, successors and
assigns (if any). This Proxy shall inure to the benefit of Parent, Merger Sub
and the Company and their respective successors and assigns (if any).
Dated: December ____ , 1996
---------------------------------------
(Signature)
---------------------------------------
(Name, printed)
EXHIBIT C
TO SHAREHOLDERS AGREEMENT
SHARES REQUIRED TO CONVERT TO COMMON
SERIES B PREFERRED ONLY
ASSUMES NO SETTLEMENT OF MICROMUSE CONTRACT, $31 STOCK PRICE
This exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAXM SYSTEMS CORPORATION
Xxxx X. Xxxxxx and Xxxxxx X. Xxxxx, Xx. hereby certify:
1. The original name of this corporation is ITMX CORPORATION and the date
of filing the original Certificate of Incorporation of this corporation with
the Secretary of State of the State of Delaware is October 21, 1987.
2. They are the duly elected and acting President and Secretary,
respectively, of MAXM SYSTEMS CORPORATION a Delaware corporation.
3. The Certificate of Incorporation of this corporation is hereby amended
and restated to read as follows:
I.
The name of this corporation is MAXM Systems Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is:
CorpAmerica
00 Xxx Xxxxxxx Xxxx
Xxxxx, XX 00000
The name of the Corporation's registered agent at said address is
CorpAmerica, Inc.
C-1
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
IV.
This corporation is authorized to issue one class of stock to be
designated, "Common Stock". The total number of shares which the corporation
is authorized to issue is one hundred (100) shares. One hundred (100) shares
shall be Common Stock, each having a par value of one tenth of one cent
($0.001).
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by the Board of Directors in the manner provided in the Bylaws.
2. The Board of Directors may from time to time make, amend,
supplement or repeal the Bylaws; provided, however, that the stockholders may
change or repeal any Bylaw adopted by the Board of Directors by the
affirmative vote of the holders of a majority of the voting power of all of
the then outstanding shares of the capital stock of the corporation
(considered for this purpose as one class); and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
3. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
C-2
VI.
A director of the corporation shall, to the full extent not prohibited
by the Delaware General Corporation Law, as the same exists or may hereafter
be amended, not be liable to the corporation or its stockholders for monetary
damages for breach of his fiduciary duty as a director.
VII.
The corporation is to have perpetual existence.
VIII.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
4. This Amended and Restated Certificate of Incorporation has been duly
approved by the Board of Directors of this Corporation.
5. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Section 228 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors
and the stockholders of the Corporation. The total number of the outstanding
shares entitled to vote or act by written consent was 100 shares of Common
Stock. A majority of the outstanding shares of Common Stock approved this
Amended and Restated Certificate of Incorporation by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
C-3
IN WITNESS WHEREOF, MAXM SYSTEMS CORPORATION has caused this Amended and
Restated Certificate of Incorporation to be signed by the President and the
Secretary in San Jose, California this ___________ day of January, 1997.
MAXM SYSTEMS CORPORATION
By:
-------------------------------
President
ATTEST:
By:
------------------------------
Secretary
Exhibit D
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
DIRECTORS
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxx, Xx.
OFFICERS
President and Chief Executive Officer Xxxx X. Xxxxxx
Chief Financial Officer and Secretary Xxxxxx X. Xxxxx, Xx.
Senior Vice President, Engineering Xxxxx X.X. Black
Senior Vice President, Marketing Xxxxxxx Xxxxx
EXHIBIT E
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of the date written below, by
and among the undersigned shareholder, XXXXX & BABBAGE, INC., a Delaware
corporation ("Parent"), MAXM SYSTEMS CORPORATION, a Delaware corporation (the
"Company"); and XXXXXXX XXXXX (the "Shareholder Representative") as
representative of the shareholders of the Company, all of whom are listed on
Attachment A (the "Shareholders"); and STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A. (the "Escrow Agent").
RECITALS
A. Parent, MINIMUM ACQUISITION SUB., INC., a Delaware corporation and
a wholly-owned subsidiary of Parent ("Merger Sub"), and the Company have
entered into an Agreement and Plan of Merger Reorganization, dated December
10, 1996 (the "Reorganization Agreement") which provides that Merger Sub will
be merged with and into the Company (the "Merger"), with the Company being
the surviving corporation, on the terms and conditions set forth therein,
resulting in the Company becoming a wholly-owned subsidiary of Parent.
B. The Reorganization Agreement contemplates the establishment of an
escrow arrangement to secure the indemnification and other obligations of the
Company and the Shareholders under the Reorganization Agreement and various
related agreements. As a condition precedent to Parent's execution of the
Reorganization Agreement and related agreements, Parent has required that the
Company and the Shareholder Representatives on behalf of the Shareholders
enter into this Agreement as set forth in Section 1.8 of the Reorganization
Agreement; and the Company and the Shareholder Representatives on behalf of
the Shareholders have agreed to enter into this Agreement in order to induce
Parent to consummate the Merger.
C. By virtue of the Shareholders' approval of the Reorganization
Agreement, and/or by the execution of an Affiliate Agreement, the
Shareholders have consented to: (i) the indemnification of Parent by the
Shareholders as set forth in Section 9.2 of the Reorganization Agreement and
(ii) their agreement to be bound by the terms of this Escrow Agreement and to
be a party hereto with the same force and effect as if they were a signatory
hereto, including without limitation (x) the establishment of this escrow to
secure the indemnification obligations to Parent under Section 9.2 of the
Reorganization Agreement, (y) the appointment of the Shareholder
Representatives as their representative for the purposes of this Agreement
and as attorney-in-fact and agents for and on behalf of each of the
Shareholders, and the taking by the Shareholder Representatives of any and
all actions and the making of any decisions required or permitted to be taken
or made by them under this Agreement, and (z) all of the other terms,
conditions and limitations in this Agreement.
E-1
AGREEMENT
The parties to this Escrow Agreement, intending to be legally bound,
agree as follows:
SECTION 1. DEFINED TERMS
Capitalized terms used and not otherwise defined in this Escrow
Agreement shall have the meanings assigned to them in the Reorganization
Agreement.
SECTION 2. ESCROW
2.1 SHARES TO BE PLACED IN ESCROW. On the date of the Closing (the
"Closing Date"), Parent shall issue a certificate for ten percent (10%) of
the aggregate number of shares of the Common Stock of Parent (the "Parent
Common Stock") to be issued in the Merger (the "Escrow Shares"), in the name
of Escrow Agent or its nominee, evidencing the shares of the Parent Common
Stock to be held in escrow in accordance with this Escrow Agreement. The
Escrow Shares shall be held as a trust fund and shall not be subject to any
lien, attachment, trustee process or any other judicial process of any
creditor of any party hereto. The Escrow Agent agrees to accept delivery of
the Escrow Shares and to hold the Escrow Shares in escrow (the "Escrow"),
subject to the terms and conditions of this Agreement.
2.2 INDEMNIFICATION. The Shareholders have agreed in Section 9.2 of
the Reorganization Agreement severally, but not jointly and severally, to
indemnify and hold harmless each of Parent, Merger Sub and the Surviving
Corporation from and against, and shall compensate and reimburse each of them
for, Damages, as set forth therein. The Escrow Shares shall be security for
such indemnity obligation, subject to the limitations, and in the manner
provided, in this Agreement.
2.3 VOTING OF SHARES. On any matter brought before the Parent
stockholders for a vote, the Escrow Agent shall vote the Escrow Shares as
directed by the Shareholders individually. Each Shareholder shall have the
right to direct the vote of the number of shares resulting from the
multiplication of the Shareholder's percentage set forth on Attachment A by
the total number of Escrow Shares held by the Escrow Agent on the record date
for the vote.
2.4 DIVIDENDS, ETC. Any distributions of cash, securities or other
property in respect of or in exchange for any of the Escrow Shares, other
than distributions of capital stock of the Parent (by way of stock dividend,
stock split or otherwise) not constituting a dividend for purposes of Section
301 of the Code, shall be payable and distributed directly to the
stockholders and shall not be held in the Escrow. At the time any of the
Escrow Shares are required to be released from the Escrow to any person
pursuant to this Escrow Agreement, any distributions of capital stock of the
Parent previously made in respect of such released Escrow Shares and held in
the Escrow shall be released from the Escrow to such person.
E-2
2.5 TRANSFERABILITY. The interests of the Shareholders in the Escrow
and in the Escrow Shares held in the Escrow shall not be assignable or
transferable, other than by operation of law. No transfer of any of such
interests by operation of law shall be recognized or given effect until
Parent shall have received written notice of such transfer.
