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EXHIBIT 10.2
PLAN AND AGREEMENT OF MERGER
AND
STOCK PURCHASE AGREEMENT
AMONG
THE XXXXXXX GROUP, INC.,
A DELAWARE CORPORATION,
RMI ACQUISITION CO.,
A DELAWARE CORPORATION,
RESOURCE MANAGEMENT INTERNATIONAL, INC.,
A CALIFORNIA CORPORATION,
AND
ALL OF THE SHAREHOLDERS OF RESOURCE MANAGEMENT INTERNATIONAL, INC.
DATED AS OF JULY 31, 1997
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TABLE OF CONTENTS
PAGE
RECITALS.................................................................... 1
AGREEMENT................................................................... 1
1. DEFINITIONS....................................................... 2
2. STOCK PURCHASE AND MERGER......................................... 7
2.1. Stock Purchase and Merger.................................. 7
(a) Purchase and Sale of Shares......................... 7
(b) The Merger.......................................... 8
2.2. Closing.................................................... 8
2.3. Effects of the Merger...................................... 8
2.4. Articles of Incorporation and By-Laws...................... 9
2.5. Directors and Officers..................................... 9
2.6. Conversion of Securities................................... 9
2.7. Closing of Company Transfer Books.......................... 9
2.8. Exchange of Certificates................................... 9
2.9. Rights of the Company Shareholders........................ 10
2.10. Taking of Necessary Action; Further Action................ 10
2.11. Share Escrow.............................................. 11
2.12. Shareholders' Representative.............................. 11
3. REPRESENTATIONS AND WARRANTIES................................... 13
3.1. Representations and Warranties of the RMI Shareholders.... 13
3.2. Representations and Warranties Concerning the Company..... 15
(a) Organization, Qualification and Corporate Power.... 15
(b) Authorization of Transaction....................... 15
(c) Noncontravention................................... 16
(d) Capitalization..................................... 16
(e) Subsidiaries....................................... 17
(f) Financial Statements; Books and Records............ 17
(g) Recent Events...................................... 18
(h) Undisclosed Liabilities............................ 19
(i) Tax Matters........................................ 20
(j) Title and Condition of Properties.................. 21
(i) Owned Real Property........................ 21
(ii) Leased Real Property....................... 24
(iii) Title to Assets............................ 24
(iv) Condition and Sufficiency of Assets........ 24
(k) Intellectual Property.............................. 25
(l) Contracts.......................................... 27
(m) Notes and Accounts Receivable...................... 29
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(n) Powers of Attorney; Bank Accounts.................. 29
(o) Litigation......................................... 29
(p) Employees; Employment Matters...................... 30
(q) Employee Benefit Plans............................. 31
(r) Licenses, Permits and Approvals.................... 34
(s) Unlawful Payments.................................. 34
(t) Compliance with Laws............................... 35
(u) Suppliers and Clients.............................. 35
(v) Insurance.......................................... 35
(w) Warranty........................................... 36
(x) Transaction-Related Tax and Accounting Matters..... 36
(y) Brokers' Fees...................................... 36
(z) Potential Conflicts of Interest.................... 36
(aa) Disclosure......................................... 36
3.3. Representations and Warranties of Acquisition
and Xxxxxxx............................................... 37
(a) Organization....................................... 37
(b) Authorization of Transaction....................... 37
(c) Noncontravention................................... 37
(d) Xxxxxxx Common..................................... 38
(e) Brokers' Fees...................................... 38
(f) Commission Filings................................. 38
(g) Capital Structure.................................. 39
(h) No Material Adverse Changes........................ 39
(i) Transaction-Related Tax and Accounting
Matters............................................ 39
(j) Continuity of Business............................. 39
4. CONDITIONS....................................................... 40
4.1. Conditions to Obligation of Xxxxxxx and
Acquisition............................................... 40
4.2. Conditions to Obligations of the Company and the
Shareholders ............................................. 42
5. ADDITIONAL AGREEMENTS............................................ 43
5.1. Post-Merger Covenants..................................... 43
(a) General............................................ 43
(b) Transition......................................... 43
(c) Confidentiality.................................... 44
(d) Transfer of Xxxxxxx Common......................... 44
(e) Transaction-Related Tax Matters.................... 45
5.2. Waiver and Release........................................ 45
5.3. Indemnification........................................... 46
(a) Survival Periods Generally......................... 46
(b) Indemnification by the Shareholders................ 46
(c) Certain Limits On and Provisions
Relating to Shareholders' Indemnification.......... 47
(d) Matters Involving Third Parties.................... 47
(e) No Contribution.................................... 48
5.4. Dispute Resolution Regarding Indemnification.............. 48
5.5. Arbitration............................................... 48
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5.6. Miscellaneous............................................. 50
(a) Press Releases and Announcements................... 50
(b) No Third Party Beneficiaries....................... 50
(c) Entire Agreement................................... 50
(d) Succession and Assignment.......................... 50
(e) Counterparts....................................... 50
(f) Notices............................................ 50
(g) Governing Law...................................... 51
(h) Amendments and Waivers............................. 51
(i) Severability....................................... 52
(j) Expenses........................................... 52
(k) Construction....................................... 52
(l) Incorporation of Exhibits and Schedules............ 53
(m) Directly or Indirectly............................. 53
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EXHIBITS
Exhibit A California Merger Agreement
Exhibit B Delaware Certificate of Merger
Exhibit C Form of Escrow Agreement
Exhibit D Form of Opinion of Shareholder/Company Counsel
Exhibit E Form of Registration Agreement
Exhibit F Form of Opinion of Xxxxxxx'x Counsel
RMI DISCLOSURE SCHEDULE
OTHER SCHEDULES
Schedule 4.2(k) Options to be Issued
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PLAN AND AGREEMENT OF MERGER
AND
STOCK PURCHASE AGREEMENT
THIS PLAN AND AGREEMENT OF MERGER AND STOCK PURCHASE AGREEMENT (this
"AGREEMENT") is made and entered into as of July 31, 1997, by and among The
Xxxxxxx Group, Inc., a Delaware corporation ("XXXXXXX"), RMI Acquisition Co., a
Delaware corporation and wholly-owned, direct subsidiary of Xxxxxxx
("ACQUISITION"), Resource Management International, Inc., a California
corporation ("RMI" or the "COMPANY"), and the RMI Shareholders (as herein
defined). Xxxxxxx, Acquisition, the Company, the RMI Shareholders are sometimes
referred to herein individually as a "PARTY" and collectively as the "PARTIES."
RECITALS
X. Xxxxxxx desires to purchase and the Selling Shareholders (as defined
herein) desire to sell the Purchased Shares (as defined herein) pursuant to the
terms of Section 2.1(a) (the "SHARE PURCHASE").
B. The respective boards of directors of Xxxxxxx, Acquisition and the
Company have approved the transactions contemplated herein, as applicable, and
have determined that it is desirable and in their respective best interests to
consummate the merger described in Section 2.1(b) (the "MERGER") immediately
after Xxxxxxx and the Selling Shareholders consummate the Share Purchase.
C. As a result of the Merger, Acquisition will be merged with and into the
Company, all of the outstanding capital stock of the Company will be converted
into the right to receive common stock of Xxxxxxx, and the Company will be the
surviving corporation, all on the terms and subject to the conditions set forth
in this Agreement.
D. For federal income tax purposes, the Parties intend that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
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1. DEFINITIONS
"AFFILIATE" means, with respect to any particular Person, any Person
controlling, controlled by or under common control with such Person, whether by
ownership or control of voting securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Section 1504 of the Code.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, costs of defense,
judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities, Taxes,
Security Interests, losses, expenses, and fees, including all attorneys' fees
and court costs.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"CGCL" means the California General Corporation Law.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission or any successor
agency.
"COMPANY COMMON" means the Company's Common Stock, no par value per share,
whether Class A Voting Stock or Class B Non-voting Stock.
"COMPANY SHARES OUTSTANDING" means the sum of (i) the number of shares of
Company Common actually issued and outstanding as of the Effective Time, plus
(ii) the number of shares of Company Common obtainable upon exercise of all
options or other contractual rights to acquire Company Common outstanding as of
the Effective Time, plus (iii) the number of shares of Company Common
obtainable upon the conversion of all convertible Company securities
outstanding as of the Effective Time, or issuable upon exercise of options to
acquire such convertible Company securities (whether or not such options or
convertible Company securities are at that time then vested or exercisable).
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of a Party other than any such information that (i) is generally
available to or known by the public immediately prior to the time of disclosure
(except through the actions or inactions of the Person to whom disclosure has
been made) or (ii) has been acquired or developed independent from such Party.
"DETERMINATION DATE" means the second trading day prior to the Closing.
"DGCL" means the Delaware General Corporation Law.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any corporation or other business entity that is
included in a controlled group of corporations within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the Company, as provided in Section 414(c)
of the Code; or which constitutes a member of an affiliated service group
within which the Company is also included, as provided in Section 414(m) of the
Code; or which is required to be aggregated with the Company pursuant to
regulations issued under Section 414(o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING COMPANY DOCUMENTS" means, collectively, the Shareholders
Agreement made as of May 29, 1997 by and between RMI and Xxxxxx Xxxxxxx, the
Shareholders Agreement made as of November 1, 1989 by and between RMI and Xxxx
Xxxxx, the Shareholders Agreement made as of November 15, 1989 by and between
RMI and Xxxxxxx Xxxxx, the Shareholders Agreement made as of October 19, 1989
by and between RMI and Xxxx X. Xxxxxx, the Shareholders Agreement made as of
November 27, 1989 by and between RMI and Xxxxx X. Xxxxxx, the Shareholders
Agreement made as of May 15, 1995 by and between RMI and Xxxxxxx X. Xxxxxxxxx,
the Shareholders Agreement made as of October 18, 1989 by and between RMI and
Xxxxx X. Xxxxxxx, the Shareholders Agreement made as of October 9, 1989 by and
between RMI and Xxxxxxx X. Xxxxx, the Shareholders Agreement made as of October
18, 1989 by and between RMI and Xxxxxx X. Xxxxxxx and the Shareholders
Agreement made as of February 1, 1995 by and between RMI and Xxxxxx X. Xxxxx.
"GAAP" means generally accepted accounting principles in the U.S., as in
effect from time to time.
"HAZARDOUS MATERIAL" shall mean any of the following: asbestos,
asbestos-containing materials, polychlorinated biphenyls ("PCBS"), petroleum
products (other than petroleum products used in the normal course to the extent
they are not released) and any other hazardous, special or toxic materials,
wastes and substances which are defined, determined or identified as such in
any federal, state or local laws, rules, regulations, ordinances, orders, codes
or statutes, in each case as amended (whether now existing or hereafter enacted
or promulgated including, without limitation, the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), Safe Drinking Water Act (42
U.S.C. Section 3000(f) et seq.), Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and any other
governmental entity with jurisdiction over the Owned Real Property or any part
thereof, concerning such hazardous, special or toxic materials, wastes or
substance or any judicial or administrative interpretation of such laws, rules
or regulations (all of the foregoing being herein collectively called
"ENVIRONMENTAL LAWS").
"INDEBTEDNESS" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person
as liabilities of such entity, and in any event, regardless of how classified
in accordance with GAAP, shall include (i) all
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obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any Security Interest upon property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of the property, and (iv) capitalized lease obligations.
"INTELLECTUAL PROPERTY" means any and all of the following which is owned
by, licensed by, licensed to, used or held for use by the Company (including
all copies and embodiments thereof, in electronic, written or other media): (i)
all registered and unregistered trademarks, trade dress, service marks, logos,
trade names, corporate names (including the name "Resource Management
International") and all applications to register the same (the "TRADEMARKS");
(ii) all issued U.S. and foreign patents and pending patent applications,
patent disclosures and improvements thereto (the "PATENTS"); (iii) all
registered and unregistered copyrights, mask work rights and all applications
to register the same (the "COPYRIGHTS"); (iv) all computer software and
databases owned or used (excluding software and databases licensed to the
Company under standard, non-exclusive software licenses granted to end-user
customers by third parties in the ordinary course of such third parties'
business) by the Company or under development for the Company by third parties
(the "SOFTWARE"); (v) all categories of trade secrets, know-how, inventions
(whether or not patentable and whether or not reduced to practice), processes,
procedures, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing, and business data, pricing and
cost information, business and marketing plans, client and supplier lists and
information and other confidential and proprietary information ("PROPRIETARY
RIGHTS"); (vi) all licenses and agreements pursuant to which the Company has
acquired rights in or to any of the Trademarks, Patents, Copyrights, Software
or Proprietary Rights (excluding software and databases licensed to the Company
under standard, non-exclusive software licenses granted to end-user customers
by third parties in the ordinary course of such third parties' business)
("LICENSES-IN"); and (vii) all licenses and agreements pursuant to which the
Company has licensed or transferred any rights to any of the Trademarks,
Patents, Copyrights, Software or Proprietary Rights ("LICENSES-OUT").
"KNOWLEDGE" and its derivatives mean or refer to, in the case of any
individual, knowledge that a reasonable person under similar circumstances
would have after diligent investigation and inquiry, and in the case of a
corporation, the knowledge (under the same standard as described immediately
above) of the directors, executive officers (vice president and above) and
Shareholders of the corporation and the employees having responsibility for the
particular subject matter at issue. "ACTUAL KNOWLEDGE" and its derivatives
shall mean or refer to Knowledge as defined, provided that Actual Knowledge
shall not include any Knowledge which would be obtainable only after
investigation and inquiry of parties other than the individual, in the case of
individual knowledge, or, as to a corporation, investigation and inquiry of
persons other than the directors, executive officers (vice president and above)
and, in the case of a private corporation, its shareholders.
"LIABILITY" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), obligation or Indebtedness, including any liability for Taxes.
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"MATERIAL ADVERSE EFFECT" means a material adverse effect or impact upon:
(i) the assets, financial position, results of operations, business, or
prospects of the Company and its subsidiaries, taken as a whole, or (ii) on the
ability of the Parties to consummate the transactions contemplated hereby.
"XXXXXXX COMMON" means the Common Stock, par value $0.001 per share, of
Xxxxxxx.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of the
Company consistent with past custom and practice (including with respect to
quantity and frequency) of the Company, Xxxxxxx, Acquisition or the Surviving
Corporation, respectively, as the context herein may require.
"PERSON" means any individual, trust, corporation, partnership, limited
partnership, limited liability company or other business association or entity,
court, governmental body or governmental agency.
"PLANS" means: (i) all employee benefit plans as defined in Section 3(3)
of ERISA; (ii) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock, stock option, fringe benefit and
incentive plans, contracts, schemes, programs, funds, commitments, or
arrangements of any kind; and (iii) all other plans, contracts, schemes,
programs, funds, commitments, or arrangements providing money, services,
property, or other benefits, whether written or oral, formal or informal,
qualified or nonqualified, funded or unfunded, and including any that have been
frozen or terminated, which pertain to any employee, former employee, director,
officer, shareholder, consultant, or independent contractor of the Company or
any ERISA Affiliate of the Company and (a) to which the Company or any ERISA
Affiliate of the Company is or has been a party or by which any of them is or
has been bound or (b) with respect to which the Company or any ERISA Affiliate
of the Company has made any payments or contributions since December 31, 1990
or (c) to which the Company or any ERISA Affiliate of the Company may otherwise
have any liability (including any such plan or arrangement formerly maintained
by the Company or any ERISA Affiliate of the Company).