2.6 FRACTIONAL SHARES. No fractional shares of Parent Common Stock
shall be retained in or released from the Escrow pursuant to this Escrow
Agreement. In connection with any release of shares from the Escrow, the
Escrow Agent shall be permitted to "round down" or to follow such other
rounding procedures as the Escrow Agent reasonably determines to be
appropriate in order to avoid (i) retaining any fractional share in the
Escrow or (ii) releasing any fractional share from the Escrow.
SECTION 3. CLAIM PROCEDURES
3.1 CLAIM NOTICE. If Parent determines in good faith that there is or
has been a possible inaccuracy in or breach of any representation or warranty
made by the Company or covenant or other provision imposed on the Company and
set forth in any of the Reorganization Agreement or related agreements, or in
any document or instrument delivered pursuant thereto or in connection
therewith, (collectively, the "Transactional Agreements") and if Parent is
entitled, under the terms of the Reorganization Agreement, to make a claim
against the Escrow with respect to such possible inaccuracy or breach, then
Parent may deliver to both the Shareholder Representatives and the Escrow
Agent a written notice of such possible inaccuracy or breach (a "Claim
Notice") setting forth (i) a brief description of the circumstances
supporting Parent's belief that such possible inaccuracy or breach exists or
has occurred, and (ii) to the extent possible, a non-binding, preliminary
estimate of the aggregate dollar amount of all Damages that have arisen and
may arise as a result of such possible inaccuracy or breach (such aggregate
amount being referred to as the "Claim Amount"). Such Claim Notice must be
delivered prior to the date of release of the audit report for Parent's
audited financial statements for its fiscal year ended September 30, 1997.
3.2 RESPONSE NOTICE. Within forty-five (45) days after the delivery of
a Claim Notice to the Shareholder Representatives, the Shareholder
Representatives shall deliver to Parent, with a copy to the Escrow Agent, a
written notice (the "Response Notice") containing: (i) instructions to the
effect that shares of Parent Common Stock having a Stipulated Value (as
defined in Section 6 of this Escrow Agreement) equal to the entire Claim
Amount set forth in such Claim Notice are to be released from the Escrow to
Parent; or (ii) instructions to the effect that shares of Parent Common Stock
having a Stipulated Value equal to a specified portion (but not the entire
amount) of the Claim Amount set forth in such Claim Notice are to be released
from the Escrow to Parent, together with a statement that the remaining
portion of such Claim Amount is being disputed; or (iii) a statement that the
entire Claim Amount set forth in such Claim Notice is being disputed. If no
Response Notice is received by Parent from the Shareholder Representatives
within forty-five (45) days after the delivery of a Claim Notice to the
Shareholder Representatives, then the Shareholder Representatives shall be
deemed to have given instructions that shares of Parent Common Stock having a
Stipulated Value equal to the
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entire Claim Amount set forth in such Claim Notice are to be released to
Parent from the Escrow.
3.3 RELEASE OF SHARES TO PARENT.
(a) If the Shareholder Representatives give (or are deemed to have
given) instructions that shares of Parent Common Stock having a Stipulated
Value equal to the entire Claim Amount set forth in a Claim Notice are to be
released from the Escrow to Parent, then the Escrow Agent shall promptly
following the required delivery date for the Response Notice transfer,
deliver and assign to Parent such number of Escrow Shares held in the Escrow
as have a Stipulated Value equal to the Claim Amount (or such lesser number
of Escrow Shares as is then held in the Escrow).
(b) If a Response Notice delivered by the Shareholder
Representatives in response to a Claim Notice contains instructions to the
effect that shares of Parent Common Stock having a Stipulated Value equal to
a specified portion (but not the entire amount) of the Claim Amount set forth
in such Claim Notice are to be released from the Escrow to Parent, then (i)
the Escrow Agent shall promptly following the required delivery date for the
Response Notice transfer, deliver and assign to Parent such number of Escrow
Shares held in the Escrow as have a Stipulated Value equal to such specified
portion of such Claim Amount, and (ii) the procedures set forth in Section
3.3(c) of this Escrow Agreement shall be followed with respect to the
remaining portion of such Claim Amount.
(c) If a Response Notice delivered by the Shareholder
Representatives in response to a Claim Notice contains a statement that all
or a portion of the Claim Amount set forth in such Claim Notice is being
disputed (such Claim Amount or the disputed portion thereof being referred to
as the "Disputed Amount"), then, notwithstanding anything contained in
Section 3 of this Escrow Agreement, the Escrow Agent shall continue to hold
in the Escrow (in addition to any other shares of Parent Common Stock
permitted to be retained in the Escrow, whether in connection with any other
dispute or otherwise) shares of Parent Common Stock having a Stipulated Value
equal to 125% of the Disputed Amount. Such shares of Parent Common Stock
shall continue to be held in the Escrow until (i) delivery of a notice
executed by Parent and the Shareholder Representatives setting forth
instructions to the Escrow Agent regarding the release of such shares, or
(ii) the Escrow Agent receives a copy of a court order containing
instructions to the Escrow Agent regarding the release of such shares. The
Escrow Agent shall thereupon release shares of Parent Common Stock from the
Escrow in accordance with the instructions set forth in such notice or order.
(The parties acknowledge that it is appropriate to retain more than 100% of
the Claim Amount in the Escrow in recognition of the fact that Parent may
have underestimated the aggregate amount of the actual and potential Damages
arising in connection with a particular Claim Notice.)
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SECTION 4. SHAREHOLDER REPRESENTATIVES
4.1 SHAREHOLDER REPRESENTATIVES.
(a) The Shareholders shall be represented hereunder by a committee
consisting initially of one (1) member (the "Shareholder Representative").
The initial member of the committee shall be Xxxxxxx Xxxxx. The Shareholder
Representative is hereby empowered by each Shareholder to give and receive
notices and communications, to authorize delivery to Parent of Parent Common
Stock or other property placed in Escrow in satisfaction of claims by Parent,
Merger Sub or the Company, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, request arbitration of
and comply with awards of arbitrators with respect to such claims and to take
any and all actions necessary or appropriate in the judgment of the
Shareholder Representative for the accomplishment of the foregoing.
(b) In the event any Shareholder Representative shall die or
resign or otherwise terminate this status as such, a successor, who shall be
a Shareholder, shall be appointed by the remaining Shareholder
Representatives, or, if no members of the committee remain, by the
Shareholders. All decisions of the Shareholder Representatives, if there be
more than one, shall be made by a unanimous vote. The Shareholder
Representatives shall receive no compensation for their services.
(c) The Shareholders have agreed that the Shareholder
Representatives shall not be liable to the Shareholders for any act done or
omitted hereunder while acting in good faith and in the exercise of
reasonable judgment. The Shareholders have agreed to indemnify and hold the
Shareholder Representatives harmless against any loss, liability, or expenses
incurred by them in their capacity as such, except to the extent such loss,
liability or expense is due to bad faith or negligent conduct. The
Shareholder Representatives shall be entitled to reimbursement by the
Shareholders, pro rata to the percentages set forth opposite the names of the
Shareholders on Attachment A hereto, for attorneys fees and other
out-of-pocket expenses incurred by them in accordance with this Agreement.
(d) The Shareholders have agreed that a decision by the
Shareholder Representatives shall constitute a decision of all of the
Shareholders, and shall be final, binding and conclusive upon each of them.
Parent, Merger Sub, the Company and the Escrow Agent may rely upon any act,
decision, consent or instruction of the Shareholder Representatives as being
the act, decision, consent or instruction of each and all of the Shareholders
and Parent, Merger Sub, the Company and the Escrow Agent are hereby relieved
from any liability to any person for any acts done by them in accordance with
any act, decision, consent or instruction of the Shareholder Representatives.
SECTION 5. RELEASE OF SHARES TO SHAREHOLDERS
5.1 SHARES TO BE RELEASED. On the Termination Date the Escrow Agent
shall release to the Shareholders from the Escrow all shares of Parent Common
Stock then held in the
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Escrow, except for any shares of Parent Common Stock that are to be retained
in the Escrow in accordance with Section 3.3(c) of this Escrow Agreement.
5.2 PROCEDURES FOR RELEASING SHARES. Any distribution of all or a
portion of the Escrow Shares to the Shareholders shall be made in accordance
with the percentages set forth opposite such holders' respective names on
Attachment A attached hereto.
SECTION 6. VALUATION OF SHARES HELD IN ESCROW
For purposes of this Escrow Agreement, the "Stipulated Value" of each of
the Escrow Shares shall be deemed to be the average closing price on the
Nasdaq National Market for the shares of Parent Common Stock for the 5
trading days ending two days prior to the date the Merger becomes effective.
SECTION 7. FEES AND EXPENSES
7.1 Parent agrees to pay or reimburse the Escrow Agent for legal fees
incurred in connection with the preparation of this Agreement and to pay the
Escrow Agent's reasonable compensation for its normal services hereunder in
both cases in accordance with the attached fee schedule, which may be subject
to change on an annual basis. The Escrow Agent shall be entitled to
reimbursement on demand for all expenses incurred in connection with the
administration of the escrow created hereby which are in excess of its
compensation for normal services hereunder, including without limitation,
payment of any legal fees incurred by the Escrow Agent in connection with
resolution of any claim by any party hereunder. Each of (i) Parent and (ii)
the Shareholders shall be liable for one-half (1/2) of such amounts and
Parent shall be entitled to reimbursement from the Escrow Shares of the
Shareholders' share of any such extraordinary expenses, if such share is paid
by Parent.
7.2 Except as may otherwise be provided herein, all expenses (including
attorneys' fees) incurred by any Shareholder in connection with this
Agreement shall be borne by such Shareholder.
7.3 Fifteen days following the delivery of a notice in writing to the
Escrow Agent and the Shareholder Representative by Parent in respect of
Section 7.1 or Section 8.3, the Escrow Agent shall transfer, deliver and
assign to Parent, in reimbursement of fees and expenses pursuant to the last
sentence of Section 8.1 or the last sentence of Section 8.3, such number of
Escrow Shares held in the Escrow which have a Stipulated Value equal to the
amount to be reimbursed unless the Escrow Agent receives written notice of
objection from the Shareholder Representative. In the event such objection
is received, the reimbursement claim shall be handled in accordance with
Section 3.3(c).
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SECTION 8. DUTIES OF THE ESCROW AGENT; LIMITATION OF ESCROW AGENT'S LIABILITY.
8.1 The sole duty of the Escrow Agent, other than as herein specified,
shall be to receive and hold the Escrow Shares, subject to disbursement in
accordance with this Agreement, and the Escrow Agent shall be under no duty
to determine whether Parent, the Shareholder Representatives or the
Shareholders are complying with the requirements of this Agreement or any
other agreement. Parent and Shareholders acknowledge and agree that the
Escrow Agent (i) shall not be responsible for any of the agreements referred
to herein but shall be obligated only for performance of such duties as are
specifically set forth in this Escrow Agreement; (ii) shall not be obligated
to take any legal or other action hereunder which might in its judgment
involve any expense or liability unless it shall have been furnished with
acceptable indemnification; (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction,
instrument, statement, request or document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the
proper person, and shall have no responsibility for determining the accuracy
thereof, and (iv) may consult counsel satisfactory to it, including house
counsel, and the opinion of such counsel, shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion of
such counsel.
8.2 Neither the Escrow Agent nor any of its directors, officer or
employees shall be liable to anyone for any action or omitted to be taken by
it or any of its directors, officers or employees hereunder except in the
case of gross negligence or willful misconduct. Parent and Shareholders,
jointly and severally, covenant and agree to indemnify the Escrow Agent and
hold it harmless without limitation from and against any loss, liability or
expense of any nature incurred by the Escrow Agent arising out of or in
connection with this Agreement or with the administration of its duties
hereunder, including but not limited to legal fees and other costs and
expenses of loss, liability or expense shall be caused by the Escrow Agent's
willful misconduct or gross negligence. In no event shall the Escrow Agent
be liable for indirect, punitive, special or consequential damages.
8.3 Parent and Shareholder, jointly and severally, agree to assume any
and all obligations imposed now or hereafter by any applicable tax law with
respect to the payment of Escrow Funds under this Agreement, and to indemnify
and hold the Escrow Agent harmless from and against any taxes, additions for
late payment, interest,penalties and other expenses, that may be assessed
against the Escrow Agent on any such payment or other activities under this
Agreement. Parent and Shareholders undertake to instruct the Escrow Agent in
writing with respect to the Escrow Agent's responsibility for withholding and
other taxes, assessments or other governmental charges, certifications and
governmental reporting in connection with its acting as Escrow Agent under
this Agreement. Parent and Shareholders, jointly and severally, agree to
indemnify and hold the Escrow Agent harmless from any liability on account of
taxes, assessments or other governmental charges, including without
limitation the withholding or deduction or the failure to withhold or deduct
same, and any liability for failure to obtain proper certifications or to
properly report to governmental authorities, to which the Escrow Agent may be
or become subject in connection with or which arises out of this Agreement,
including costs and expenses (including reasonable legal fees), interest and
penalties. Notwithstanding the
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foregoing, no distributions will be made unless the Escrow Agent is supplied
with an original, signed W-9 form or its equivalent prior to distribution.
8.4 The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository
or subescrow agent employed by the Escrow Agent than any such book-entry
depository or subescrow agent has to the Escrow Agent, except as to the
extent that such action or omission of any book-entry depository or subescrow
agent was caused by the Escrow Agent's own gross negligence or bad faith.
8.5 As among themselves, each of (i) Parent and (ii) the Shareholders
shall be liable for one-half (1/2) of any amounts owed to the Escrow Agent in
satisfaction of any of the foregoing indemnification obligations and Parent
shall be entitled to reimbursement from the Escrow Shares of the
Shareholders' share of any such loss, liability or expense, if such share is
paid by Parent. The provisions of paragraphs (b) and (c) shall survive
termination of this Agreement.
SECTION 9. GENERAL
9.1 OTHER AGREEMENTS. Nothing in this Escrow Agreement is intended
to limit any of Parent's or the Shareholders' rights, or any obligation of
any Shareholder, or of Parent under the Reorganization Agreement (or any
agreement entered into in connection with the transactions contemplated by
the Reorganization Agreement).
9.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect
to the conflict of laws provisions thereunder.
9.3 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. No party hereto
may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
9.4 SEVERABILITY. If any provision of this Agreement, or the
application thereof, is for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the greatest extent
possible, the economic, business and other purposes of the void or
unenforceable provision.
9.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which shall constitute one and the same instrument. This Agreement will
become binding when one or more counterparts hereof,
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individually or taken together, bear the signatures of all the parties
reflected hereon as signatories.
9.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby;
provided that this Agreement may be amended on behalf of all of the
Shareholders by (i) the Shareholder Representatives or (ii) a majority in
interest of the Shareholders. Notwithstanding any rights that may be created
in any third party under the terms of this Agreement, no such amendment or
waiver will require the consent of such third party to be effective. The
waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any
succeeding breach or default.
9.7 ATTORNEYS' FEES. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including, without limitation, costs, expenses
and fees on any appeal). The prevailing party will be entitled to recover
its costs of suit, regardless of whether such suit proceeds to final judgment.
9.8 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):
If to Parent to: XXXXX & XXXXXXX, INC.
0000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Chief Financial Officer and
Secretary
Telephone: (408) 526-333
Facsimile: (000) 000-0000
With a copy to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
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If to the
Shareholders
Representative: _______________________
_______________________
_______________________
_______________________
Telephone:
Facsimile:
_______________________
_______________________
_______________________
_______________________
Telephone:
Facsimile:
With a copy to: _______________________
_______________________
_______________________
_______________________
Telephone:
Facsimile:
If to Escrow Agent to:
_______________________
_______________________
_______________________
_______________________
Telephone:
Facsimile:
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following
dispatch, and (d) in the case of mailing, on the third business day following
such mailing.
9.9 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a Section
or an exhibit will mean a Section in, or exhibit to, this Agreement unless
otherwise explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Agreement, which will be considered as a whole.
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9.10 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
9.11 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except
as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
9.12 ENTIRE AGREEMENT. This Agreement and the Reorganization Agreement
and the exhibits hereto and thereto constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto. The express terms hereof control and supersede
any course of performance or usage of the trade inconsistent with any of the
terms hereof.
9.13 RESIGNATION AND SUBSTITUTION OF ESCROW AGENT. Escrow Agent may at
any time resign as Escrow Agent hereunder by giving thirty (30) days prior
written notice of resignation to ________________ and _________________.
Prior to the effective date of the resignation as specified in such notice,
Parent will issue to the Escrow Agent a written instruction authorizing
redelivery of the Escrow Shares to a bank or trust company that it selects
subject to the reasonable consent of the Shareholder's Representative. Such
bank or trust company shall have a principal office in Boston, Massachusetts,
and shall have capital, surplus and undivided profits in excess of
$50,000,000. If, however, Parent shall fail to name such a successor agent
within twenty (20) days after the notice of resignation from the Escrow
Agent, the Shareholder's Representative shall be entitled to name such
successor escrow agent. If no successor escrow agent is named by Parent or
the Shareholder's Representative, the Escrow Agent may apply to a court of
competent jurisdiction for appointment of a successor escrow agent.
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IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of January ___, 1997.
XXXXX & BABBAGE, INC.