"PRO RATA PERCENTAGE" means, with respect to each Shareholder, the
percentage equivalent of a fraction, the numerator of which shall be the number
of shares of Xxxxxxx Common to be issued to such Shareholder in the Merger, and
the denominator of which shall be the total number of shares of Xxxxxxx Common
issued to all Shareholders.
"RMI SHAREHOLDERS" means the Selling Shareholders and the Shareholders .
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest, charge,
lien or other encumbrance or right of any third party.
"SELLING SHAREHOLDERS" means the following persons: Xxxxxxx X. Xxxxxxx,
Xxxx X. Xxxxx, Xxxxxxx Xxxxx, Xxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxxxxx X.
Xxxxx, and Xxxxxx X. Xxxxx.
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"SHAREHOLDERS" means the following persons: Xxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxxx, and Xxxxx X. Xxxxxx.
"SUBSIDIARY" means any corporation, limited liability company, limited
partnership, partnership, trust or other entity with respect to which another
Person has the power, directly or indirectly through one or more
intermediaries, to vote or direct the voting of sufficient securities or
interests to elect a majority of the directors or management committee or
similar governing body.
"TAX" or "TAXES" means any federal, state, local, or foreign income, gross
receipts, sales, licenses, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
INDEX TO OTHER DEFINED TERMS
----------------------------
Term Section Reference
---- -----------------
Acquiring Parties ....................... 5.3(b)
California Merger Agreement ............. 2.1
California Department ................... 2.1
Closing ................................. 2.2
Delaware Certificate of Merger .......... 2.1
Delaware Department ..................... 2.1
COBRA ................................... 3.2(p)(iv)
Effective Time .......................... 2.1
Escrow Agreement ........................ 2.11
Escrow Fund ............................. 2.11
Escrow Shares ........................... 2.8
Exchange Ratio .......................... 2.6(a)
Financial Statements .................... 3.2(f)(i)
Fixed Rate Engagements .................. 3.2(l)
Indemnified Party ....................... 5.3(d)(i)
Indemnifying Party ...................... 5.3(d)(i)
Latest Balance Sheet .................... 3.2(f)(i)
Latest Balance Sheet Date ............... 3.2(h)
Litigation .............................. 3.2(o)
Lock-Up Period .......................... 5.1(d)(iii)
Merger................................... Recital B
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Xxxxxxx Adverse Effect .................. 3.3(c)
Xxxxxxx Financial Statements ............ 3.3(f)
Xxxxxxx Indemnifiable Losses ............ 5.3(b)
Xxxxxxx Preferred Stock ................. 3.3(g)(i)
Xxxxxxx Representations ................. 5.3(a)
Xxxxxxx SEC Reports ..................... 3.3(f)
Most Recent Fiscal Year End ............. 3.2(f)(i)
Non-Competition Agreements .............. 4.1(f)
Other Agreements ........................ 2.12(b)
Owned Real Property ..................... 3.2(j)(1)
Party, Parties .......................... Preamble
Pension Plan ............................ 3.2(q)
Pooling Letter .......................... 3.1(g)
Pre-Collected Revenue ................... 3.2(l)
Property Leases ......................... 3.2(j)(ii)
Purchase Price .......................... 2.1(a)
Purchased Shares ........................ 2.1(a)
Registration Agreement .................. 4.1(m)
Related Agreements ...................... 3.1(b)
Released Claims ......................... 5.2
Released Parties ........................ 5.2
Releasing Parties ....................... 5.2
RMI Disclosure Schedule ................. 3.1
RMI Representations ..................... 5.3(a)(i)
Share Purchase .......................... Recital A
Shareholder Individual Representations .. 5.3(b)
Shareholders' Representative ............ 2.12(a)
Survival Period ......................... 5.3(a)(i)
Surviving Corporation ................... 2.3(a)
Third Party Claim ....................... 5.3(d)
2. STOCK PURCHASE AND MERGER
2.1. Stock Purchase and Merger.
(a) Purchase and Sale of Shares. Prior to the consummation of the
Merger in Section 2.1(b), and subject to the terms and conditions of this
Agreement, Xxxxxxx agrees to purchase, and the Selling Shareholders agree to
sell, the number of Company Common opposite each such Selling Shareholder's
name on the signature page of this Agreement. The "PURCHASE PRICE" for the
Company Common purchased and sold pursuant to this Section 2.1(b) (the
"PURCHASED SHARES") shall be calculated as follows: each Selling Shareholder
shall receive an amount equal to the product of: (i) the number of shares of
Company Common held by him times (ii) the Exchange Ratio times (iii) $35.25
(the closing price of Xxxxxxx Common on July 31, 1997). Upon each Selling
Shareholder's delivery to Xxxxxxx of duly-endorsed certificates representing
all of such Selling Shareholder's shares of Company Common, Xxxxxxx shall pay
each such Selling
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Shareholder his Purchase Price by cashiers check or wire transfer within three
(3) business days after the Closing.
(b) The Merger.
In connection with the Merger, the respective boards of
directors and stockholders of Acquisition and the Company have, by resolutions
duly adopted, approved the following provisions of this Article 2 as the Plan
of Reorganization within the meaning of Section 368(a) of the Code and as a
"Merger Agreement" within the meaning of Section 1101 of the CGCL and as an
"Agreement of Merger" within the meaning of Section 252 of the DGCL.
Immediately after the consummation of the Share Purchase, and
subject to the provisions of this Agreement, an Agreement of Merger as required
by Section 1101 of the CGCL, together with an officer's certificate of each of
Acquisition and the Company (collectively the "CALIFORNIA MERGER AGREEMENT")
attached hereto as Exhibit A, shall be duly prepared, executed and acknowledged
by the Company, Acquisition and such other parties as may be appropriate, and
thereafter the California Merger Agreement shall be delivered to the Secretary
of State of the State of California (the "CALIFORNIA DEPARTMENT"), as provided
in Section 1103 of the CGCL, for filing as soon as practicable on or after the
date on which the Closing occurs. Simultaneously with filing in the State of
California and subject to the provisions of this Agreement, an Agreement of
Merger as required by Section 252 of the DGCL, together with an officer's
certificate of each of Acquisition, Xxxxxxx and the Company (collectively the
"DELAWARE CERTIFICATE OF MERGER") attached hereto as Exhibit B, shall be duly
prepared, executed and acknowledged by the Company, Acquisition and such other
parties as may be appropriate, and thereafter the Delaware Certificate of
Merger shall be delivered to the Department of State of the State of Delaware
(the "DELAWARE DEPARTMENT"), as provided in Section 252 of the DGCL, for filing
as soon as practicable on or after the date on which the Closing occurs. The
Merger shall become effective on August 1, 1997 at 5:00 p.m. Eastern Time (the
"EFFECTIVE TIME").
2.2. Closing. The closing of the Share Purchase and the Merger (the
"CLOSING") will take place commencing at 10:00 a.m. on August 1, 1997, or as
soon as practicable after the closing conditions set forth in Article 4 have
been met or waived as provided in Article 4, at the offices of Xxxxxx Brand
Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxxxx,
unless another time, date or place is agreed to by the Parties.
2.3. Effects of the Merger.
(a) At the Effective Time, the separate corporate existence of
Acquisition shall cease and Acquisition shall be merged with and into the
Company and the Company, as the surviving corporation in the Merger (the
"SURVIVING CORPORATION"), under the name "Resource Management International,
Inc." shall continue its corporate existence under the laws of the State of
California.
(b) At and after the Effective Time, the Merger will have the effects set
forth in Chapters 11 and 12 of the CGCL and in Subchapter IX of Title 8 of the
DGCL.
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2.4. Articles of Incorporation and By-Laws. The amended Articles of
Incorporation and Amended By-Laws of RMI, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation immediately after the Effective Time and shall thereafter
continue to be its Articles of Incorporation and By-Laws until amended as
provided therein and under the CGCL.
2.5. Directors and Officers. The directors of Acquisition holding office
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation immediately after the Effective Time. The statutory officers
(President, Secretary, Chief Financial Officer, Executive Vice President) of
Acquisition holding office immediately prior to the Effective Time shall be the
statutory officers of the Surviving Corporation immediately after the Effective
Time.
2.6. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition, the Company or the
holders of any of the following securities, will be converted in the manner set
forth below:
(a) Each share of Company Common which is issued and outstanding
immediately prior to the Effective Time (other than treasury shares or shares
held, after the Share Purchase, by Xxxxxxx) shall be canceled and extinguished
and converted into and become a right to receive a number of shares of Xxxxxxx
Common determined by dividing 2,350,000 by 2,098 (such quotient being referred
to herein as the "EXCHANGE RATIO"); provided that, if as the result of the
conversion of any Shareholder's Company Common upon consummation of the Merger,
a fractional interest in a share of Xxxxxxx Common would be deliverable under
this Section 2.6(a), in lieu of a fractional share being delivered therefor,
such fractional interest shall automatically be converted into the right to
receive an amount in cash (without interest) equal to the product of the last
sale price of Xxxxxxx Common as reported by the Nasdaq National Market on the
Determination Date, multiplied by the amount of such fractional interest. No
such holder will be entitled to dividends, voting rights or any other rights as
a shareholder in respect of any fractional share.
(b) Each share of Company Common which is issued, outstanding and held by
Xxxxxxx immediately prior to the Effective Time shall be canceled.
(c) Each share of Common Stock, par value $.01 per share, of Acquisition
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of Class
A Voting Common Stock, no par value, of the Surviving Corporation.
2.7. Closing of Company Transfer Books. Immediately prior to the Effective
Time the stock transfer books of the Company shall be closed and no transfer of
shares of Company Stock shall thereafter be made or recognized. After the
Effective Time valid certificates previously representing shares of Company
Common which are presented to the Surviving Corporation in accordance with this
Agreement shall be exchanged as provided in Sections 2.6(b) and 2.8.
2.8. Exchange of Certificates. Each holder (other than Xxxxxxx) of a
certificate or certificates representing shares of Company Common issued and
outstanding immediately prior to
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the Effective Time shall at or as soon as practicable following the Closing,
surrender to Xxxxxxx for exchange a certificate or certificates, duly endorsed
in blank or accompanied by duly executed stock powers, representing the number
of shares of Company Common held by such holder. In exchange therefor, Xxxxxxx
shall issue or pay, as applicable, to such holder whose shares of Company
Common will be converted pursuant to Section 2.6 (a) a certificate or
certificates representing eighty-two and 35/100 percent (82.35%) of the shares
of Xxxxxxx Common to be issued to such holder pursuant to Section 2.6(a), to be
delivered to or at the direction of such holder, (b) a certificate or
certificates representing seventeen and 65/100 percent (17.65%) of the shares
of Xxxxxxx Common to be issued to such holder pursuant to Section 2.6(a), to be
delivered to the Escrow Agent to hold in escrow under the Escrow Agreement in
accordance with Section 2.11 hereof (the "ESCROW SHARES"), and (c) in the case
of payment for any fractional interest in Xxxxxxx Common, a check payable to
the holder. Surrendered certificates shall immediately be canceled. Xxxxxxx
shall not be obligated to deliver the consideration to which any former holder
of Company Common is entitled as a result of the Merger until such holder
surrenders such holder's certificate or certificates representing shares of
Company Common for exchange as provided in this Section 2.8; provided that,
procedures allowing for payment against receipt of customary and appropriate
certifications and indemnities shall be provided with respect to lost or
destroyed certificates. If any certificate for shares of Xxxxxxx Common is to
be issued in the name of, or directed to an account in the name of, a Person
other than the Person in whose name the certificates for shares surrendered for
exchange are registered, it shall be a condition of the exchange that the
Person requesting such exchange shall pay to Xxxxxxx any transfer or other
Taxes required by reason of the issuance of such certificate in the name of a
Person other than the registered owner of the certificates surrendered, or
shall establish to the satisfaction of Xxxxxxx that such Tax has been paid or
is not applicable. Until so surrendered and exchanged, each such certificate
shall represent solely the right to receive the shares of Xxxxxxx Common to be
issued pursuant to Section 2.6(a), in exchange for the shares of Company Common
represented by such surrendered certificate and the right to receive the
fractional share payment to be paid pursuant to Section 2.6(a), without
interest, and Xxxxxxx shall not be required to issue to such holder the stock
to which such holder otherwise would be entitled; provided that, procedures
allowing for payment against receipt of customary and appropriate
certifications and indemnities shall be provided with respect to lost or
destroyed certificates.
2.9. Rights of the Company Shareholders. From and after the Effective Time,
the holders of shares of the Company Common issued and outstanding at the
Effective Time (other than Xxxxxxx) shall have no rights with respect to such
shares other than to surrender the certificate or certificates representing
such shares pursuant to Section 2.8.
2.10. Taking of Necessary Action; Further Action. Xxxxxxx and Acquisition
on the one hand, and the Company and the RMI Shareholders, on the other hand,
shall use reasonable efforts to take all such action (including action by RMI
to cause the satisfaction of the conditions to the Share Purchase and Merger)
as may be necessary or appropriate in order to effectuate the Share Purchase
and Merger as promptly as possible. If, at any time after the Effective Time,
any further action is necessary or desirable to vest the Surviving Corporation
with full possession of all the rights, privileges, immunities and franchises
of the Company and Acquisition, the officers of the Surviving Corporation are
fully authorized in the name of either the Company or Acquisition or otherwise
to take, and shall take, all such action.
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2.11. Share Escrow. The Escrow Shares shall be delivered by Xxxxxxx on
behalf of the Shareholders, pro rata in accordance with their respective Pro
Rata Percentages, to the Xxxxxx Trust and Savings Bank, Chicago, Illinois,
pursuant to an Escrow Agreement in the form set forth in Exhibit C attached
hereto (the "ESCROW AGREEMENT") (such shares and the proceeds and products
thereof, while subject to the Escrow Agreement, being referred to herein as the
"ESCROW FUND").
2.12. Shareholders' Representative
(a) In order to administer efficiently the defense and/or settlement of
any claims for which the Shareholders may be required to indemnify Xxxxxxx or
the Surviving Corporation pursuant to Section 5.3 hereof, the Shareholders
hereby designate Xxxxx X. Xxxxxxx as their representative (the "SHAREHOLDERS'
REPRESENTATIVE").
(b) The Shareholders hereby authorize the Shareholders' Representative
(i) upon the receipt of instructions of the Shareholders representing a
majority of Pro Rata Percentages, to take all action necessary in connection
with the defense and/or settlement of any claims for which the Shareholders may
be required to indemnify Xxxxxxx and/or the Surviving Corporation pursuant to
Section 5.3 hereof, (ii) to give and receive all notices required to be given
and take all action required or permitted to be taken under this Agreement and
the other agreements contemplated hereby to which all the Shareholders are
parties, including the Escrow Agreement ("OTHER AGREEMENTS"), and (iii) to take
any and all additional action as is contemplated to be taken by or on behalf of
the Shareholders by the terms of this Agreement and the Other Agreements.
(c) Upon receiving notice of the death or incapacity of the
Shareholders' Representative, the Shareholders (who shall be deemed to include
any successor in interest to any Shareholder, including a successor in interest
to the stock holdings of the Shareholders' Representative) shall by majority
vote (based on their Pro Rata Percentages) appoint a successor to fill the
vacancy. The Shareholders may by such majority vote remove the Shareholders'
Representative with or without cause and appoint a successor, provided that
notice thereof is given by the new Shareholders' Representative to each of the
other Parties hereto (including Xxxxxxx) and to the Escrow Agent. The
Shareholders' Representative may resign if, and only if, he is simultaneously
replaced with a substitute Shareholders' Representative, or upon the
termination of the Escrow Agreement pursuant to its terms.
(d) By their execution of this Agreement, the Shareholders agree that:
(i) Notwithstanding any other provision herein to the
contrary, Xxxxxxx shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative as to
the settlement of any claims for indemnification by Xxxxxxx or the
Surviving Corporation pursuant to Section 5.3 hereof or any other
actions required to be taken by the Shareholders' Representative
hereunder, and no Party hereunder shall have any cause of action
against Xxxxxxx or the Surviving Corporation for any action taken by
Xxxxxxx or the Surviving Corporation in reliance upon the instructions
or decisions of the Shareholders' Representative.
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(ii) all actions, decisions and instructions of the
Shareholders' Representative, including the defense or settlement of any
claims for which the Shareholders may be required to indemnify Xxxxxxx
and/or the Surviving Corporation pursuant to Section 5.3 hereof, shall
be conclusive and binding upon all of the Shareholders, and no
Shareholder shall have any right to object, dissent, protest or
otherwise contest the same or have any cause of action against the
Shareholders' Representative for any action taken, decision made or
instruction given by the Shareholders' Representative under this
Agreement, except for willful misconduct (which shall include fraud),
gross negligence or breach by the Shareholders' Representative of his
obligations as such Representative;
(iii) the provisions of this Subsection 2.12 are independent
and severable, are irrevocable and shall be enforceable notwithstanding
any rights or remedies that any Shareholder may have in connection with
the transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the
provisions of this Subsection 2.12 are inadequate; therefore, Xxxxxxx,
the Surviving Corporation and the Shareholders' Representative shall be
entitled to temporary and permanent injunctive relief without the
necessity of proving damages if either Xxxxxxx, the Surviving
Corporation or the Shareholders' Representative brings an action to
enforce the provisions of this Subsection 2.12; and
(v) the provisions of this Subsection 2.12 shall be binding
upon the executors, heirs, legal representatives, successors and assigns
of each Shareholder, and any references in this Agreement to a
Shareholder or the Shareholders shall mean and include the successors to
the Shareholders' rights hereunder, whether pursuant to assignment,
testamentary disposition, the laws of descent, and distribution or
otherwise.
(e) All fees and expenses incurred by the Shareholders' Representative in
connection with this Agreement shall be paid by the Shareholders in proportion
to their respective Pro Rata Percentages.
(f) In acting as the representative of the Shareholders, the
Shareholders' Representative may rely upon, and shall not be liable to any
Shareholder (or such Shareholder's successor in interest) for acting or
refraining from acting upon, an opinion of counsel, certificate of auditors or
other certificate, statement, instrument, opinion, report, notice, request,
consent, order, arbitrator's award, appraisal, bond or other paper or document
reasonably believed by him to be genuine and to have been signed or presented
by the proper party or parties. The Shareholders' Representative shall incur no
liability to any Shareholder (or such Shareholder's successor in interest) with
respect to any action taken or suffered by him in his capacity as Shareholders'
Representative in reliance upon any note, direction, instruction, consent,
statement or other documents believed by him to be genuinely and duly
authorized, nor for other action or inaction except his own willful misconduct
or gross negligence and the Shareholders' Representative shall
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be indemnified and held harmless by the Shareholders from all losses, costs and
expenses, including reasonable attorney's fees, which the Shareholders'
Representative may incur as a result of involvement in any legal proceedings
arising from the performance of his or her duties hereunder. The Shareholders'
Representative may perform his duties as Shareholders' Representative either
directly or by or through his agents or attorneys and the Shareholders'
Representative shall not be responsible to the other Shareholders for any
misconduct or negligence on the part of any agent or attorney appointed with
reasonable care by him hereunder.
3. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the RMI Shareholders. As a material
inducement to Xxxxxxx and Acquisition to enter into this Agreement and
consummate the transactions contemplated hereby, each RMI Shareholder hereby
severally represents and warrants to Xxxxxxx and Acquisition that all of the
statements contained in this Section 3.1 are correct and complete with respect
to such RMI Shareholder as of the date of this Agreement, and hereby covenants
that all of said statements will be correct and complete with respect to such
RMI Shareholder as of the Effective Time (as though made as of the Effective
Time and as though the Effective Time were substituted for the date of this
Agreement throughout such statements), except as set forth in the schedule
attached to this Agreement setting forth exceptions to the representations and
warranties set forth herein (the "RMI DISCLOSURE SCHEDULE"):
(a) Such RMI Shareholder has good and marketable title to the shares
of Company Common which are to be exchanged by such RMI Shareholder pursuant to
this Agreement, free and clear of any and all Security Interests, option or
rights of any nature. Section 3.2(d) of the RMI Disclosure Schedule sets forth
a true and correct description of all shares of Company Common owned by such
RMI Shareholder.
(b) Such RMI Shareholder has the full right, power and authority to
execute and deliver this Agreement and all other agreements entered into in
connection herewith by such RMI Shareholder, if any ("RELATED AGREEMENTS"), to
perform such RMI Shareholder's obligations hereunder and thereunder, and to
vote such RMI Shareholder's shares of Company Common in favor of the Merger.
This Agreement and the Related Agreements to which each RMI Shareholder is a
party constitute the valid and legally binding obligations of such RMI
Shareholder enforceable against such RMI Shareholder in accordance with their
respective terms.
(c) Such RMI Shareholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of
any court or other governmental body which would prevent the execution or
delivery of this Agreement by such RMI Shareholder, such RMI Shareholder's
approval of the Merger, the conversion of such RMI Shareholder's shares of
Company Common pursuant to the Merger or sale of his Company Common pursuant to
the Share Purchase, as applicable.
(d) All existing agreements between such RMI Shareholder and the
Company have been (or on or prior to the Effective Time will be) terminated and
such RMI Shareholder is not a party to, subject to or bound by any agreement,
commitment or understanding whatsoever
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between such RMI Shareholder and the Company, other than terms, conditions,
benefits and perquisites arising from such RMI Shareholder's status as an
at-will employee of the Company, which terms, conditions, benefits and
perquisites are generally available to all such employees;
(e) Each Shareholder understands that: (i) the Xxxxxxx Common to be
issued pursuant to the Merger has not been, and as of the Effective Time will
not be, registered under the Securities Act or under any state securities laws;
(ii) the Xxxxxxx Common is being offered and issued in reliance upon federal
and state exemptions for transactions not involving any public offering; (iii)
a "stop transfer" order consistent with the terms of this Agreement and the
Registration Agreement (as defined below) will be placed against the
certificates representing shares of Xxxxxxx Common issued pursuant to the
Merger; and (iv) such certificates will, in addition to any legends required
pursuant to the Registration Agreement, bear on their face the legend listed
below (until such time as (A) the Registration Statement required to be filed
pursuant to the Registration Agreement has been declared effective by the
Commission (to the extent the Registration Statement covers such shares), (B)
such Xxxxxxx Common is otherwise registered under the Securities Act, or (C) if
later, the Lock-Up Period (as defined in Section 5.1(d)) expires:
"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any applicable state securities laws. No
transfer or sale of these shares or any interest
therein may be made without such registration and
qualification unless the issuer has received an
opinion of counsel satisfactory to it that a proposed
transfer or sale does not require registration or
qualification under applicable law.
The shares evidenced by this certificate were issued
pursuant to an Agreement and Plan of Merger, dated as
of July 31, 1997, among the issuer, Resource
Management International, Inc., the original holder of
the such shares and certain other parties (the "Merger
Agreement"). A copy of the Merger Agreement is on file
at the offices of the issuer. The Merger Agreement
provides for, among other things, certain restrictions
upon transfer of the shares evidenced by this
certificate. By accepting such shares, the holder
agrees to be bound by all such transfer restrictions
in the Merger Agreement."
(f) Each Shareholder further represents that: (i) such Shareholder is
acquiring the Xxxxxxx Common to be acquired by such Shareholder pursuant to the
Merger solely for such Shareholder's own account for investment purposes and
not with a view to the distribution thereof within the meaning of the
Securities Act; (ii) such Shareholder is a sophisticated investor with
knowledge and experience in business and financial matters and, except as
indicated on the RMI Disclosure Schedule, is an "accredited investor" within
the meaning of Rule 501 under the Securities Act; (iii) such Shareholder has
had access to all Xxxxxxx SEC Reports (as hereinafter defined) filed by Xxxxxxx
during the current year and the year preceding the current year, and has had
the opportunity to obtain additional information and ask questions and receive
answers as
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desired in order to evaluate the merits and risks inherent in holding the
Xxxxxxx Common; (iv) such Shareholder has not been offered the Xxxxxxx Common
by any form of general advertising or general solicitation; and (v) such
Shareholder is able to bear the economic risk and lack of liquidity inherent in
holding the Xxxxxxx Common.
(g) Each Shareholder further represents and warrants to Xxxxxxx and
the Surviving Company that all representations and warranties contained in such
Shareholder's "POOLING LETTER" (which such Shareholder has provided to RMI's
accountants, Coopers & Xxxxxxx LLP, in support of its Pooling Letter provided
to Xxxxxxx'x accountants, KPMG Peat Marwick LLP) are true, complete and
correct, and covenants to Xxxxxxx and the Surviving Company that such
Shareholder shall fully discharge and comply with the covenants undertaken by
such Shareholder in such Pooling Letter.
3.2. Representations and Warranties Concerning the Company. As a material
inducement to Xxxxxxx and Acquisition to enter into this Agreement and
consummate the transactions contemplated hereby, the Company and the
Shareholders hereby jointly and severally represent and warrant to Xxxxxxx and
Acquisition that all of the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement, and hereby covenant that
said statements will be correct and complete as of the Effective Time (as
though made as of the Effective Time and as though the Effective Time were
substituted for the date of this Agreement throughout this Section 3.2), except
as set forth in the RMI Disclosure Schedule. The RMI Disclosure Schedule will
be arranged in sections corresponding to the numbered and lettered sections
contained in this Section 3.2.
(a) Organization, Qualification and Corporate Power. The Company and
each of its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its respective state of incorporation. The
Company and each Subsidiary has all requisite corporate power and authority to
carry on the respective businesses in which they are engaged and to own and use
the respective properties owned and used by each of them. True and correct
copies of the Articles of Incorporation and By-Laws, in each case as amended to
date, of the Company and each Subsidiary, have been delivered to Xxxxxxx. The
Company and each Subsidiary is qualified to conduct business and is in good
standing under the laws of each jurisdiction wherein the nature of its business
or its ownership of property requires it to be so qualified, except where the
failure to be so qualified, would not individually or in the aggregate, have a
Material Adverse Effect. Section 3.2(a) of the RMI Disclosure Schedule lists
each subsidiary of the Company, the percentage of the Subsidiary owned by the
Company and each other Subsidiary and all jurisdictions in which the Company
and each Subsidiary is qualified to do business.
(b) Authorization of Transaction. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the prior
sentence, the Board of Directors and the Shareholders (who hold more than 90%
of the outstanding voting stock of the Company) have duly authorized the
execution, delivery and performance of this Agreement and the consummation of
the Merger by the Company (and all applicable notice requirements of Section
603(a) of the CGCL with respect
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to such approval have been satisfied). This Agreement constitutes the valid and
legally binding obligation of the Company enforceable against the Company in
accordance with its terms.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate or conflict in any way with any applicable statute, regulation,
law, rule, common law doctrine, judgment, order, decree, stipulation,
injunction, charge or other restriction of any governmental body, governmental
agency or court to which the Company or any Subsidiary is subject or any
provision of the charter or By-Laws of the Company or any Subsidiary, or (ii)
conflict with, result in a breach of, constitute a default under (with or
without notice or lapse of time, or both), result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel,
require any notice under, or result in the creation of any Security Interest
upon any of the assets of the Company or any Subsidiary pursuant to the terms
of, any contract, agreement, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement for borrowed money, instrument of indebtedness,
Security Interest or other arrangement to which the Company or any Subsidiary
is a party or by which any of them is bound or to which any of their respective
assets are subject, except for conflicts, breaches, defaults, accelerations,
terminations, modifications, cancellations which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole. Neither the Company nor any
Subsidiary is required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government, governmental agency
or court, or any other Person in order for the Parties to consummate the Merger
and the transactions contemplated by this Agreement and in order that the
Merger and such transactions not constitute a breach or violation of, or result
in a right of termination or acceleration or any encumbrance on any of the
Company's or the Subsidiaries' assets pursuant to the provisions of, any
agreement, arrangement or understanding or any license, franchise or permit,
except for the filings of the California Merger Agreement with the California
Department and the Delaware Certificate of Merger with the Delaware Department.
(d) Capitalization. The authorized capital stock of the Company
consists of (A) 100,000 shares of Class A Company Common, of which 1,975 shares
are issued and outstanding on the date hereof, and no shares are reserved for
issuance under any options currently outstanding, and (B) 10,000 shares of
Class B Company Common, of which 123 shares are issued and outstanding on the
date hereof, and no shares are reserved for issuance under any options
currently outstanding. Set forth on Section 3.2(d) of the RMI Disclosure
Schedule is a true and correct description of (i) the full legal names, current
address and social security or tax identification number of each owner of
issued and outstanding shares of Company Common, (ii) the number of shares of
each class of Company Common owned of record by each such shareholder and the
certificate numbers of the stock certificates representing such shares, and
(iii) all of the current directors and officers of the Company. The Company has
never authorized, offered, sold or issued capital stock other than the Company
Common (all of which then outstanding was converted into Class A Company Common
upon the recapitalization of the Company), Class A Company Common and Class B
Company Common. All offerings, sales and issuances by the Company of any
Company Common have been conducted in compliance with, in accordance with or in
reliance upon exemptions from all applicable federal and state securities laws
and all applicable state corporation laws. All of the issued and outstanding
shares of Company Common have been duly
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authorized, validly issued, fully paid and nonassessable, and are not, and when
issued were not, subject to any preemptive rights. There are no currently
outstanding or authorized options, warrants, rights, contracts, rights of first
refusal or first offer, calls, puts, rights to subscribe, conversion rights, or
other agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance, disposition, or
acquisition of any of its capital stock or securities convertible or
exchangeable for its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, or similar rights with respect to the
Company and, except as provided in the Existing Company Documents, there are no
contractual or statutory preemptive rights or similar restrictions with respect
to the issuance or transfer of any shares of Company Common. Except as provided
in the Existing Company Documents, there are no voting trusts, proxies, or any
other agreements, restrictions or understandings with respect to the voting of
any of the capital stock of the Company, except for those agreements expressly
contemplated hereby.