By: ___________________________________
Name:
Title:
MAXM SYSTEMS CORPORATION
By: ___________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A.
By: ___________________________________
Name: _________________________________
Title: ________________________________
By: Xxxxxxx Xxxxx
Name: _________________________________
Title: Shareholder Representative
_______________________________________
(Shareholder's Signature)
Address for Notice:
_______________________________________
_______________________________________
_______________________________________
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ATTACHMENT A TO
ESCROW AGREEMENT
This Attachment has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
Attachment to the Securities and Exchange Commission upon request.
EXHIBIT F
CURRENT SHAREHOLDER LIST
This exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request.
EXHIBIT G
BONUSES TO BE PAID FOLLOWING THE CLOSING
This exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request.
Exhibit H
SHAREHOLDER INVESTMENT CERTIFICATION
THIS SHAREHOLDER INVESTMENT CERTIFICATION ("Certification") is being
executed and delivered as of the date written below, by the undersigned
shareholder of MAXM SYSTEMS CORPORATION, a Delaware corporation (the
"Company"), in favor of and for the benefit of XXXXX & XXXXXXX, INC., a
Delaware corporation ("Parent").
RECITALS
A. The undersigned shareholder of the Company ("Shareholder") owns the
number and class of shares of the voting capital stock of the Company set
forth opposite Shareholder's name on the Shareholders List attached as
Exhibit F to The Agreement and Plan of Merger and Reorganization, dated as of
December 10, 1996, among Parent, Minimum Acquisition Sub., Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub") and the
Company (the "Reorganization Agreement"). Said shares are referred to in
this Certification as the "Shares."
B. Pursuant to the Reorganization Agreement, it is contemplated that
(if various conditions are satisfied) Merger Sub will merge with the Company
(the merger of Merger Sub with the Company being referred to in this
Certification as the "Merger"). Upon the consummation of the Merger, the
holders of the Company's voting capital stock who do not properly perfect
their appraisal rights are to receive shares of common stock of Parent
("Parent Common Stock") in exchange for their shares of voting capital stock
of the Company, and the Company is to become a wholly owned subsidiary of
Parent. Accordingly, it is contemplated that Shareholder will receive shares
of Parent Common Stock in the Merger.
CERTIFICATION
1. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER. Shareholder
represents, warrants and certifies to Parent as follows:
(a) Shareholder is the holder and beneficial owner of the Shares
and has good and valid title to the Shares free and clear of any liens,
pledges, security interests, adverse claims, equities, options, proxies,
community property interests, charges, encumbrances or restrictions of any
nature. The Shares are the only shares of the capital stock of the Company
held by Shareholder. Shareholder has the ability to vote all of the Shares
at any meeting of the shareholders of the Company, or by written consent in
lieu of any such meeting. Shareholder has not appointed or granted any proxy
or entered into any agreement, contract, commitment or understanding with
respect to any of the Shares.
(b) Shareholder is aware (i) that the Parent Common Stock to be
issued to Shareholder in the Merger will not be registered and will not be
issued pursuant to a registration statement under the Securities Act of 1933,
as amended (the "Act"), but will instead be issued in reliance on the
exemption from registration set forth in Section 4(2) of the Act and in Rule
506 under the Act, and (ii) that neither the Merger nor the issuance of such
Parent Common Stock has been approved or reviewed by the Securities and
Exchange Commission or by any other governmental agency.
(c) Shareholder is aware that, because the Parent Common Stock to
be issued in the Merger will not be registered under the Act, such Parent
Common Stock cannot be resold unless such Parent Common Stock is registered
under the Act or unless an exemption from registration is available.
Shareholder is also aware that: (i) except as expressly provided in the
Registration Rights Agreement between Parent and the Company entered into or
to be entered into as provided in the Reorganization Agreement, Parent is
under no obligation to file a registration statement with respect to the
Parent Common Stock to be issued to Shareholder in the Merger; and (ii) the
provisions of Rule 144 under the Act will permit resale of the Parent Common
Stock to be issued to Shareholder in the Merger only under limited
circumstances, and such Parent Common Stock must be held by Shareholder for
at least two years before it can be sold pursuant to Rule 144.
(d) The Parent Common Stock to be issued to Shareholder in the
Merger will be acquired by Shareholder for investment and for his or her own
account, and not with a view to, or for resale in connection with, any
unregistered distribution thereof.
(e) Shareholder has received, reviewed and considered all the
information Shareholder considers necessary to enable Shareholder to make an
informed decision concerning whether to invest in Parent Common Stock or to
seek appraisal rights in connection with the Merger, including: (i) the
Information Statement, dated January [ ], 1997; (ii) a copy of the
Reorganization Agreement (which is included as an exhibit to said Information
Statement); (iii) a copy of Parent's report on Form 10-K for 1995; (iv) a
copy of Parent's 1995 Annual Report to Stockholders; and (v) a copy of the
Parent's preliminary proxy filed on December 27, 1996 (the documents referred
to in clauses "(i)," "(ii)," "(iii)," "(iv)" and "(v)" of this Section 1(e)
being referred to collectively in this Certification as the "Disclosure
Documents").
(f) Shareholder acknowledges the he or she has appointed Xxxxx
Xxxxx of The Updata Group (the "Purchaser Representative") to act as his or
her purchaser representative in connection with his or her evaluation of the
merits and risks of the Merger and Shareholder's investment in Parent Common
Stock. Shareholder further acknowledges that he or she has read and
understands the Information Statement (including the Reorganization Agreement
and the other exhibits thereto) and has had the opportunity to meet with the
Purchaser Representative for the purpose of discussing the merits and risks
of the Merger and his or her proposed investment in Parent Common Stock.
H-2.
(g) Shareholder has been given the opportunity: (i) to ask
questions of, and to receive answers from, persons acting on behalf of the
Company and Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in the Merger, and the business,
properties, prospects and financial condition of the Company and Parent; and
(ii) to obtain any additional information (to the extent the Company or
Parent possesses such information or is able to acquire it without
unreasonable effort or expense and without breach of confidentiality
obligations) necessary to verify the accuracy of the information set forth in
the Disclosure Documents.
(h) Shareholder is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
securities presenting investment decisions like that involved in
Shareholder's contemplated investment in the Parent Common Stock to be issued
in the Merger. Shareholder understands and has fully considered the risks of
acquiring and owning Parent Common Stock and further understands that: (i) an
investment in Parent Common Stock is a speculative investment which involves
a high degree of risk and is suitable only for an investor who is able to
bear the economic consequences of losing his or her entire investment; and
(ii) there are substantial restrictions on the transferability of the Parent
Common Stock to be issued in the Merger, and, accordingly, it may not be
possible for Shareholder to liquidate his or her investment in such Parent
Common Stock (in whole or in part) in the case of emergency. Shareholder is
able: (1) to hold the Parent Common Stock that he or she is to receive in the
Merger for a substantial period of time; and (2) to afford a complete loss of
his or her investment in such Parent Common Stock.
(i) Shareholder understands that stop transfer instructions will
be given to Parent's transfer agent with respect to the Parent Common Stock
to be issued to Shareholder in the Merger, and that there will be placed on
the certificate or certificates representing such Parent Common Stock a
legend identical or similar in effect to the following legend (together with
any other legend or legends required by applicable state securities laws or
otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS
AVAILABLE."
(j) The representations and warranties contained in this
Certification are accurate in all respects as of the date of this
Certification, will be accurate in all respects at all times through the
consummation of the Merger and will be accurate in all respects as of the
date of the consummation of the Merger as if made on that date.
H-3.
2. RELIANCE. Shareholder acknowledges that Parent will rely on his or
her representations, warranties and certifications set forth in Section 1
above for purposes of determining his or her suitability as an investor in
Parent Common Stock and for purposes of confirming the availability of an
exemption from the registration requirements of the Act.
3. PROHIBITIONS AGAINST TRANSFER. Shareholder shall not effect any
sale, transfer or other disposition of any of the Parent Common Stock that he
or she is to receive in the Merger unless:
(a) such sale, transfer or other disposition has been registered
under the Act;
(b) such sale, transfer or other disposition is made in conformity
with the requirements of Rule 144 under the Act, as evidenced by a broker's
letter and a representation letter executed by Shareholder (satisfactory in
form and content to Parent) stating that such requirements have been met;
(c) counsel reasonably satisfactory to Parent shall have advised
Parent in a written opinion letter (satisfactory in form and content to
Parent), upon which Parent may rely, that such sale, transfer or other
disposition will be exempt from registration under the Act; or
(d) an authorized representative of the SEC shall have rendered
written advice to Shareholder to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy
of such written advice and all other related communications with the SEC
shall have been delivered to Parent.
H-4.
Shareholder has executed and delivered this Certification as of the date
first written above.