(e) Subsidiaries. Except as indicated on Section 3.2(a) of the RMI
Disclosure Schedule, the Company does not own or control any direct or indirect
equity interest or participation in any corporation, partnership, limited
liability company, trust, or other business association or Subsidiary.
(f) Financial Statements; Books and Records.
(i) The Company has provided Xxxxxxx with the following
financial statements, correct and complete copies of which are set
forth on Section 3.2(f) of the RMI Disclosure Schedule
(collectively the "FINANCIAL STATEMENTS"): (A) audited consolidated
balance sheets and related statements of income, changes in
stockholders' equity and cash flows for the Company) as of and for
each of the fiscal years ended December 31, 1994, 1995 and 1996
(the latest of these being referred to as the "MOST RECENT FISCAL
YEAR END"), and (B) the unaudited consolidated balance sheet as of
May 31, 1997 (the "LATEST BALANCE SHEET") and related unaudited
statement of income for the five months then ended. The Financial
Statements are correct and complete, have been prepared in
accordance with GAAP, consistently applied throughout the periods
indicated, and fairly present in all material respects the
financial position and results of operations of the Company as of
the times and for the periods referred to therein.
(ii) The Company's books and records are and have been
properly prepared and maintained in form and substance adequate both
for preparing financial statements in accordance with GAAP, and for
subsequently auditing such statements pursuant to generally accepted
auditing standards in the U.S., and fairly and accurately reflect all
of the assets and Known Liabilities of the Company and all contracts
and transactions to which the Company is or was a party or by which
the Company or any of its business or assets is or was affected. The
corporate minute books of the Company, copies of which have been made
available to Xxxxxxx, correctly reflect all resolutions adopted and
all other material corporate actions taken at all meetings or through
consents of the directors (including committees thereof)
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and the shareholders of the Company. The stock transfer books and
stock ledger of the Company are complete and correctly reflect all
issuances and transfers of the capital stock of the Company.
(g) Recent Events. Since the Most Recent Fiscal Year End, neither
the Company nor any Subsidiary has experienced or suffered any Material Adverse
Effect. Without limiting the generality of the foregoing, except as set forth
on the Latest Balance Sheet, since the Most Recent Fiscal Year End, neither the
Company nor any Subsidiary has:
(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, other than in the Ordinary Course of
Business;
(ii) accelerated, terminated, modified, canceled or committed
any breach of any contract, lease, sublease, license, or sublicense
(or series of related contracts, leases, subleases, licenses, and
sublicenses) either involving more than $50,000 individually or
$250,000 in the aggregate, or otherwise outside of the Ordinary
Course of Business;
(iii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving
more than $50,000 individually or $250,000 in the aggregate or
outside of the Ordinary Course of Business;
(iv) experienced any damage, destruction, or loss to its
property in excess of $20,000 individually or $100,000 in the
aggregate (whether or not covered by insurance);
(v) created or suffered to exist any Security Interest upon
any of its assets, tangible or intangible, outside the Ordinary
Course of Business or securing any Liabilities in the aggregate in
excess of $20,000;
(vi) issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion or exercise) any of
its capital stock, or any securities convertible or exchangeable
into any of its capital stock;
(vii) declared, set aside, or paid any dividend or
distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(viii) entered into any transaction, arrangement or contract
with, or distributed or transferred any property or other assets
to, any officer, director, shareholder or other insider or Affiliate
of the Company (other than salaries and employee benefits in the
Ordinary Course of Business);
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(ix) made or committed to make any capital expenditures or
entered into any other material transaction outside the Ordinary
Course of Business or involving an expenditure in excess of $50,000
individually or $250,000 in the aggregate;
(x) amended or modified in any respect any Plan (beyond any
amendments and modifications reflected in true and complete copies
of such Plans delivered to Xxxxxxx);
(xi) entered into any collective bargaining agreement or,
since April 1, 1997, granted any increase in excess of $10,000 in
the salary of any officer or management employee of the Company (or
increase in excess of $5,000 in the case of any non-management
employee) or paid or committed to pay any bonus to any officer or
employee, other than bonuses fully reflected in the Company's
financial statements for 1996;
(xii) changed the manner in which the business has been
conducted, including billing of clients or collection of accounts
receivable, purchases of goods and services or payment of accounts
payable;
(xiii) changed the accounting principles, methods or practices
or any change in the depreciation or amortization policies or
rates, other than those changes in principles, methods, practices,
policies or rates implemented at Xxxxxxx'x request, which are
listed on Section 3.2(i) of the RMI Disclosure Schedule;
(xiv) changed the relationships with any client, contractor or
supplier which might reasonably be expected to result in a Material
Adverse Effect; or
(xv) committed (orally or in writing) to any of the foregoing.
(h) Undisclosed Liabilities. The Company has no Liability (and
there is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Company giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Latest Balance Sheet, (ii) Liabilities, in an amount less than $50,000 payable
to any single Person or any group of Affiliated Persons, which have arisen
after the date of the Latest Balance Sheet (the "LATEST BALANCE SHEET DATE") in
the Ordinary Course of Business (none of which relates to any breach of
contract, breach of warranty, tort, infringement, or violation of law or arose
out of any charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand) and (iii) Liabilities otherwise expressly disclosed in this
Agreement or on the RMI Disclosure Schedule. Section 3.2(h) of the RMI
Disclosure Schedule sets forth, on an itemized basis, each item of the
Company's Indebtedness specifically identified in (i) to (iv) of the definition
of Indebtedness, as of the Latest Balance Sheet Date, specifying principal
amount, current interest rate and payee.
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(i) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file on or prior to the date hereof (taking account of all
extensions duly obtained). All such Tax Returns were correct and
complete in all material respects and accurately reflected all
Liability for Taxes for the periods covered thereby. The Company's
Liability for unpaid Taxes, whether to any governmental authority
or to another Person such as under a tax sharing agreement, for all
periods ending on or before the Effective Time does not exceed the
amount of the Liability accruals for Taxes (excluding reserves for
deferred Tax assets or deferred Tax Liabilities) on the Latest
Balance Sheet. Neither the Company nor any of the Shareholders have
received notice of any claim made by an authority in a jurisdiction
where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax
when due.
(ii) The Company has withheld and paid when due all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or
other third party.
(iii) Neither the Company nor any of the Shareholders has any
Actual Knowledge of any Basis on which any taxing authority could
assess, and have the likelihood of prevailing with respect to, any
additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
the Company either (A) claimed or raised by any taxing authority in
writing or (B) as to which any of the Shareholders or the Company
has Actual Knowledge. The Company has previously provided to
Xxxxxxx correct copies of all federal, state, local, and foreign
Tax Returns filed with respect to the Company for all taxable
periods for which the applicable statue of limitations has not
closed. None of such Tax Returns have been audited, and none
currently are the subject of audit, and there are no examination
reports or statements of deficiencies assessed against or agreed to
by the Company for such taxable periods.
(iv) The Company has disclosed on its federal income tax
returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning
of Section 6662 of the Code. Neither the Company nor any Subsidiary
has filed a consent under Section 341(f) of the Code concerning
collapsible corporations. Neither the Company nor any Subsidiary has
made any material payments, is not obligated to make any material
payments, and is not a party to any agreement that would obligate it
to make any material payments that will not be deductible under
Section 280G of the Code. Neither the Company nor any Subsidiary has
been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period
specified in Sec. 897(c)(A)(ii) of the Code. The Company is not a
party to any tax allocation or sharing agreement. The Company never
has been a member of an Affiliated Group
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which filed federal income tax returns, other than a group of which
the Company was the common parent. The Company has no Liability for
Taxes owed by any Person (other than the Company), including without
limitation, (A) as a transferee, assignee or other successor or (B)
pursuant to a Tax sharing agreement or other contract.
(v) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
(j) Title and Condition of Properties.
(i) Owned Real Property. Section 3.2(j) of the RMI Disclosure
Schedule sets forth a correct and complete list of all real estate
in which the Company or any of its Subsidiaries has an ownership
interest (the "OWNED REAL PROPERTY"). The Company or a Subsidiary,
as applicable, is the owner of all of the Owned Real Property, in
each case, free and clear of all covenants, conditions,
restrictions, rights-of-way, easements, leases, tenancies,
licenses, claims, options, options to purchase, mortgages,
hypothecations, assessments, pledges, restrictions, liens,
encumbrances, security interests, charges, or any other matter
affecting title. The Owned Real Property and the Property Leases,
as defined below, constitute all real properties used or occupied
by the Company or any of its Subsidiaries in connection with their
businesses or reflected on their financial statements. With respect
to the Owned Real Property:
(a) the Company or its Subsidiaries have all easements,
licenses and rights necessary to conduct its business in the
manner heretofore conducted or carried on by the Company or
any of its Subsidiaries;
(b) no portion thereof is subject to any pending
condemnation proceeding or proceeding by any public or
quasi-public authority materially adverse to such Owned Real
Property and there is no threatened condemnation or
proceeding with respect thereto;
(c) the buildings, plants, improvements, structures and
fixtures owned, leased or used by the Company or any of its
Subsidiaries on the Owned Real Property, including, without
limitation, heating, ventilation and air conditioning systems,
roof, foundation and floors, are in a state of maintenance,
repair and operating condition reasonably consistent with the
historical practices of the Company and its Subsidiaries, and
the Owned Real Property of the Company and its ubsidiaries and
the use thereof by the Company and its Subsidiaries is not in
violation of any zoning, subdivision, health, safety, landmark
preservations, wetlands preservations, building, land use or
other ordinances, laws, codes or regulations or any covenants,
restrictions or other documents of record, the violation of
which might have
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a Material Adverse Effect upon the Company or any of its
Subsidiaries taken as a whole, nor has any notice of any
claimed violation of any such ordinances, laws, codes or
regulations or any covenants, restrictions or other documents
of record been served on the Company or any of its
Subsidiaries;
(d) neither the Company nor any of its Subsidiaries has
received actual notice of any increase in the assessed
valuation of the Owned Real Property or notice of any
contemplated special assessment, and to the Company's Actual
Notice, there is no threatened special assessment;
(e) there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to
any party or parties the right of use or occupancy of any
portion of the Owned Real Property; other than the Company or
any of its Subsidiaries which is the owner of such Owned Real
Property, there are no parties in possession of any portion
of such Owned Real Property;
(f) neither the Company nor any Subsidiary is or are a
party to any written or oral agreements or undertakings with
owners or users of real property adjacent to any facility
located on any parcel of the Owned Real Property relating to
the use, operation or maintenance of such facility or any
adjacent real property;
(g) neither the Company nor any Subsidiary is a lessor
of real property;
(h) there are no material defects thereto which are not
consistent with the historical condition of such Owned Real
Property, or which impair the usage thereof in the manner
heretofore used by the Company or any Subsidiary;
(i) all assessments and taxes currently due and payable
on the Owned Real Property have been paid;
(j) there has been no subsidence earth movement on any
part of the Owned Real Property;
(k) the buildings, plants, and structures on the Owned
Real Property are free from material flooding and leaks;
(l) all warranties in existence in respect of
improvements on the Owned Real Property have been disclosed;
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(m) the Owned Real Property is, and to the Company's
Knowledge, at all times has been, in compliance with all
Environmental Laws;
(n) no notice, demand, claim or other communication has
been given to or served on the Company and the Company has no
Actual Knowledge of any such notice given to previous owners
or tenants of the Owned Real Property, from any entity,
governmental body or individual claiming any violation of any
of the Environmental Laws or demanding payment, contribution,
indemnification, remedial action, removal action or any other
action or inaction with respect to any actual or alleged
environmental damage or injury to persons, property or
natural resources, and no basis for any of the foregoing
exists;
(o) no above-ground or underground storage tanks for
petroleum or any other substance are located on the Owned
Real Property;
(p) to the Actual Knowledge of the Company, none of the
Owned Real Property has ever been used (whether by the
Company or by any other person) as a treatment, storage or
disposal (whether permanent or temporary) site for any
Hazardous Materials;
(q) to the Actual Knowledge of the Company, the soil,
surface water and ground water of, under or on the Owned Real
Property are free from any Hazardous Material;
(r) to the Actual Knowledge of the Company, the Owned
Real Property has never been used for or in connection with
the manufacture, refinement, treatment, storage, generation,
transport, disposal or hauling of any Hazardous Material;
(s) to the Actual Knowledge of the Company, no Hazardous
Material has been discharged, dispersed, released disposed
of, or allowed to escape on, under or in the Owned Real
Property;
(t) to the Actual Knowledge of the Company, no asbestos
or asbestos-containing materials have been installed, used,
incorporated into or disposed of on the Owned Real Property;
(u) to the Actual Knowledge of the Company, no PCBs are
or ever have been located on, in, or used in connection with
the Owned Real Property; and
(v) to the Actual Knowledge of the Company, no
investigation, administrative order, administrative order by
consent, consent order,
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agreement, litigation or settlement is proposed or in
existence or, threatened or anticipated, with respect to or
arising from environmental, health, safety aspects of the
Owned Real Property or in any way related to Hazardous
Material.
(ii) Leased Real Property. The leases described in Section
3.2(j) of the RMI Disclosure Schedule (the "PROPERTY LEASES") cover
all of the real estate leased, used or occupied by the Company or
any of its Subsidiaries. Each of the Property Leases is in full
force and effect and the Company holds a valid and existing
leasehold interest under each of such Property Leases. The Company
has delivered to Xxxxxxx complete and accurate copies of each of
the Property Leases and none of such Property Leases has been
modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Xxxxxxx.
Neither the Company nor any Subsidiary is in default, and no
circumstances exist which would result in such default (including
upon the giving of notice or the passage of time, or both), under
any of such Property Leases, and no other party thereto has the
right to terminate, accelerate performance under or otherwise
modify any of such leases. To the Knowledge of the Company and the
Shareholders, no lessor under any such lease is in default under
any of such leases in its duties to the lessee. Neither the Company
nor any Subsidiary has assigned, transferred, conveyed, subjected
to a Security Interest, or otherwise encumbered any interest in any
of the Property Leases.
(iii) Title to Assets. The Company and the Subsidiaries
collectively own good and marketable title, free and clear of all
Security Interests, to all of the personal property and assets
reflected on the Latest Balance Sheet or acquired after the Latest
Balance Sheet Date, except for (1) assets with an aggregate
original purchase price of less than $50,000 in the aggregate which
have been disposed of to non-affiliated third parties since the
Latest Balance Sheet Date in the Ordinary Course of Business, (2)
Security Interests securing liabilities reflected on the Latest
Balance Sheet and (3) Security Interests for current Taxes not yet
due and payable.
(iv) Condition and Sufficiency of Assets. The Company's and
the Subsidiaries' computer hardware, equipment and other tangible
personal property and assets are in good condition and repair, except
for ordinary wear and tear not caused by neglect, and are useable in
the Ordinary Course of Business. The personal property and assets
shown on the Latest Balance Sheet or acquired after the Latest Balance
Sheet Date, the lease rights under the Property Leases and leases of
personal property and the Intellectual Property owned or used by the
Company or any Subsidiary under valid licenses, collectively include
all assets necessary to the conduct of the Company's business as
presently conducted or currently proposed to be conducted. None of the
Shareholders, other employees or independent contractors of the
Company or any Subsidiary or their respective Affiliates owns any
rights in any assets, real or personal, which are used by the Company
in its business.
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(k) Intellectual Property.
(i) Section 3.2(k) of the RMI Disclosure Schedule contains a
complete list and an accurate functional description by category
and indication of status (completed or in process, registered or
unregistered) of all items of Intellectual Property which are
owned, licensed by, licensed to, used or held for use in or
necessary for the conduct of the business of the Company and the
Subsidiaries, as such business is currently conducted and presently
contemplated to be conducted.
(ii) Other than Intellectual Property covered by Licenses-In,
the rights of the Company and the Subsidiaries in and to each item
of the Intellectual Property are owned outright by the Company and
the Subsidiaries, free and clear of any Security Interests. Except
to the extent provided in the Licenses-In, all of the Company's and
the Subsidiaries' rights in and to such Intellectual Property are
freely assignable in its or their own name, including the right to
create derivatives, and neither the Company nor any Subsidiary is
under any obligation to pay any royalty or other compensation to
any third party or to obtain any approval or consent for use of any
of the Intellectual Property. None of the Intellectual Property is
subject to any outstanding judgment, order, decree, stipulation,
injunction or charge; no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is pending or,
to the Knowledge of the Company or any of the Shareholders,
threatened, which challenges the legality, validity,
enforceability, use or ownership of any of the Intellectual
Property; and, except pursuant to the Licenses-Out, the Company has
never agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict
with respect to Intellectual Property.
(iii) No breach or default (or event which with notice or
lapse of time or both would result in a breach or default) by the
Company or any Subsidiary exists or has occurred under any
License-In or other agreement pursuant to which the Company or any
Subsidiary uses any Intellectual Property, and the consummation of
the transactions contemplated by this Agreement will not violate or
conflict with or constitute a breach or default (or an event which,
with notice or lapse of time or both, would constitute a breach or
default) or result in a forfeiture under, or constitute a material
Basis for termination of, any such License-In or other agreement,
except where such breaches, defaults, violations, conflicts or
other events which would not, individually or in the aggregate,
result in a Material Adverse Effect.
(iv) The Company and the Subsidiaries own or have the right to
use all the Intellectual Property necessary to provide, sell and
license the services currently provided, sold and licensed by the
Company and the Subsidiaries, and to conduct the Company's and
Subsidiaries' business as presently conducted, and to satisfy and
perform the existing contracts, commitments, arrangements and
understandings with clients of the Company and the Subsidiaries, and
the consummation of the
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transactions contemplated hereby will not alter or impair any such
rights, including any right of the Company or any Subsidiary to use
or sublicense any Intellectual Property owned by others.
(v) No Intellectual Property owned by the Company or any
Subsidiary, and no product or service practiced, offered, licensed,
sold or under development by the Company or any Subsidiary,
infringes any trademark, trade name, copyright, trade secret,
patent, right of publicity, right of privacy or other proprietary
right of any Person or would give rise to an obligation to render
an accounting to any Person as a result of co-authorship,
co-invention or an express or implied contract for any use or
transfer. Neither the Company nor any of the Shareholders has any
Knowledge of any Basis for any charge or claim, threatened claim or
any suit or action asserting any such infringement or conflict or
asserting that the Company or any Subsidiary does not have the
legal right to own, enforce, sell, license, sublicense, lease or
otherwise use any such Intellectual Property, process, product or
service.
(vi) Neither the Company nor any Subsidiary has sent or
otherwise communicated to any other Person any notice, charge,
claim or assertion of, and neither the Company nor any of the
Shareholders has any Knowledge of, any present, impending or
threatened infringement by any other Person of any Intellectual
Property.
(vii) The Company and the Subsidiaries have at all times
diligently protected their rights in the Intellectual Property and
any related apparatus or processes and have maintained the
confidentiality of its trade secrets, know-how and other
confidential Intellectual Property, and there have been no acts or
omissions by the Company or any Subsidiary, the result of which
would be to compromise the rights of the Company and the
Subsidiaries to apply for or enforce appropriate legal protection
of such Intellectual Property.
(viii) Each of the Company's and the Subsidiaries' current or
former employees and those current or former independent contractors
retained by the Company or any Subsidiary who, either alone or in
concert with others, created or creates, developed or develops,
invented or invents, discovered or discovers, derived or derives,
programmed or programs or designed or designs any of the Intellectual
Property, has entered into a written agreement with the Company
irrevocably and exclusively assigning all rights in such Intellectual
Property to the Company. To the Knowledge of the Company and the
Shareholders, no former employees or independent contractors of the
Company have any claims or rights to any of the Intellectual Property
necessary for the lawful conduct of the Company's business as now
conducted. To the Knowledge of the Company and the Shareholders, no
employee of the Company or any Subsidiary is a party to or otherwise
bound by any agreement with or obligated to any other Person
(including, any former employer) which in any respect conflicts with
any obligation, commitment or job responsibility
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of such employee to the Company or any Subsidiary under any
agreement to which currently he or she is a party or otherwise.
(ix) Section 3.2(k) of the RMI Disclosure Schedule identifies
each Person to whom the Company or any Subsidiary has sold,
licensed, leased or otherwise transferred or granted any interest
or rights to any Intellectual Property, and the date of each such
sale, license, lease or other transfer or grant.
(l) Contracts. Section 3.2(l) of the RMI Disclosure Schedule lists
each of the twenty (20) largest current clients of the Company and the
Subsidiaries, taken as a whole (based on gross xxxxxxxx to such clients from
January 1, 1996 through May 31, 1997), and each of the following contracts,
agreements, and other written arrangements to which the Company or any
Subsidiary is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third
parties with annual payments exceeding $50,000 and with a term
exceeding one year;
(ii) any written arrangement concerning a partnership or joint
venture;
(iii) any written arrangement (or group of related written
arrangements) under which the Company has (A) created, incurred,
assumed, or guaranteed (or may create, incur, assume, or guarantee)
Indebtedness in excess of $50,000 or (B) imposed (or may impose) a
Security Interest on any of its assets, tangible or intangible;
(iv) all client service contracts and engagements (whether
with the 20 largest clients listed on Section 3.2(l) of the RMI
Disclosure Schedule or otherwise) in excess of $100,000 and Fixed
Rate Engagements, as defined herein, in excess of $50,000 under
which the Company's work is not yet complete or was completed since
January 1, 1996, or under which the Company otherwise has on-going
client service obligations;
(v) any written arrangement concerning confidentiality or any
written arrangement concerning non-competition, provided that
arrangements which are of a similar nature and recur in the
ordinary course, such as confidentiality agreements entered into
between the Company and clients or potential clients, may be
described generically by category and need not be specifically
identified;
(vi) any contract with any labor union or written contract for
the employment of any officer, individual employee or other Person
on a full-time, part-time or consulting basis, and any contract for
the engagement of any consultants or independent contractors,
provided that employment agreements with non-officer employees and
engagement agreements with consultants, subcontractors and other
independent contractors, provided in either case that they are
entered into in the
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ordinary course of RMI's business, need not be individually listed
on the RMI Disclosure Schedule;
(vii) any guaranty of any obligation for borrowed money or
otherwise, other than endorsements made for collection in the
Ordinary Course of Business, or any agreement or commitment with
respect to the lending or investing of funds to or in other
Persons;
(viii) any contract or group of related contracts with the
same party (or group of related parties) for or relating to the
purchase or sale of products or provision of services, either (A)
which is not terminable by the Company on sixty (60) days or less
notice, (B) under which the undelivered balance of products and
services has a selling price in excess of $100,000, or (C) which
relates to a Fixed Rate Engagement, as to which the cost to
complete the services contracted for exceeds the currently unbilled
engagement price by more than $25,000;
(ix) any other contract or group of related contracts with the
same party either (A) requiring payments after the date hereof to
or by the Company of more than $100,000 or (B) not terminable by
the Company on sixty (60) days or less notice;
(x) any agreement with any employee, the benefits of which are
contingent or the terms of which are materially altered upon the
occurrence of a transaction of the nature contemplated by this
Agreement involving the Company;
(xi) any agreement or plan the benefits of which will be
increased or accelerated by the occurrence of the transactions
contemplated by this Agreement; and
(xii) any other written arrangement or group of related
written arrangements not entered into in the Ordinary Course of
Business, the breach, default or termination of which would have a
Material Adverse Effect.
The Company has delivered or otherwise made available to Xxxxxxx a correct
and complete copy of each written arrangement (including all amendments
thereto) listed in Section 3.2(l) of the RMI Disclosure Schedule. With respect
to each written arrangement so listed: (A) the written arrangement is legal,
valid, binding, enforceable, and in full force and effect; (B) the written
arrangement will continue to be legal, valid, binding, and enforceable and in
full force and effect on identical terms immediately after the Effective Time;
(C) neither the Company nor any Subsidiary (nor, to the Actual Knowledge of the
Company and the Shareholders, any other party) is in material breach or default
(including, with respect to any express or implied warranty), and no event has
occurred which with notice or lapse of time or both would constitute a material
breach or default or permit termination, modification, or acceleration, under
the written arrangement, except for any breaches, defaults, terminations,
modifications or accelerations which have been cured or waived; and (D) no
party has repudiated any provision of any such written arrangement. Neither the
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34
Company nor any Subsidiary is a party to any verbal contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in the RMI Disclosure Schedule under the terms of this Section 3.2(l).
Correct and complete copies of the general forms of client engagement and
services agreements used by the Company and the Subsidiaries have been
delivered to Xxxxxxx. Except for those Contracts set forth on Section
3.2(l)(iv) of the RMI Disclosure Schedule (the "FIXED RATE ENGAGEMENTS") or
contracts which would be Fixed Rate Engagements, but for their size being less
than the thresholds provided in 3.2(l)(iv), neither the Company nor any
Subsidiary is a party to any fixed fee or capped price contracts or engagement
arrangements, nor does the Company or any Subsidiary have any outstanding
offers, bids or proposals to perform any services on a fixed fee or capped
basis. Section 3.2(l)(iv) of the RMI Disclosure Schedule identifies each Fixed
Rate Engagement required to be set forth therein and sets forth the number of
hours remaining to complete the work required thereunder and the amount of fees
uncollected with respect thereto. Section 3.2(1) of the RMI Disclosure Schedule
also sets forth the full amount, to the Knowledge of the Company and the
Shareholders, of client payments to the Company through May 31, 1997 with
respect to services not yet performed by the Company ("PRE-COLLECTED REVENUE"),
provided that such disclosure may omit any Pre-Collected Revenue in an amount
less $25,000 from any single client.
(m) Notes and Accounts Receivable. All notes and accounts receivable of
the Company are reflected properly on its books and records, such receivables
are valid receivables subject to no set-offs or counterclaims, are current and
collectible in the aggregate amount shown, and will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Latest Balance Sheet, as adjusted for
operations and transactions through the Effective Time in accordance with the
past custom and practice of the Company. Since the Most Recent Fiscal Year End,
there has not been a material adverse change in (i) the aggregate amount of the
accounts receivable of the Company (other than as indicated on the Latest
Balance Sheet) or (ii) the aging of such accounts receivable.
(n) Powers of Attorney; Bank Accounts. There are no outstanding powers of
attorney executed by or on behalf of the Company or any Subsidiary. Section
3.2(n) of the RMI Disclosure Schedule lists each bank account and credit
arrangement maintained by the Company or any Subsidiary (together with relevant
account information, authorized signatures and account users).
(o) Litigation. Section 3.2(o) of the RMI Disclosure Schedule sets forth
each instance in which the Company or any Subsidiary (i) is subject to any
unsatisfied judgment, order, decree, stipulation, injunction or charge or (ii)
is a party to or, to the Actual Knowledge of any of the Shareholders or the
Company, is threatened to be made a party to, any charge, complaint, action,
suit, proceeding, hearing, or investigation of or in any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 3.2(o) of the RMI Disclosure Schedule could reasonably be expected
to result in any Material Adverse Effect. None of the Shareholders or the
Company has any reason to believe that there exists a Basis on which any such
charge, complaint, action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Company. The "A-Tumbling-T Ranches"
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litigation (Case No. CV95-00253) and Texas-Ohio Power litigation (Cause No.
95-05619) described in Section 3.2(o) of the RMI Disclosure Schedule are herein
referred to as the "LITIGATION".
(p) Employees; Employment Matters.
(i) To the Actual Knowledge of the Shareholders and the
Company, no key employee or group of employees has any plans to
terminate his, her or their employment with the Company or any
Subsidiary generally or as a result of the transactions
contemplated hereby or otherwise. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining
agreement, and neither the Company nor any Subsidiary has
experienced any strikes, grievances, other collective bargaining
disputes or, to the Actual Knowledge of any of the Shareholders or
the Company, claims of unfair labor practices. Neither the Company
nor any of the Shareholders has any Actual Knowledge of any
organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company,
nor, to the Actual Knowledge of the Company or the Shareholders,
has any event occurred that could provide the basis for any work
stoppage or labor dispute.
(ii) Except as disclosed on Section 3.2(p) of the RMI
Disclosure Schedule, the Company has no unsatisfied Liability to
any previously terminated employee or independent contractor. The
Company has disclosed all written employee handbooks, policies,
programs and arrangements to Xxxxxxx, and the Company has no orally
disseminated policies, programs or arrangements which are
materially different in any terms, manner or amounts from the
written handbooks, policies, programs and arrangements.
(iii) All Persons employed by the Company or any Subsidiary
are employees at will or otherwise employed such that the Company
or the applicable Subsidiary may lawfully terminate their
employment at any time, with or without cause, without creating any
material cause of action against the Company or any Subsidiary or
otherwise giving rise to any material Liability of the Company or
any Subsidiary for wrongful discharge, breach of contract or tort,
except for public policy and other limitations applicable to
employers generally in the locations where the Company employs such
Persons.