________________________________________
(Signature)
Name: __________________________________
Date: __________________________________
State of Residence: ____________________
H-5.
EXHIBIT I-1
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Agreement") is being executed and delivered
as of December [ ], 1997 by the undersigned ("Affiliate") in favor of and
for the benefit of XXXXX & XXXXXXX, INC., a Delaware corporation ("Parent").
RECITALS
A. Affiliate's relationship to MAXM SYSTEMS CORPORATION, a Delaware
corporation (the "Company") as a shareholder, officer and/or director is
shown on Exhibit A.
B. Parent, the Company and MINIMUM ACQUISITION SUB., INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), have
entered into an Agreement and Plan of Merger and Reorganization dated as of
December 10, 1996 (the "Reorganization Agreement"), providing for the merger
of Merger Sub with and into the Company (the "Merger"). The Reorganization
Agreement contemplates that, upon consummation of the Merger, (i) the
Company's shareholders will receive shares of common stock, par value $.001
per share, of Parent ("Parent Common Stock") in exchange for all of their
shares of capital stock of the Company ("Company Shares"), and (ii) the
Company will become a wholly owned subsidiary of Parent. It is accordingly
contemplated that Affiliate will receive shares of Parent Common Stock in the
Merger.
C. Affiliate may be deemed to be an "affiliate" of the Company for
purposes of: (i) the restrictions on resale imposed by the Securities Act of
1933, as amended (the "Act"); and (ii) determining Parent's eligibility to
account for the Merger as a "pooling of interests" under applicable "pooling
of interests" accounting requirements (including Accounting Principles Board
Opinion No. 16 and Accounting Series Releases 130 and 135, as amended, of the
Securities and Exchange Commission (the "SEC")).
AGREEMENT
1. REPRESENTATIONS AND WARRANTIES. Affiliate represents and warrants
to Parent as follows:
(a) Affiliate is the holder and beneficial owner of the Company
Shares shown on Exhibit B, and Affiliate has good and valid title to the
Company Shares, free and clear of any liens, pledges, security interests,
adverse claims, equities, options, proxies, charges, encumbrances or
restrictions of any nature.
I-1-1.
(b) Affiliate has carefully read this Agreement, and has discussed
with counsel to the extent Affiliate felt necessary the limitations imposed
on Affiliate's ability to sell, transfer or otherwise dispose of the Company
Shares and the shares of Parent Common Stock that Affiliate is to receive in
the Merger (the "Parent Shares"). Affiliate fully understands the
limitations this Agreement places upon Affiliate's ability to sell, transfer
or otherwise dispose of the Company Shares and the Parent Shares.
(c) Affiliate understands that the representations, warranties and
covenants set forth in this Agreement will be relied upon by Parent and its
counsel and accountants for purposes of determining Parent's eligibility to
account for the Merger as a "pooling of interests," for purposes of
determining whether Parent should proceed with the Merger and for various
other purposes.
2. PROHIBITIONS AGAINST TRANSFER.
(a) Affiliate agrees that until such time as the Reorganization
Agreement is validly terminated in accordance with Section 8 thereof, he
shall not sell, transfer or otherwise dispose of, or reduce his interest in
or risk relating to, any capital stock of the Company (including the Company
Shares) except pursuant to and upon consummation of the Merger.
(b) Affiliate agrees that during the period from the date on which
the Merger is consummated through the date on which financial results
covering at least 30 days of post Merger combined operations of Parent and
the Company have been published by Parent (within the meaning of the
applicable "pooling of interests" accounting requirements) he shall not sell,
transfer or otherwise dispose of, or reduce his interest in or risk relating
to, any shares of Parent Common Stock (including the Parent Shares).
(c) Without limiting the generality of Section 2(b) of this
Agreement, Affiliate shall not effect any sale, transfer or other disposition
of any of the Parent Shares unless:
(i) such sale, transfer or other disposition has been
registered under the Act;
(ii) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 144 under the Act, as
evidenced by a broker's letter and a representation letter executed
by Affiliate (satisfactory in form and content to Parent) stating
that such requirements have been met;
(iii) counsel reasonably satisfactory to Parent shall have
advised Parent in a written opinion letter (satisfactory in form
and content to Parent), upon which Parent may rely, that such sale,
transfer or other disposition will be exempt from registration
under the Act; or
(iv) an authorized representative of the SEC shall have
rendered written advice to Affiliate to the effect that the SEC
would take no action, or that the
I-1-2.
staff of the SEC would not recommend that the SEC take action, with
respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the
SEC shall have been delivered to Parent.
3. STOP TRANSFER INSTRUCTIONS; LEGEND.
Affiliate understands that the Parent Shares will be characterized
as "restricted securities" for purposes of Rule 144 under the Act, and that
therefore any sale, transfer or other disposition of any of the Parent Shares
must be made in conformity with the provisions of said Rule or be registered
under the Act. Affiliate acknowledges and agrees that (i) stop transfer
instructions will be given to Parent's transfer agent with respect to the
Parent Shares, and (ii) each certificate representing any of such shares
shall bear a legend identical or similar in effect to the following legend
(together with any other legend or legends required by applicable state
securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS
AVAILABLE. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
AS OF DECEMBER [ ], 1996, BETWEEN THE REGISTERED HOLDER HEREOF
AND XXXXX & BABBAGE, INC., A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF XXXXX & XXXXXXX, INC."
4. INDEPENDENCE OF OBLIGATIONS. The covenants and obligations of
Affiliate set forth in this Agreement shall be construed as independent of
any other agreement or arrangement between Affiliate, on the one hand, and
the Company or Parent, on the other. The existence of any claim or cause of
action by Affiliate against the Company or Parent shall not constitute a
defense to the enforcement of any of such covenants or obligations against
Affiliate.
5. SPECIFIC PERFORMANCE. Affiliate agrees that in the event of any
breach or threatened breach by Affiliate of any covenant, obligation or other
provision contained in this Agreement, Parent shall be entitled (in addition
to any other remedy that may be available to Parent) to: (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision; and (b) an
injunction restraining such breach or threatened breach.
6. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to Parent, Affiliate shall hold harmless and
indemnify Parent from and against, and shall compensate and reimburse Parent
for, any loss, damage, injury, decline in
I-1-3.
value, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge, cost or expense of any
nature (whether or not relating to a third party claim) which is directly or
indirectly suffered or incurred at any time by Parent or any of Parent's
affiliates or to which Parent or any of Parent's affiliates otherwise becomes
subject and that arises from any inaccuracy in or breach of any
representation, warranty, covenant or obligation of Affiliate contained in
this Agreement.
7. OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Parent under the Reorganization Agreement or any
Shareholder Agreement executed or to be executed by Shareholder in favor of
Parent in connection with the transaction contemplated therein and nothing in
the Reorganization Agreement or said Shareholder Agreement shall limit any of
the rights or remedies of Parent under this Agreement.
8. NOTICES. Any notice or other communication required or permitted
to be delivered to Affiliate or Parent under this Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other party hereto):
IF TO PARENT: Xxxxx & Xxxxxxx, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Chief Financial
Officer and Secretary
Facsimile: (000) 000-0000
WITH A COPY TO: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
IF TO AFFILIATE: At address shown on signature page
9. SEVERABILITY. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to
the fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other
I-1-4.
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder
of such provision or the validity or enforceability of any other provision of
the Agreement. Each provision of the Agreement is separable from every other
provision of the Agreement, and each part of each provision of the Agreement
is separable from every other part of such provision.
10. GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of Delaware
(without giving effect to principles of conflicts of laws).
11. WAIVER. No failure on the part of Parent to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
Parent in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy. Parent shall not be deemed to have
waived any claim arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of Parent; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
12. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
13. FURTHER ASSURANCES. Affiliate shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
14. ENTIRE AGREEMENT. This Agreement the Reorganization Agreement and
the Shareholder Agreement referred to in Section 7 set forth the entire
understanding of Parent and Affiliate relating to the subject matter hereof
and thereof and supersede all other prior agreements and understandings
between Parent and Affiliate relating to the subject matter hereof and
thereof.
15. NON-EXCLUSIVITY. The rights and remedies of Parent hereunder are
not exclusive of or limited by any other rights or remedies which Parent may
have, whether at law, in equity, by contract or otherwise, all of which shall
be cumulative (and not alternative).
16. AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent and Affiliate.
17. ASSIGNMENT. This Agreement and all obligations of Affiliate
hereunder are personal to Affiliate and may not be transferred or delegated
by Affiliate at any time. Parent may freely assign any or all of its rights
under this Agreement (including its indemnification
I-1-5.
rights under Section 6), in whole or in part, to any other person or entity
without obtaining the consent or approval of Affiliate.
18. BINDING NATURE. Subject to Section 17, this Agreement will inure
to the benefit of Parent and its successors and assigns and will be binding
upon Affiliate and his representatives, executors, administrators, estate,
heirs, successors and assigns.
19. ATTORNEYS' FEES AND EXPENSES. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement is
brought against Affiliate, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
20. SURVIVAL. Each of the representations, warranties, covenants and
obligations contained in this Agreement shall survive the consummation of the
Merger.
21. CONSTRUCTION.
(a) Affiliate agrees that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(b) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(c) Except as otherwise indicated, all references in this
Agreement to "Sections" are intended to refer to Sections of this Agreement.
Affiliate has executed this Agreement as of the date first above written.
(Signature) _______________________________
(Name, print) _____________________________
(Address for notices, printed)
___________________________________________
___________________________________________
I-1-6.
EXHIBIT I-2
PERSONS TO EXECUTE AFFILIATE AGREEMENTS
This exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request.
EXHIBIT J
PERSONS TO SIGN RELEASE
This exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
The Registrant hereby agrees to furnish supplementally a copy of this omitted
exhibit to the Securities and Exchange Commission upon request.
EXHIBIT K
RELEASE
THIS RELEASE ("Release") is being executed and delivered as of the date
written below, by the undersigned ("Releasor") in favor of, and for the
benefit of, MAXM SYSTEMS CORPORATION, a Delaware corporation (the
"Corporation"), XXXXX & XXXXXXX, INC., a Delaware corporation ("Parent"), and
the other Releasees (as defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this Release,
pursuant to an Agreement and Plan of Merger and Reorganization, dated as of
December 10, 1996 (the "Reorganization Agreement"), among the Corporation,
Parent and Minimum Acquisition Sub., Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), Merger Sub is merging with
the Corporation (the merger of Merger Sub with the Corporation being referred
to in this Release as the "Merger"). As a result of the Merger, the
Corporation's shareholders are receiving shares of common stock of Parent in
exchange for their shares of voting capital stock of the Corporation, and the
Corporation is becoming a wholly owned subsidiary of Parent.
B. Parent has required, as a condition to consummating the Merger and
the other transactions contemplated by the Reorganization Agreement, that
Releasor execute and deliver this Release.
AGREEMENT
In order to induce Parent to consummate the transactions contemplated by
the Reorganization Agreement, and for other valuable consideration (the
receipt and sufficiency of which are hereby acknowledged by Releasor),
Releasor hereby covenants and agrees as follows:
1. RELEASE. Releasor, for himself and for each of his Associated
Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with respect
to Releasor, shall mean and include: (i) Releasor's predecessors,
successors, executors, administrators, heirs and estate; (ii) Releasor's
past, present and future assigns, agents and representatives; (iii) each
entity that Releasor has the power to bind (by Releasor's acts or signature)
or over which
K-1
Releasor directly or indirectly exercises control; and (iv) each entity of
which Releasor owns, directly or indirectly, at least 50% of the outstanding
equity, beneficial, proprietary, ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i) Parent; (ii)
the Corporation; (iii) each of the direct and indirect subsidiaries of
Parent; (iv) each other affiliate of Parent; and (v) the successors and past,
present and future assigns, directors, officers, employees, agents, attorneys
and representatives of the respective entities identified or otherwise
referred to in clauses "(i)" through "(iv)" of this sentence, other than
Releasor.
(c) The term "Claims" shall mean and include all past, present and
future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature,
including: (i) any unknown, unsuspected or undisclosed claim; (ii) any claim
or right that may be asserted or exercised by Releasor in his capacity as a
shareholder, director, officer or employee of the Corporation or in any other
capacity; and (iii) any claim, right or cause of action based upon any breach
of any express, implied, oral or written contract or agreement; (iv) any tort
claim; and (v) any indemnification claim.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) Releasor or any Associated Party of Releasor may have
had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises out of, or relates to, any
circumstance, agreement, activity, action, omission, event or matter
occurring or existing on or prior to the date of this Release PROVIDED,
HOWEVER, that the Released Claims shall not include:
(1) Releasor's rights, if any, against Parent under the
Reorganization Agreement;
(2) any vested benefits that Releasor may have as a beneficiary
under any of the Corporation's employee benefit plans; or
(3) any right of indemnification Releasor may have against the
Corporation under the Corporation's articles of incorporation in his
capacity as an officer and director of the Corporation, to the extent such
right of indemnification arises as a result of any lawsuit that (A) is
brought against Releasor after the date of this Release by a party who is
not a current or former shareholder of the Corporation and who is not
affiliated with or related to any current or former shareholder of the
Corporation, (B) is not brought in the name of the Corporation, and (C) is
based on an allegedly wrongful action taken by Releasor prior to the date
of this Release in his capacity as a director and officer of the
Corporation.
3. REPRESENTATIONS AND WARRANTIES. Releasor represents and warrants
that:
(a) Releasor has not assigned, transferred, conveyed or otherwise
disposed of any Claim against any of the Releasees, or any direct or indirect
interest in any such Claim, in whole or in part;
K-2
(b) to the best of Releasor's knowledge, no other person or entity
has any interest in any of the Released Claims;
(c) Releasor is not aware of any claim or potential claim by any
person or entity against Releasor, and is not aware of any other facts or
circumstances, that could give rise to a right of indemnification in favor of
Releasor against the Corporation;
(d) to the best of Releasor's knowledge, no Associated Party of
Releasor has or had any Claim against any of the Releasees;
(e) to the best of Releasor's knowledge, no Associated Party of
Releasor will in the future have any Claim against any Releasee that arises
from or relates to any circumstance, agreement, activity, action, omission,
event or matter occurring or existing on or prior to the date of this Release;
(f) this Release has been duly and validly executed and delivered
by Releasor;
(g) this Release is a valid and binding obligation of Releasor and
Releasor's Associated Parties, and is enforceable against Releasor and each
of his Associated Parties in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance;
(h) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the best
of the knowledge of Releasor, threatened against Releasor or any of
Releasor's Associated Parties that challenges or would challenge the
execution and delivery of this Release or the taking of any of the actions
required to be taken by Releasor under this Release;
(i) neither the execution and delivery of this Release nor the
performance hereof will: (i) result in any violation or breach of any
agreement or other instrument to which Releasor or any of Releasor's
Associated Parties is a party or by which Releasor or any of Releasor's
Associated Parties is bound; or (ii) result in a violation or any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which Releasor or any of Releasor's Associated Parties is subject;
and
(j) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by Releasor or any of Releasor's
Associated Parties in connection with the execution and delivery of this
Release or the performance hereof.
4. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, Releasor shall hold harmless
and indemnify each Releasee from and against, and shall compensate and
reimburse each Releasee for, any loss, damage, injury, decline in value, lost
opportunity, liability, exposure, claim, demand, settlement,
K-3
judgment, award, fine, penalty, tax, fee (including reasonable attorneys'
fees) charge, cost (including costs of investigation) or expense of any
nature which are suffered or incurred at any time by any Releasee, or to
which any Releasee otherwise becomes subject at any time, and that arises out
of or by virtue of, or relates to: (a) any failure on the part of Releasor
to observe, perform or abide by, or any other breach of, any restriction,
covenant, obligation, representation, warranty or other provision contained
herein; (b) the assertion or purported assertion of any of the Released
Claims by Releasor or any of Releasor's Associated Parties; or (c) any
inaccuracy in or breach of any representation or warranty set forth in this
Release.
5. NOTICES. Any notice or other communication required or permitted
to be delivered to Releasor, the Corporation or Parent under this Release
shall be in writing and shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier or express
delivery service or by facsimile) to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other
address or facsimile telephone number as such party shall have specified in a
written notice given to the other party hereto):
IF TO THE CORPORATION: MAXM Systems Corporation
0000 Xxxxxxxxxx Xxxxx, 0xx Xxxxx
XxXxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxx Xxxxxxx
IF TO PARENT: Xxxxx & Babbage, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxx X. Xxxxx, Xx.
Chief Financial Officer and
Secretary
WITH A COPY TO: Cooley Godward LLP
Five Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attn.: Xxxxxxx Xxxxxxxxx, Esq.
IF TO RELEASOR: (address on signature page)
6. SEVERABILITY. If any provision of this Release or any part of any
such provision is held under any circumstances to be invalid or unenforceable
in any jurisdiction, then (a) such provision or part thereof shall, with
respect to such circumstances and in such jurisdiction, be deemed amended to
conform to applicable laws so as to be valid and enforceable to the fullest
possible extent, (b) the invalidity or unenforceability of such provision or
part thereof under such
K-4
circumstances and in such jurisdiction shall not affect the validity or
enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the validity
or enforceability of any other provision of this Release. Each provision of
this Release is separable from every other provision of this Release, and
each part of each provision of this Release is separable from every other
part of such provision.