(iv) The Company and all Subsidiaries have materially complied
with all applicable laws relating to labor, including any provisions
thereof relating to wages, equal employment opportunity,
immigration, occupational safety and health, termination pay,
vacation pay, fringe benefits, collective bargaining and the payment
and/or accrual of the same and all Taxes, insurance and all other
costs and expenses applicable thereto, and neither the Company nor
any Subsidiary is liable for any arrearage, or any Taxes, costs or
penalties for failure to comply with any of the foregoing. Except as
disclosed in Section 3.2(p) of the RMI Disclosure Schedule, there is
not presently pending or existing, or to the Actual Knowledge of
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36
the Shareholders and the Company, threatened (i) any strike,
slowdown, picketing, work stoppage or employee grievance process or
(ii) any proceedings against or affecting the Company relating to
the alleged violation of any act, regulation or statute pertaining
to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission or any
comparable governmental body. Without limiting the generality of
the foregoing, neither the Company nor any Subsidiary has incurred
a violation of Part 6 of Subtitle B of Title I of ERISA ("COBRA")
or other applicable state insurance continuation law. No material
COBRA or other state insurance continuation law violation exists or
will exist with respect to any employees of the Company or any
Subsidiary prior to and including the Effective Time, nor will any
such violation occur as a result of the transactions contemplated
hereby. As of the Effective Time, neither the Company nor any
Subsidiary will incur, nor ever have incurred, material
Liabilities, penalties or other charges under the Workers
Adjustment Retraining and Notification Act.
(v) Each Person whom the Company or any Subsidiary currently
retains as a consultant or previously retained as a consultant
qualifies, or at all times while performing services for the
Company qualified, as an independent contractor and not as an
employee of the Company or the Subsidiary, as the case may be,
under the Code and all applicable state laws. Neither the execution
of this Agreement nor the consummation of the transactions
contemplated hereby shall cause the Company or any Subsidiary to be
in breach of any agreement with any employee, contractor or
consultant or cause the Company or any Subsidiary to be liable to
pay any severance or other amount to any employee, contractor or
consultant of the Company.
(q) Employee Benefit Plans.
(i) All Plans are listed and briefly described in Section
3.2(q) of the RMI Disclosure Schedule. Each Plan is in substantial
compliance with its terms, with ERISA and other applicable laws
(including compliance with the health care continuation
requirements of COBRA and any proposed regulations promulgated
thereunder), with any applicable collective bargaining agreement
and with all other agreements and instruments applicable to any
Plan. Section 3.2(q) of the RMI Disclosure Schedule sets forth each
former employee of the Company or any Subsidiary entitled to COBRA
benefits and the remaining period of such benefits. The Company and
each applicable ERISA Affiliate of the Company have received
favorable determination letters as to the qualification under the
Code of each pension plan, as defined in Section 3(2) of ERISA
("PENSION PLAN"), and there have been no amendments or other
developments since the date of such determination letters which
would cause the loss of such qualified status. No material
violation of ERISA has at any time occurred in connection with the
administration of any of the Plans, and there are no actions,
suits, or claims (other than routine, non-contested claims for
benefits) pending or, to the Company's Actual Knowledge, threatened
against the Plans, or any administrator or fiduciary thereof, which
could result in
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any Liability. Except as set forth on Section 3.2(q) of the RMI
Disclosure Schedule, each Plan can be terminated within thirty
days, without the payment of any addition contributions or amount
and, except as otherwise mandated by ERISA or the Code, without the
vesting or acceleration of any benefits promised by such Plan.
(ii) With respect to all present Plans, the Company and all
ERISA Affiliates of the Company have heretofore delivered to
Xxxxxxx true and complete copies of each of the following
(including descriptions of vacation, severance pay, sickness, and
separation policies):
(A) the Plan documents (and any applicable trust
agreement or insurance contract);
(B) the most recent Internal Revenue Service
determination letter request relating to each of the Pension
Plans, if any;
(C) the summary plan description (as currently in
effect) and any summary of material modification for each of
the Plans, if any;
(D) the 1995 Annual Report (Form 5500 Series), and
accompanying schedules, filed for each of the Plans, if any,
and the most recent summary annual report furnished for each
of the Plans;
(E) the most recent actuarial valuations, if applicable,
and latest financial statements for each of the Plans; and
(F) all documents filed with the Internal Revenue
Service, Department of Labor or Pension Benefit Guaranty
Corporation since January 1, 1991, if any.
There is and has been no material violation of ERISA known to the Company
or any ERISA Affiliate of the Company with respect to the filing of applicable
reports, documents, and notices regarding such past or present Plans with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of such Plans.
(iii) Each Plan is maintained by the Company or any ERISA
Affiliate of the Company under a plan document which does not
provide for other participating employers except for the Company or
any ERISA Affiliate of the Company and no Plan provides or has
provided credit with respect to service other than with the Company
or any ERISA Affiliate of the Company.
(iv) Neither the Company nor any ERISA Affiliate of the
Company nor any of their employees, shareholders, or directors have
engaged in any transaction in connection with which any of them
would be subject either to a civil penalty assessed pursuant to
Section 502 of ERISA or a tax imposed by Section 4975 of the
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Code. The execution and performance of this Agreement will not
involve any prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code.
(v) None of the assets of any of the Plans is or has been
invested in any property constituting employer real property or any
employer security within the meaning of Section 407(d) of ERISA.
(vi) Except as indicated on the RMI Disclosure Schedule, no
Pension Plan or trust created under any such Pension Plan has,
since September 2, 1974, been terminated in whole or in part.
Additionally, there is no reasonable Basis for the Company or any
ERISA Affiliate of the Company to anticipate material Liability to
the Pension Benefit Guaranty Corporation with respect to a Pension
Plan and there has been no reportable event (within the meaning of
Section 4043(c) of ERISA), or any event requiring disclosure under
Section 4063(a) or 4041(c) of ERISA with respect to such a Pension
Plan since September 2, 1974. There has been no event or condition
which presents a material risk of termination of any Pension Plan
by the Pension Benefit Guaranty Corporation, and no circumstances
exist that constitute grounds under Section 4042 of ERISA entitling
the Pension Benefit Guaranty Corporation to institute any such
proceeding.
(vii) As of the Effective Time, full payment will have been
made of, or accrued for: (a) all amounts which the Company and any
ERISA Affiliate of the Company are required, under the terms of all
Plans, to have paid as contributions to such Plans as of the last
day of the most recent fiscal year prior to the Effective Time and
(b) all pro rata amounts which the Company and any ERISA Affiliate
of the Company are required to pay as contributions to each such
Plan for the fiscal year that includes the Effective Time. Further,
no accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Plan, nor has there been any lien imposed under
Section 412(n) of the Code.
(viii) The execution and performance of this Agreement will
not constitute a stated triggering event under any Plan or
employment agreement that will (a) result in any payment (whether
of severance pay or otherwise) becoming due to any employee of the
Company or ERISA Affiliate of the Company, (b) accelerate the time
of payment or vesting or increase the amount of compensation due
under any Plan or employment agreement (c) cause any individual to
accrue or receive additional benefits, service or accelerated
rights to payment of benefits under any Plan or employment
agreement or (d) directly or indirectly cause the Company or any
ERISA Affiliate of the Company to transfer or set aside any assets
to fund or otherwise provide for benefits for any individual.
(ix) Neither the Company nor any ERISA Affiliate of the
Company provides, nor have they at any time provided, coverage
under any welfare plan (as
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defined in Section 3(l) of ERISA) (including, but not limited to,
life insurance, disability, medical, dental, prescription drugs, or
accidental death or dismemberment) to any of their retirees, other
than any continuation or conversion coverage which any such retiree
may have purchased at his own expense.
(x) The financial statements of each Pension Plan as of the
end of the most recent plan year, and the list of the investments
of such Pension Plan as of the most recent plan year end,
accurately reflect the financial positions of the Pension Plans,
and there have been no material changes in such investments between
such date and the Effective Time.
(xi) There have been no statements, either written or oral, or
communications made or materials provided to any employee or former
employee of the Company or any ERISA Affiliate of the Company by
any person that provide for or could be construed as a contract or
promise by the Company or any ERISA Affiliate of the Company to
provide for any pension, welfare, or other insurance-type benefits
to such employee or former employee, whether before or after
retirement, other than benefits under the Plans.
(xii) Neither the Company nor any ERISA Affiliate of the
Company currently contributes, or at any time in the past has
contributed to a defined benefit plan (as defined in Section 3(35)
of ERISA). With respect to each multiemployer plan, as defined in
Section 3(37) of ERISA, to which the Company or any ERISA Affiliate
of the Company contributes, neither the Company nor any ERISA
Affiliate of the Company is delinquent in making any contribution
required to be paid to any multiemployer plan or would be liable to
any multiemployer plan for any withdrawal liability imposed by
Title IV of ERISA or the Plan itself.
(r) Licenses, Permits and Approvals. Section 3.2(r) of the RMI Disclosure
Schedule lists all governmental and regulatory licenses, permits and approvals
possessed by the Company. The items listed in Section 3.2(r) of the RMI
Disclosure Schedule constitute all such licenses, permits and approvals which
are necessary to the conduct of the Company's business by the Company and its
Subsidiaries, except for such licenses, permits and approvals the absence of
which would not, individually or in the aggregate, result in a Material Adverse
Effect. All such licenses, permits and approvals are in full force and effect.
There are no violations by the Company or any Subsidiary of, or any claims or
proceedings, pending or, to the Actual Knowledge of any of the Shareholders or
the Company, threatened, challenging the validity of or seeking to discontinue,
any such licenses, permits or approvals.
(s) Unlawful Payments. No payments of either cash or other consideration
have been made to any Person by the Company, any Subsidiary or any Shareholder
or, to the Actual Knowledge of any of the Shareholders or the Company, on
behalf of the Company or any Subsidiary by any agent, employee, officer,
director, shareholder or other Person, that were unlawful under the laws of the
United States or any state or any other foreign or municipal government
authority having appropriate jurisdiction over the Company.
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(t) Compliance with Laws. The Company, all Subsidiaries and their
respective facilities are in compliance with and have not in the past violated
any applicable law, rule or regulation of any federal, state, local or foreign
government or agency thereof, including without limitation, environmental laws
and laws relating to labor and employment, and no notice, claim, charge,
complaint, action, suit, proceeding, investigation or hearing has been received
by the Company or any Subsidiary or filed, commenced or, to the Actual
Knowledge of the Company or any of the Shareholders threatened against the
Company or any Subsidiary alleging any such violation.
(u) Suppliers and Clients. Since the Latest Balance Sheet Date, no
material licensor, vendor, supplier or licensee, or any client of the Company
accounting for more than $350,000 of the Company's consolidated expenses or
revenues, as applicable, in fiscal 1996, has canceled or otherwise adversely
modified its relationship with the Company or any Subsidiary and, to the Actual
Knowledge of the Company or any of the Shareholders, no such Person has any
intention to do so, and, to the Actual Knowledge of the Company or any of the
Shareholders, there are no disputes or problems or notices of dissatisfaction
with or from any client of the Company, and the consummation of the
transactions contemplated hereby shall not adversely affect any relationships
with any such client.
(v) Insurance.
(i) Section 3.2(v) of the RMI Disclosure Schedule sets forth
the following information with respect to each in-force insurance
policy (including policies providing property, casualty, liability,
directors and officers and workers' compensation coverage and bond
and surety arrangements) to which the Company or any Subsidiary is
currently a party, or which was obtained by the Company, as well as
all other prior policies under which any claims were made, which
claims remain open as of the Latest Balance Sheet Date: (A) the
name, address, and telephone number of the agent; (B) the name of
the insurer, the name of the policyholder, and the name of each
covered insured; (C) the policy number and the period of coverage;
and (D) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles or retainages and
ceilings are calculated and operate) of coverage.
(ii) With respect to each such insurance policy which has not
by its original terms expired: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms immediately following the consummation of the transactions
contemplated hereby; (C) neither the Company nor any Subsidiary nor, to
the Actual Knowledge of the Company or any of the Shareholders, any other
party to the policy, is in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, or both, would
constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has
repudiated any provision thereof.
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(w) Warranty. All services rendered by the Company and all Subsidiaries
have been in material conformity with all applicable contractual commitments
and all express and implied warranties, and neither the Company nor any
Subsidiary has any Liability (and neither the Company nor any Subsidiary nor
any of the Shareholders has any Actual Knowledge of any Basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand giving rise to any Liability) for damages in connection
therewith, subject only to the reserve for client claims set forth on the face
of the Latest Balance Sheet as adjusted for the passage of time through the
Effective Time in accordance with the past custom and practice of the Company.
No services provided by the Company are subject to any guaranty, warranty, or
other indemnity beyond the Company's applicable standard terms and conditions
of engagement and such other indemnities and warranties disclosed on Section
3.2(w) or elsewhere in the RMI Disclosure Schedule.
(x) Transaction-Related Tax and Accounting Matters. Neither the Company
nor any Subsidiary or Shareholder has taken or agreed to take any action, nor
does the Company or any Shareholder have any Actual Knowledge of any fact or
circumstance, that would (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368 of the Code, or (ii) prevent the transactions contemplated hereby,
including the Merger, from being accounted for as a pooling of interests in
accordance with GAAP.
(y) Brokers' Fees. Neither the Company nor any of the Shareholders has any
Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement for
which Xxxxxxx or Acquisition could become liable or otherwise obligated.
(z) Potential Conflicts of Interest. No officer, director or shareholder
of the Company or any Subsidiary: (i) owns, directly or indirectly, any
interest in (excepting not more than 2% stock acquired for investment purposes
in securities of publicly held and traded companies) or is an officer,
director, employee or consultant of any Person which is a competitor, lessor,
lessee, client or supplier of the Company or any Subsidiary; (ii) owns,
directly or indirectly, in whole or in part, any interest in Intellectual
Property which the Company or any Subsidiary is using or the use of which is
necessary for the business of the Company or any Subsidiary; (iii) has any loan
outstanding to or any cause of action or other claim whatsoever against the
Company or any Subsidiary, except for claims in the Ordinary Course of
Business, such as for accrued salary, bonus, vacation pay and benefits under
Benefit Plans and similar matters and agreements existing on the date hereof;
(iv) has made, on behalf of the Company or any Subsidiary, any payment or
commitment to pay any commission, fee or other amount to, or purchase or obtain
or otherwise contract to purchase or obtain any goods or services from, any
corporation or other Person of which any officer or director of the Company or
any Subsidiary, or a relative of any of the foregoing, is a partner or
shareholder (except stock acquired solely for investment purposes in securities
of publicly held and traded companies).
(aa) Disclosure. Neither this Agreement nor the RMI Disclosure Schedule
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not
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misleading. There is no material fact Actually Known by the Company or any of
the Shareholders (other than general economic or industry conditions) which has
not been disclosed to Xxxxxxx which results in, or could reasonably be
anticipated to result in, a Material Adverse Effect.