7. GOVERNING LAW. This Release shall be construed in accordance with,
and governed in all respects by, the laws of the State of Delaware (without
giving effect to principles of conflicts of laws).
8. WAIVER. No failure on the part of any Releasee to exercise any
power, right, privilege or remedy under this Release, and no delay on the
part of any Releasee in exercising any power, right, privilege or remedy
under this Release, shall operate as a waiver of such power, right, privilege
or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy. No Releasee shall be deemed
to have waived any claim arising out of this Release, or any power, right,
privilege or remedy under this Release, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such party; and any such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9. CAPTIONS. The captions contained in this Release are for
convenience of reference only, shall not be deemed to be a part of this
Release and shall not be referred to in connection with the construction or
interpretation of this Release.
10. FURTHER ASSURANCES. Releasor shall execute and/or cause to be
delivered to the Corporation and Parent such instruments and other documents
and shall take such other actions as Corporation or Parent may reasonably
request to effectuate the intent and purposes of this Release.
11. ENTIRE AGREEMENT. This Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings between the parties relating to the subject
matter hereof.
12. AMENDMENTS. This Release may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Releasor, Parent and the Corporation.
13. BINDING NATURE. This Release will be binding upon Releasor and
Releasor's Associated Parties and will inure to the benefit of each of the
Releasees.
14. ATTORNEYS' FEES AND EXPENSES. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Release is
brought against Releasor, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
K-5
15. CONSTRUCTION.
(a) For purposes of this Release, whenever the context requires:
the singular number shall include the plural, and vice versa.
(b) Releasor agrees that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Release.
(c) As used in this Release, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Release
to "Sections" are intended to refer to Sections of this Release.
Releasor has executed this Release as of the date first above written.
________________________________________
[Releasor]
________________________________________
________________________________________
________________________________________
Address for notices
K-6
EXHIBIT L
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the date written below, by and between the undersigned
shareholder, XXXXX & XXXXXXX, INC., a Delaware corporation ("Parent"), and
MAXM SYSTEMS CORPORATION, a Delaware corporation (the "Company").
RECITALS
A. Parent, MINIMUM ACQUISITION SUB, INC., a wholly owned subsidiary
of Parent and a Delaware corporation ("Merger Sub"), and the Company have
entered into an Agreement and Plan of Merger and Reorganization dated as of
December 10, 1996 (the "Reorganization Agreement") pursuant to which Merger
Sub will be merged with and into the Company (the "Merger"), with the Company
being the surviving corporation. Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. As a condition of entering into the Reorganization Agreement,
Parent has agreed to grant registration rights to certain recipients of
Common Stock of Parent pursuant to the Merger as listed on Attachment A
hereto (each a "Holder" and, collectively, the "Holders") as set forth herein.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DEFINITIONS
1.1 CAPITALIZED TERMS. Capitalized terms used and not otherwise
defined in this Agreement shall have the meanings assigned to them in the
Reorganization Agreement.
1.2 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"PARENT OFFERING" means any firmly underwritten offering of the Common
Stock of Parent for its own account pursuant to a registration statement
under the Securities Act.
"POOLING PERIOD" means the period from the date on which the Merger is
consummated through the date on which financial results covering at least 30
days of post Merger combined operations of Parent and the Company have been
published by Parent (within the meaning of the applicable "pooling of
interests" accounting requirements).
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"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.9 hereof.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) the Shares; and (ii) any Common Stock
of Parent issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the
Shares. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which
the transferror's rights under Section 2 of this Agreement are not assigned.
"REGISTRATION EXPENSES" shall mean all expenses incurred by Parent in
complying with Sections 2.1 and 2.2 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements
of counsel for Parent, reasonable fees and disbursements not to exceed
Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Participating Holders (as defined in Section 2.10), blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of
Parent which shall be paid in any event by Parent).
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean Parent's Common Stock, $0.001 par value per share,
issued to the Holders pursuant to the Reorganization Agreement.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by Parent with
the SEC.
SECTION 2. REGISTRATION
2.1 PIGGYBACK REGISTRATION.
2.1.1 With respect to any Parent Offering which Parent proposes to
commence after the end of the Pooling Period and prior to June 30, 1997 (an
"Underwritten Offering"), Parent shall notify all Holders of Registrable
Securities in writing no later than February 15, 1997 and will afford each
such Holder an opportunity to include in such registration statement all or
part of such Registrable Securities held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by it shall no
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later than March 1, 1997 so notify Parent in writing (a "Participation
Notice"). The right of any Holder to include its Registrable Securities in
such registration shall be conditioned upon (i) such Holder being a
Participating Holder (as defined in Section 2.10), (ii) such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein and
(iii) receipt by Parent of Participation Notices covering an aggregate of at
least six hundred thousand (600,000) shares of Registrable Securities (as
adjusted for stock splits, recapitalizations and the like) (a "Qualifying
Commitment"). All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by Parent. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number
of shares that may be included in the underwriting shall be allocated, first,
to the Holders on a pro rata basis based on the total number of Registrable
Securities held by the Holders; second, to Parent; and third, to any
stockholder of Parent (other than a Holder) on a pro rata basis. In no event
will shares of any other selling stockholder be included in such registration
which would reduce the number of shares which may be included by Holders
without the written consent of Holders of not less than two-thirds (66 2/3%)
of the Registrable Securities proposed to be sold in the offering. In the
event of any underwriter cutback, any selling stockholder which is a Holder
of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates
and family members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons shall be deemed to be a
single "selling Holder", and any pro rata reduction with respect to such
"selling Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling Holder", as defined in this sentence. No securities excluded from
the underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter. The Registrable Securities so withdrawn shall
also be withdrawn from registration.
2.1.2 Parent shall have the right to terminate or withdraw any
registration initiated or withdraw any registration initiated by it under
this Section 2.1 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by Parent
in accordance with Section 2.3 hereof. So long as the Company intends to
proceed with any registration initiated by it under this Section 2.1, it
shall use reasonable efforts to cause such registration to become effective
as soon as reasonably practicable.
2.2 SHELF REGISTRATION.
2.2.1 Parent shall prepare and file with the Securities and
Exchange Commission ("SEC") one or more registration statements on Form S-3
(or any successor to Form S-3) or any similar short-form registration
statement pursuant to Rule 415 (or any appropriate similar rule that may be
adopted by SEC) covering such number of the Registrable Securities as
specified in Section 2.2.3 owned by all Holders then holding Registrable
Securities (the "Shelf
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Registration"). The initial such registration statement shall be filed by
(as applicable, the "Filing Date") and the Company shall make reasonable
efforts to cause such registration statement to become effective not later
than:
(a) May 15, 1997 if Parent has received a Qualifying
Commitment but has not filed a registration statement for an Underwritten
Offering prior to such date; or
(b) June 1, 1997 if Parent has not received a Qualifying
Commitment and has not filed a registration statement for an Underwritten
Offering prior to such date; or
(c) June 30, 1997 otherwise.
2.2.2 Notwithstanding the foregoing, Parent shall not be
obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.1:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if Parent shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of Parent stating that in
the good faith judgment of the Board of Directors of Parent, it would be
seriously detrimental to Parent and its stockholders for such Form S-3
Registration to be effected at such time, in which event Parent shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.2, or
(iii) prior to the end of the Pooling Period, or
(iv) prior to forty-five (45) days following the closing of
an Underwritten Offering (or such longer period of time as may be requested
by the underwriters of such offering), or
(v) in any particular jurisdiction in which Parent would be
required to qualify to do business or to execute a general consent to service
of process in effecting such registration.
2.2.2 The number of shares that are registered under the Shelf
Registration shall be as follows:
(a) in the case of a Shelf Registration made pursuant to
Section 2.2.1(a) or 2.2.1(b), twenty-five percent (25%) of the Registrable
Securities of each Holder shall be registered upon the effective date of the
initial registration statement and an additional twenty-five percent (25%) of
the Registrable Securities of each Holder shall be registered not later than
every forty-five (45) days thereafter until all such shares have been
registered; and
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(b) in the case of a Shelf Registration made pursuant to
Section 2.2.1(c), fifty percent (50%) of the Registrable Securities of each
Holder shall be registered upon the effective date of the initial
registration statement and the remaining Registrable Securities of each
Holder shall be registered not later than forty-five (45) days thereafter.
2.2.4 Parent shall use its best efforts to cause the Shelf
Registration to become effective under the Act as soon as practicable
following the Filing Date. Subject to the requirements of the Act including,
without limitation, requirements relating to updating through post-effective
amendments or otherwise, Parent shall use its best efforts to keep the Shelf
Registration continuously effective until the earlier of (i) the third
anniversary of the Closing Date or (ii) such time as all of the Registrable
Securities may be traded pursuant to Rule 144 under the Act by Holders who
are not at such time affiliates of the Parent within the meaning set forth in
Rule 144 under the Act; PROVIDED, that in the event of a Suspension Period,
as set forth in Section 2.2.5 hereof, Parent shall extend the period of
effectiveness of such Shelf Registration by the number of days of each such
Suspension Period. Parent shall use its best efforts to take such actions
under the laws of various states as may be required to cause the resale of
the Registrable Securities pursuant to the Shelf Registration to be lawful.
2.2.5 Following the effectiveness of a Registration Statement
filed pursuant to this Section, Parent may, at any time, suspend the
effectiveness of such Registration Statement for up to 60 days, as
appropriate (a "Suspension Period"), by giving notice to the Holders, if
Parent shall have determined that Parent may be required to disclose any
material corporate development which disclosure may have a material adverse
effect on the Company. Notwithstanding the foregoing, no more than two
Suspension Periods (i.e., 120 days) may occur in immediate succession. The
period of any such suspension of the Registration Statement shall be added to
the period of time Parent agrees to keep the Registration Statement effective
as provided in Section 2.2.4. Parent shall use its best efforts to limit the
duration and number of any Suspension Periods. The Holders agree that, upon
receipt of any notice from the Company of a Suspension Period, the Holders
shall forthwith discontinue disposition of shares covered by such
registration statement until the Holders (i) are advised in writing by Parent
that the use of the applicable prospectus may be resumed, (ii) have received
copies of a supplemental or amended prospectus, if applicable, and (iii) have
received copies of any additional or supplemental filings which are
incorporated or deemed to be incorporated by reference in such prospectus.
2.2.6 The right of any Holder to include its Registrable
Securities in a registration pursuant to this Section 2.2 shall be
conditioned upon such Holder being a Participating Holder (as defined in
Section 2.10).
2.3 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration
pursuant to Section 2.1 or 2.2 hereof shall be borne by Parent. All Selling
Expenses incurred in connection with any registrations hereunder, shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of shares so registered.
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2.4 OBLIGATIONS OF PARENT. Whenever required to effect the
registration of any Registrable Securities, Parent shall, as expeditiously as
reasonably possible:
2.4.1 Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days or, if earlier, until the Holder or Holders have completed the
distribution related thereto, PROVIDED, HOWEVER, that if such registration
statement is filed pursuant to Section 2.2 hereof, the Company shall keep
such registration statement effective for the period set forth therein.
2.4.2 Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement.
2.4.3 Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
2.4.4 Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, provided that Parent shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
2.4.5 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
2.4.6 Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing.
2.4.7 Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing Parent for the purposes of such
registration, in form and substance as is customarily given to
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underwriters in an underwritten public offering and reasonably satisfactory
to a majority in interest of the Holders requesting registration, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated as of such date, from the
independent certified public accountants of Parent, in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory
to a majority in interest of the Holders requesting registration, addressed
to the underwriters, if any, and if permitted by applicable accounting
standards, to the Holders requesting registration of Registrable Securities.
2.5 DELAY OF REGISTRATION; FURNISHING INFORMATION.
2.5.1 No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of this Section 2.
2.5.2 It shall be a condition precedent to the obligations of
Parent to take any action pursuant to Section 2.1 or 2.2 hereof that the
selling Holders shall furnish to Parent such information regarding
themselves, the Registrable Securities held by them and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
2.6 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.1 or 2.2 hereof:
2.6.1 To the extent permitted by law, Parent will indemnify and
hold harmless each Participating Holder against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation") by Parent: (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or (iii)
any violation or alleged violation by Parent of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and
Parent will reimburse each such Participating Holder for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided
however, that the indemnity agreement contained in this Section 2.6.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of
Parent, which consent shall not be unreasonably withheld, nor shall Parent be
liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and
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in conformity with written information furnished expressly for use in
connection with such registration by such Participating Holder.
2.6.2 To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless Parent, each of its directors, its officers, and
legal counsel and each person, if any, who controls Parent within the meaning
of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or several) to
which Parent or any such director, officer, controlling person, underwriter
or other such Holder, or partner, director, officer or controlling person of
such other Holder may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder under an instrument duly executed by such Holder and
stated to be specifically for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses reasonably
incurred by Parent or any such director, officer, controlling person,
underwriter or other Holder, or partner, officer, director or controlling
person of such other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action if it is judicially determined
that there was such a Violation; provided, however, that the indemnity
agreement contained in this Section 2.6.2 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.6 exceed the proceeds from the offering
received by such Holder.
2.6.3 Promptly after receipt by an indemnified party under this
Section 2.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
materially prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 2.6, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 2.6.
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2.6.4 If the indemnification provided for in this Section 2.6 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall to the extent permitted by applicable law contribute
to the amount paid or payable by such indemnified party as a result of such
loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by a court of law by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, that
in no event shall any contribution by a Holder hereunder exceed the proceeds
from the offering received by such Holder.
2.6.5 The obligations of Parent and Holders under this Section 2.6
shall survive completion of any offering of Registrable Securities in a
registration statement. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. In the event any offering of
Registrable Securities is underwritten, and the underwriting agreement
provides for indemnification and/or contribution by Parent and the Holders
offering securities thereunder, the indemnification and/or contribution
obligations of Parent and the Holders hereunder shall in no event exceed the
obligations of the parties set forth in such underwriting agreement.
2.7 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the company
to register Registrable Securities pursuant to this Section 2 may only be
transferred by a Holder to (i) any "affiliate" (as defined in Rule 405 under
the Securities Act) of such Holder or (ii) any person or entity acquiring at
least twenty-five percent (25%) of the Registrable Securities of such Holder;
provided, that (A) the transferor shall, within ten (10) days after such
transfer, furnish to Parent written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned, (B) such transferee shall promptly
agree in writing to be subject to all restrictions set forth in this
Agreement and (C) such transfer does not affect the treatment of the Merger
as a "pooling of interests."
2.8 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of Parent and the Holders of at least a majority of
the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 2.8 shall be binding upon each Holder and Parent. By
acceptance of any benefits under this Section 2, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
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2.9 AGREEMENT OF PARTICIPATING HOLDERS. Notwithstanding anything to
the contrary contained herein, no Holder shall have any rights under this
Section 2 unless such Holder (i) executes a written agreement satisfactory in
form and content to Parent, confirming that such Holder wishes to be allowed
to sell Parent Common Stock pursuant to the respective registration
statements under Sections 2.1 or 2.2 hereof and agrees to be bound by the
provisions of this Section 2, and (ii) delivers such written agreement (as
executed by such Holder) to Parent within 15 days after Parent delivers the
form of such written agreement to such Holder. (A Holder who so executes and
delivers such an agreement is referred to in this Section 2 as a
"Participating Holder.") No Holder may sell any Parent Common Stock pursuant
to a registration statement under Section 2.1 or 2.2 hereof unless such
Holder is a Participating Holder and shall have notified Parent in writing,
not less than seven nor more than 21 days prior to the sale of such shares,
of such Participating Holder's intention to sell such shares.
SECTION 3. MISCELLANEOUS.
3.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of Parent pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by
Parent hereunder solely as of the date of such certificate or instrument.
3.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by Parent of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, Parent may deem and treat the person listed as
the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
3.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
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3.5 AMENDMENT AND WAIVER.
3.5.1 Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written consent of Parent and the
holders of at least a majority of the Registrable Securities.
3.5.2 Except as otherwise expressly provided, the obligations
of Parent and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least a majority of the
Registrable Securities.
3.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of Parent under this Agreement shall impair any such
right, power, or remedy, nor shall it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character
on any Holder's part of any breach, default or noncompliance under the
Agreement or any waiver on such Holder's part of any provisions or conditions
of this Agreement must be in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either under
this Agreement, by law, or otherwise afforded to Holders, shall be cumulative
and not alternative.
3.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the party to be notified at the address as set forth on the
signature pages hereof or Exhibit A hereto or at such other address as such
party may designate by ten (10) days advance written notice to the other
parties hereto.
3.8 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
3.9 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of January 15, 1997.
XXXXX & XXXXXXX, INC.,
a Delaware corporation
By: ____________________________________
MAXM SYSTEMS CORPORATION,
a Delaware corporation
By: ____________________________________
________________________________________
(Signature of Shareholder)
Address for Notices:
________________________________________
________________________________________
________________________________________
L-12
ATTACHMENT A
SCHEDULE OF HOLDERS
[Intentionally left blank]
L-13