3.3. Representations and Warranties of Acquisition and Xxxxxxx. As a
material inducement to the Company and the RMI Shareholders to enter into this
Agreement and consummate the transactions contemplated herein, Acquisition and
Xxxxxxx hereby jointly and severally represent and warrant to the Company and
to each of the RMI Shareholders that the statements contained in this Section
3.3 are correct and complete as of the date of this Agreement and Xxxxxxx and
Acquisition hereby jointly and severally covenant that said statements will be
correct and complete as of the Effective Time (as though then made and as
though the Effective Time were substituted for the date of this Agreement
throughout this Section 3.3).
(a) Organization. Xxxxxxx and Acquisition are each corporations duly
organized, validly existing, and in good standing under the laws of the State
of Delaware. Xxxxxxx has all requisite corporate power and authority to carry
on the businesses in which it is engaged and to own and use the respective
properties owned and used by it.
(b) Authorization of Transaction. Each of Acquisition and Xxxxxxx has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform their respective obligations hereunder. Without limiting the
generality of the prior sentence, the Board of Directors of Xxxxxxx and the
Board of Directors and sole stockholder of Acquisition have duly authorized the
execution, delivery and performance of this Agreement by Xxxxxxx and
Acquisition, respectively, and the consummation of the Merger by Acquisition.
This Agreement constitutes the valid and legally binding obligation of each of
Xxxxxxx and Acquisition, enforceable against each of them, respectively, in
accordance with its terms.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate or conflict in any way with any statute, regulation, law, rule or
common law doctrine, (ii) violate or conflict in any way with any judgment,
order, decree, stipulation, injunction, charge or other restriction of any
government, governmental agency or court to which Xxxxxxx or Acquisition is
subject or any provision of the respective Certificates of Incorporation, as
applicable, and By-Laws of Xxxxxxx and Acquisition, or (iii) conflict with,
result in a breach of, constitute a default under (with or without notice or
lapse of time, or both), result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice under,
or result in the creation of any Security Interest upon any of the assets of
Xxxxxxx pursuant to the terms of, any contract, agreement, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which Xxxxxxx or Acquisition is a party or by which either of them is bound or
to which any of their respective assets are subject, except where such
violations, conflicts, breaches, defaults or other events would not,
individually or in the aggregate, result in an effect or impact upon the
assets, business, financial position or results of operations of Xxxxxxx and
its Subsidiaries, taken as a whole (a "XXXXXXX ADVERSE EFFECT") or prevent or
materially delay the consummation of the transactions contemplated hereby.
Neither Xxxxxxx nor Acquisition is required to give any notice to, make any
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filing with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order for the
Parties to consummate the transactions contemplated by this Agreement and in
order that the Merger and such transactions shall not constitute a breach or
violation of, or result in a right of termination or acceleration or any
encumbrance on any of Xxxxxxx'x assets pursuant to the provisions of, any
agreement, arrangement or understanding or any license, franchise or permit,
except for the filing of the California Merger Agreement with the California
Department and the Delaware Certificate of Merger with the Delaware Department.
(d) Xxxxxxx Common. Xxxxxxx has taken all actions necessary to authorize
and approve the Share Purchase and the issuance of the Xxxxxxx Common, and as
of the Effective Time the Xxxxxxx Common will, when issued in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable.
There are no statutory or contractual shareholders' preemptive rights or rights
of refusal with respect to the issuance of the Xxxxxxx Common upon consummation
of the Merger.
(e) Brokers' Fees. None of Xxxxxxx, Acquisition or, to Xxxxxxx'x Actual
Knowledge, the Company, has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any of the Shareholders or Xxxxxxx is
or could become liable or obligated.
(f) Commission Filings. Xxxxxxx has filed and made available to the
Company and the Shareholders all forms, reports and documents required to be
filed by Xxxxxxx with the Commission under the Exchange Act and the Securities
Act commencing with Xxxxxxx'x initial filing of its Registration Statement on
Form S-1 (collectively, the "XXXXXXX SEC REPORTS"). The Xxxxxxx SEC Reports (i)
at the time filed, complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such Xxxxxxx SEC Reports or necessary in order to
make the statements in such Xxxxxxx SEC Reports, in the light of the
circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of Xxxxxxx included in the Xxxxxxx
SEC Reports (the "XXXXXXX FINANCIAL STATEMENTS") complied when filed as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto, and
were, when filed, in accordance with the books and records of Xxxxxxx, complete
and accurate in all material respects, and presented fairly the consolidated
financial position and the consolidated results of operations, changes in
stockholders' equity and cash flows of Xxxxxxx and its Subsidiaries as of the
dates and for the periods indicated, in accordance with generally accepted
accounting principles, consistently applied, subject in the case of interim
financial statements to normal year-end adjustments and the absence of certain
footnote information.
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(g) Capital Structure.
(i) The authorized capital stock of Xxxxxxx consists of
15,000,000 shares of Xxxxxxx Common and 3,000,000 shares of
preferred stock, par value $0.001 per share ("XXXXXXX PREFERRED
STOCK"). As of March 31, 1997, 10,670,727 shares of Xxxxxxx Common
and no shares of Xxxxxxx Preferred Stock were issued and
outstanding. All outstanding shares of Xxxxxxx'x capital stock are
duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
(ii) Except for options granted in the normal course pursuant
to Xxxxxxx'x stock option plans, as described in Xxxxxxx SEC
Reports, and except as contemplated herein, there are no options,
warrants, calls, rights, commitments or agreements of any character
to which Xxxxxxx or any Subsidiary of Xxxxxxx is a party or by
which any of them is bound obligating Xxxxxxx or any Subsidiary of
Xxxxxxx to issue any Xxxxxxx capital stock or any securities or
rights convertible into or exchangeable for any such capital stock.
(iii) Xxxxxxx has no current plans, commitments or
understandings to repurchase or redeem more than 1,000 shares of
Xxxxxxx Common at a price above current market value.
(h) No Material Adverse Changes. Since the date of the most recent Xxxxxxx
SEC Report for the quarter ended March 31, 1997, no events have occurred which,
individually or in the aggregate, have had a Xxxxxxx Adverse Effect and no
action, suit, claim or proceeding has been filed, or threatened in writing,
which if adversely determined, would result in a Xxxxxxx Adverse Effect. During
such period, Xxxxxxx has conducted it business substantially in the ordinary
course, except as to conducting this and other acquisitions of businesses.
(i) Transaction-Related Tax and Accounting Matters. Neither Xxxxxxx nor
Acquisition has taken or agreed to take any action, nor does Xxxxxxx or
Acquisition have any Knowledge of any fact or circumstance, that would (i)
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code, or (ii) prevent the transactions contemplated hereby, including the
Merger, from being accounted for as a pooling of interests in accordance with
GAAP.
(j) Continuity of Business. Xxxxxxx has no plan or intention to liquidate
the Company; to merge the Company with or into another corporation; to sell or
otherwise dispose of the stock of the Company except for transfers of stock to
corporations controlled by Xxxxxxx within the meaning of Section 368(c) of the
Code; or to cause or permit the Company to sell or otherwise dispose of any of
its assets, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation controlled by the Company within the
meaning of Section 368(c) of the Code.
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4. CONDITIONS
4.1. Conditions to Obligation of Xxxxxxx and Acquisition. The obligations
of Xxxxxxx and Acquisition to effect the Share Purchase and the Merger are also
subject to satisfaction at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties set forth in Sections 3.1 and
3.2 shall be true and correct in all material respects at and as of the
Effective Time;
(b) Each of the Company and the RMI Shareholders shall have
performed and complied with all of their respective covenants hereunder through
the Effective Time;
(c) There shall not have been, since the Most Recent Fiscal Year End,
any change in or effect on the Company's assets, financial position, operating
results, client or employee relations or business prospects which results or
may reasonably be expected to result, in a Material Adverse Effect;
(d) The Company shall have delivered to Xxxxxxx and Acquisition a
certificate signed by an officer of the Company to the effect that each of the
conditions set forth in Section 4.1(a), (b) and (c) are satisfied in all
respects;
(e) The Company shall have delivered to Xxxxxxx (i) a copy of the
text of the director and shareholder resolutions by which the corporate action
on the part of the Company necessary to approve this Agreement and the Merger
were taken, certified by the Company's Secretary, and, such shareholder
resolutions shall have been approved by the holders of at least 95% of the
Company's voting stock, (ii) an incumbency certificate signed by an officer of
the Company certifying the signature and office of each officer executing this
Agreement or any other agreement, certificate or other instrument executed
pursuant hereto, (iii) a copy of the Company's Articles of Incorporation, as
amended to date, certified by the California Department, and (iv) good standing
certificates for the Company, issued as of a recent date, by the Secretaries of
State of California and each other jurisdiction in which the Company is
required to be qualified to do business;
(f) Each of the RMI Shareholders shall have entered into a
Confidentiality, Non-Competition and Non-Solicitation Agreement with the
Company or a Xxxxxxx Subsidiary, in form and substance acceptable to Xxxxxxx
(the "NON-COMPETITION AGREEMENTS"), and as of the Effective Time each of the
Non-Competition Agreements shall be in full force and effect;
(g) Xxxxxxx and Acquisition shall have received from Xxxxxx, Brand,
Seymour & Xxxxxx LLP, counsel to the Company and Xxxxx Xxxxxxx, an opinion with
respect to the matters set forth in Exhibit D attached hereto, addressed to
Xxxxxxx and Acquisition and dated as of the Effective Time;
(h) The Company shall not have received demands for appraisal with
respect to the Merger under Article 1300 of the CGCL from any shareholders
holding in the aggregate 10% or more of the Company Shares Deemed Outstanding;
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(i) Xxxxxxx shall have received an opinion or other advice, in form
and substance reasonably satisfactory to Xxxxxxx, from KPMG Peat Marwick LLP,
its accounting professionals, that the Merger may be accounted for as a
"pooling of interests," in accordance with generally accepted accounting
principles and all rules, regulations and policies of the Commission;
(j) The Company shall have delivered to Xxxxxxx and Acquisition
certificates, in form and substance reasonably satisfactory to Xxxxxxx, signed
by the Secretary of the Company, dated as of the Effective Time, identifying
the following documents to be delivered therewith: (i) the minute books of the
Company which, to the Knowledge of the Secretary of the Company, shall contain
minutes of all meetings (or consents to action in lieu thereof) of the
directors and shareholders of the Company from their inception to the date
thereof; (ii) the corporate seal of the Company; (iii) certified copies of the
By-Laws of the Company as in effect on the date thereof; (iv) all stock
certificate books and stock ledgers of the Company; and (v) such other
documents or instruments as Xxxxxxx or Acquisition may reasonably request in
writing not less than two days prior to the Effective Time to carry out the
intents and purposes of this Agreement, and such minute books, stock
certificate books and other documents shall be complete, accurate and
sufficient, to the reasonable satisfaction of Xxxxxxx and its counsel;
(k) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction, to which any of the Parties is a party
which would prevent or inhibit the consummation of the transaction contemplated
hereby or seek to impose any liability on any Party as a result of the
consummation of the Merger, and all necessary regulatory approvals shall have
been obtained;
(l) Xxxxxxx shall be satisfied with the results of its due diligence
review and investigation of the Company and its business, including the
Company's clients and client engagements and rights and interests in and to all
Intellectual Property necessary for the operation of the Company's business as
presently conducted or presently contemplated to be conducted;
(m) Xxxxxxx and each of the Shareholders shall have entered into a
Registration Rights Agreement in the form of Exhibit E attached hereto (the
"REGISTRATION AGREEMENT"), and as of the Effective Time the Registration
Agreement shall be in full force and effect;
(n) Xxxxxxx, the Escrow Agent and each of the Shareholders shall have
entered into the Escrow Agreement, and as of the Effective Time, all deposits
required under the Escrow Agreement shall have been made, and the Escrow
Agreement shall be in full force and effect;
(o) The Company shall have procured all of the consents, if any,
identified in Section 3.2(c) of the RMI Disclosure Schedule;
(p) The Existing Company Documents shall have been terminated by a
written instrument satisfactory in form and substance to Xxxxxxx and its
counsel;
(q) The Boards of Directors of Xxxxxxx and Acquisition shall have
approved this Agreement and authorized the Share Purchase and the Merger;
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(r) All principal and interest under all promissory notes in favor
of RMI from any of the RMI Shareholders and other employees shall have been
paid in full, as evidenced by documentation in form and substance reasonably
satisfactory to Xxxxxxx and its counsel; and
(s) All actions and proceedings hereunder and all documents and other
papers required to be delivered by the Company hereunder or in connection with
the consummation of the transactions contemplated hereby, and all other related
matters, shall have been approved by Xxxxxxxx & Xxxxxx, Ltd., counsel to
Xxxxxxx, as to their form and substance.
Xxxxxxx, on behalf of itself and Acquisition, may waive any condition, in whole
or in part, specified in this Section 4.1 if it executes a writing so stating
at or prior to the Effective Time.
4.2. Conditions to Obligations of the Company and the Shareholders. The
obligations of the Company and the RMI Shareholders to effect the Merger are
subject to satisfaction at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties set forth in Section 3.3 above
shall be true and correct at and as of the Effective Time;
(b) Acquisition and Xxxxxxx shall have performed and complied with
all of their respective covenants hereunder through the Effective Time;
(c) There shall not have been, since March 31, 1997, any change in or
effect on Xxxxxxx'x assets, financial position, operating results, client or
employee relations or business prospects which results or may reasonably be
expected to result, in a Xxxxxxx Adverse Effect;
(d) Acquisition and Xxxxxxx shall have delivered to the Company and
the Shareholders a certificate signed by an officer of Acquisition and Xxxxxxx
to the effect that each of the conditions specified above in Sections 4.2(a),
(b) and (c) are satisfied in all respects;
(e) Acquisition shall have delivered to the Company and the
Shareholders (i) a copy of the text of the director and stockholder resolutions
by which the corporate action on the part of Acquisition necessary to approve
this Agreement and the Merger were taken, certified by Acquisition's corporate
secretary, and (ii) an incumbency certificate signed by an officer of
Acquisition certifying the signature and office of each officer executing this
Agreement or any other agreement, certificate or other instrument executed
pursuant hereto;
(f) Xxxxxxx shall have delivered to the Company and the RMI
Shareholders (i) a copy of the text of the director resolutions by which the
corporate action on the part of Xxxxxxx necessary to approve this Agreement,
the Share Purchase and the Merger were taken, certified by Xxxxxxx'x corporate
secretary, (ii) an incumbency certificate signed by an officer of Xxxxxxx
certifying the signature and office of each officer executing this Agreement or
any other agreement, certificate or other instrument executed pursuant hereto;
(iii) certificates representing shares of Xxxxxxx Common and payment for
fractional interests to be delivered in accordance with Section 2.8; and (iv)
payment for the Purchased Shares in accordance with Sections 2.8 and 2.1(a).
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(g) Xxxxxxx and Acquisition shall have executed the Registration
Agreement and at the Effective Time the Registration Agreement shall be in full
force and effect;
(h) Xxxxxxx, the Escrow Agent and each of the Shareholders shall have
entered into the Escrow Agreement, and as of the Effective Time, all deposits
required under the Escrow Agreement shall have been made, and the Escrow
Agreement shall be in full force and effect;
(i) The Company and the RMI Shareholders shall have received an
opinion from Xxxxxxxx & Xxxxxx, Ltd., with respect to the matters set forth in
Exhibit F attached hereto, addressed to them and dated as of the Effective
Time;
(j) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction, to which any of the Parties is a party
which would prevent or inhibit the consummation of the transaction contemplated
hereby or seek to impose any liability on any Party as a result of the
consummation of the Merger, and all necessary regulatory approvals shall have
been obtained;
(k) Xxxxxxx shall have issued options to purchase shares of Xxxxxxx
Common, to the Company employees and in the respective amounts indicated on
Schedule 4.2(k) to this Agreement; and
(l) All actions and proceedings hereunder and all documents and other
papers required to be delivered by Acquisition and Xxxxxxx hereunder or in
connection with consummation of the transactions contemplated hereby and all
other related matters shall have been approved by from Xxxxxx, Brand, Seymour &
Xxxxxx LLP, counsel to the Company, as to their form or substance.
Each of the Company and the Shareholders may waive, in whole or in part,
any condition specified in this Section 4.2 if it executes a writing so stating
at or prior to the Effective Time.
5. ADDITIONAL AGREEMENTS
5.1. Post-Merger Covenants. The Parties agree as follows with respect to
the period following the Effective Time.
(a) General. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification with respect to
such matter under Section 5.3).
(b) Transition. For three years following the Effective Time, except
upon the request or direction of Xxxxxxx or its Affiliates, none of the RMI
Shareholders will take any action that primarily is designed or intended to
have the effect of discouraging any client, supplier, contractor or other
business partner or affiliate of the Company from maintaining the same business
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relationships with the Surviving Company after the Effective Time as it
maintained with the Company prior to the Effective Time. From and after the
Effective Time, for three years following the Effective Time, each of the RMI
Shareholders will refer all inquiries by current or former clients (as of the
Effective Time) of the Company relating to the Company's business to Xxxxxxx or
its Affiliates, including the Surviving Company.
(c) Confidentiality. Each of the RMI Shareholders will treat and hold as
confidential all of the Confidential Information, refrain from using any of the
Confidential Information (except, as applicable, in direct furtherance of such
RMI Shareholder's duties on behalf of the Surviving Corporation as directed by
the Surviving Corporation or Xxxxxxx) and shall deliver promptly to the
Surviving Corporation or destroy, at the request and option of the Surviving
Corporation, all tangible embodiments (and all copies) of the Confidential
Information which are in such RMI Shareholder's possession. In the event that
any of the RMI Shareholders is requested or required (by oral question or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, such RMI Shareholder will notify the
Company promptly of the request or requirement so that the Company may seek an
appropriate protective order or waive compliance with the provisions of this
Section 5.1(c). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the RMI Shareholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, such RMI Shareholder may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing RMI
Shareholder shall, upon the request of Xxxxxxx or the Surviving Corporation and
at their expense, exert all reasonable efforts to obtain an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Company or Xxxxxxx
shall reasonably designate.
(d) Transfer of Xxxxxxx Common.
(i) The Shareholders hereby acknowledge and agree that the
Xxxxxxx Common may not be transferred except pursuant to (a) a
registered offering under the Securities Act (in which case all
transfers shall be made in accordance with all applicable
provisions of the Registration Agreement), (b) the Commission's
Rule 144 (or any similar rule or rules then in force) if available,
or (c) subject to the conditions specified in subparagraph (ii)
below, any other legally available means of transfer.
(ii) In connection with the transfer of any Xxxxxxx Common
(other than a transfer pursuant to a registered public offering), the
holder thereof shall deliver written notice to Xxxxxxx describing in
reasonable detail the transfer or proposed transfer, together with an
opinion of securities counsel (with such opinion and such counsel being
satisfactory to Xxxxxxx) to the effect that such transfer of Xxxxxxx
Common may be effected without registration of such Xxxxxxx Common under
the Securities Act or any applicable state securities law. In addition, if
the holder of Xxxxxxx Common delivers to Xxxxxxx such an opinion that
concludes that no subsequent transfer of such Xxxxxxx Common will require
registration under the
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Securities Act or any applicable state securities law, Xxxxxxx
shall promptly upon such contemplated transfer deliver new
certificates for such Xxxxxxx Common which do not bear the
restrictive legend set forth in this Section 5.1(d). If Xxxxxxx
delivers new certificates for such Xxxxxxx Common bearing such
legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to Xxxxxxx in writing its
agreement to be bound by the conditions contained in this Section.
(iii) Each of the Shareholders hereby agrees that such
Shareholder will not (A) take any action that would prevent the
Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or prevent the Merger and transactions
contemplated hereby from being accounted for as a pooling of
interests under generally accepted accounting principles or (B)
sell, issue, grant or sell options or other rights against, lend,
or otherwise transfer or dispose of any shares of Xxxxxxx Common
obtained hereunder in violation of Rule 145 under the Securities
Act. Without limiting the generality of the foregoing, each of the
Shareholders who is an Affiliate of the Company agrees that such
Shareholder will not sell, transfer or otherwise dispose of any
Xxxxxxx Common issued to such Shareholder in the Merger until
Xxxxxxx has published financial results including at least thirty
(30) days of combined operations with the Surviving Corporation
(the period of prohibition being referred to as the "LOCK-UP
PERIOD").
(e) Transaction-Related Tax Matters. Xxxxxxx agrees that it will not take
any action that would prevent the transactions contemplated hereby, including
the Merger, from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
5.2. Waiver and Release. Each RMI Shareholder, on behalf of himself and
his heirs, executors, administrators, successors and assigns (with respect to
each RMI Shareholder, the "RELEASING PARTIES"), irrevocably and unconditionally
waives and releases any and all rights with respect to, and releases, forever
acquits and discharges each and all of the Company, the Company's shareholders,
directors, officers, employees, agents and other representatives, and their
respective heirs, executors, administrators, successors and assigns ("RELEASED
PARTIES") with respect to, each and all claims, demands, charges, complaints,
obligations, causes of action, suits, liabilities, indebtedness, sums of money,
covenants, agreements, instruments, contracts (written or oral, express or
implied), controversies, promises, fees, expenses (including attorneys' fees,
costs and expenses), damages and judgments, at law or in equity, in contract or
tort, in federal, state or other judicial, administrative, arbitration or other
proceedings, of any nature whatsoever, known or unknown, suspected or
unsuspected, previously, now or hereafter arising, in each case which arise out
of, are based upon or are connected with facts or events occurring or in
existence on or prior to the date of the Closing ("RELEASED CLAIMS"). Each RMI
Shareholder further represents and warrants that he has not assigned or
otherwise transferred any right or interest in or to any of the Released
Claims. This Section 5.2 shall not apply to any of the following: (a) claims
for salaries and benefits accrued in the Ordinary Course of Business through
the Effective Time under the express terms of the Company's written benefit
plans, (b) claims against either Xxxxxxx or Acquisition for indemnification
pursuant to Section 5.3(d) herein, to the extent applicable or (c) claims for
indemnification under the Company's Articles of Incorporation and By-Laws (in
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51
existence up to the Effective Time), or as provided by operation of law in
their capacities as employees of the Company, arising from either claims listed
on the RMI Disclosure Schedule or for post-closing claims based on pre-closing
acts.
5.3. Indemnification.
(a) Survival Periods Generally. All of the representations and
warranties of the RMI Shareholders contained in Sections 3.1 and 3.2 (the "RMI
REPRESENTATIONS"), and those of Xxxxxxx contained in Section 3.3 (the "XXXXXXX
REPRESENTATIONS"), shall survive the consummation of the Merger (regardless of
any Knowledge or investigation of Xxxxxxx, Acquisition or the Surviving
Corporation, as to the RMI Representations, and of the RMI Shareholders, as to
the Xxxxxxx Representations) and shall continue in full force and effect for
the lesser of (i) one year after the Closing, or (ii) the issuance of the first
independent audit report on the combined enterprise following the consummation
of the business combination (the "SURVIVAL PERIOD"), provided however, that the
representations in Section 3.2(o) with regard only to the Litigation shall
continue in full force and effect through the final resolution of all of the
Litigation. All covenants of the Parties in this Agreement shall survive the
consummation of the Merger and shall continue in full force thereafter.
(b) Indemnification by the Shareholders. Subject to Section 5.3(c),
each of the Shareholders shall jointly and severally indemnify, defend and hold
Xxxxxxx and the Surviving Corporation, and each of their directors, officers,
employees and agents (collectively, the "ACQUIRING PARTIES") harmless, from and
against the entirety of any Adverse Consequences any of the Acquiring Parties
may suffer, sustain or become subject to, through and after the date of the
claim for indemnification, including any Adverse Consequences any of the
Acquiring Parties may suffer after the end of any applicable Survival Period,
resulting from, arising out of, relating to, in the nature of, or caused by:
(i) any breach or inaccuracy of any representation or warranty of the RMI
Shareholders or the Company in this Agreement or in the schedules or
certificates delivered by them in connection herewith (excluding the
representations and warranties set forth in Section 3.1 made by the
Shareholders (the "SHAREHOLDER INDIVIDUAL REPRESENTATIONS")); (ii) any
nonfulfillment or breach of any covenant or agreement on the part of the
Shareholders or the Company set forth in this Agreement; (iii) without limiting
the generality of the foregoing, any claim by any Person asserting any
ownership interest in or rights to acquire any capital stock of the Company, to
the extent such ownership interest or rights are not set forth on Section
3.2(d) of the RMI Disclosure Schedule; or (iv) the costs and expense of
defending any action, demand or claim by any third-party against or affecting
any of the Acquiring Parties which, if true or successful, would give rise to a
breach of any of the representations, warranties or covenants of the Company or
the RMI Shareholders, even if such action, demand or claim ultimately proves to
be untrue or unfounded. Subject to Section 5.3(c), each Shareholder shall,
severally (in accordance with their respective Pro Rata Percentages) and not
jointly, indemnify, defend and hold the Acquiring Parties harmless, from and
against the entirety of any Adverse Consequences any of the Acquiring Parties
may suffer, sustain or become subject to, through and after the date of the
claim for indemnification, including any Adverse Consequences any of the
Acquiring Parties may suffer after the end of any applicable Survival Period,
resulting from, arising out of, relating to, in the nature of, or caused by any
breach or inaccuracy of any of the Shareholder Individual Representations made
by such Shareholder or any covenants made by such Shareholder in this
Agreement. All Adverse
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Consequences for which the Acquiring Parties are entitled to seek
indemnification under this Agreement are referred to herein as "XXXXXXX
INDEMNIFIABLE LOSSES."
(c) Certain Limits On and Provisions Relating to Shareholders'
Indemnification. The obligation of the Shareholders to indemnify and defend the
Acquiring Parties under any provision of this Agreement shall be subject to the
following:
(i) the aggregate liability of each Shareholder hereunder with
respect to all Xxxxxxx Indemnifiable Losses shall be satisfied
solely by recourse to the Escrow Fund, and shall otherwise be
without recourse to such Shareholder;
(ii) no Shareholder will have any obligation to indemnify or
defend the Acquiring Parties from and against any Xxxxxxx
Indemnifiable Losses (other than those arising (x) under Section
5.3(b)(iii) or (y) out of a breach of any RMI Shareholder
Individual Representations) until the Acquiring Parties have
suffered such aggregate Xxxxxxx Indemnifiable Losses in excess of
$500,000.00 (at which point the Shareholders will be obligated to
indemnify and defend the Acquiring Parties from and against all
Xxxxxxx Indemnifiable Losses relating back to the first dollar);
and
(iii) no Shareholder shall have any obligation to indemnify or
defend the Acquiring Parties from and against any Xxxxxxx
Indemnifiable Losses arising out of the breach of any of the RMI
Representations, unless the Acquiring Parties make a written claim
within the Survival Period with respect to the breach which gives
rise to such Xxxxxxx Indemnifiable Losses.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY
CLAIM") which may give rise to a claim by such Indemnified Party
for indemnification against any other Party (the "INDEMNIFYING
PARTY") under this Agreement, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the
extent that) the Indemnifying Party can demonstrate it is damaged
thereby.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of the
Indemnifying Party's choice, reasonably satisfactory to the
Indemnified Party, so long as (A) the Indemnifying Party notifies the
Indemnified Party, within fifteen (15) business days after the
Indemnified Party has given notice of the Third Party Claim to the
Indemnifying Party (or by such earlier date as may be necessary under
applicable procedural rules in order to file a timely appearance and
response) that the
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53
Indemnifying Party is assuming the defense of such Third Party
Claim and will indemnify the Indemnified Party against such Third
Party Claim in accordance with the terms and limitations of this
Section 5.3, (B) the Indemnifying Party provides the Indemnified
Party with reasonable evidence that the Indemnifying Party will
have the financial resources to defend against the Third Party
Claim and fulfill its indemnification obligations hereunder with
respect thereto, and (C) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the conditions set forth in Section
5.3(d)(ii) are and remain satisfied, then (A) the Indemnifying
Party may conduct the defense of the Third-Party Claim in
accordance with Section 5.3(d)(ii), (B) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except
that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified
Party reasonably concludes that the counsel the Indemnifying Party
has selected has an actual or potential conflict of interest), (C)
the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to
be unreasonably withheld, conditioned or delayed), (D) the
Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which
either imposes an injunction or other equitable relief upon the
Indemnified Party or does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, and (E) the Indemnified
Party shall, at the Indemnifying Party's reasonable request and at
the Indemnifying Party's expense, cooperate in the defense of the
matter. In the event that the conditions in Section 5.3(d)(ii) are
not or become unsatisfied in the case of any Third Party Claim,
then the Indemnified Party may assume control of the defense of
such claim.
(e) No Contribution. None of the Shareholders shall have any right of
contribution against the Surviving Corporation with respect to any
Indemnifiable Losses.
5.4. Dispute Resolution Regarding Indemnification. In the event that any
dispute should arise among the Parties with respect to any claims under this
Agreement (including Section 5.3) the Parties shall first use their best
efforts to resolve such dispute among themselves. If the Parties are unable to
resolve the dispute within thirty (30) calendar days after the commencement of
efforts to resolve the dispute, the dispute will be submitted to arbitration in
accordance with Subsection 5.5 hereof.
5.5. Arbitration.
(a) Either Xxxxxxx or the Shareholders' Representative may submit any
matter referred to in Subsection 5.3 hereof and any other dispute arising under
this Agreement to binding arbitration by notifying the other party hereto, in
writing, of such dispute and submission.
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(b) Either party requesting arbitration shall serve a written demand
for arbitration on the other party in the manner specified in Section 5.5(f).
The demand shall set forth a statement of the nature of the dispute, the amount
involved and the remedies sought. Each party shall have the right to be
represented by counsel and shall have the right to full documentary discovery.
(c) Except as specifically provided herein, the arbitration shall be
conducted by and in accordance with the commercial rules of JAMS/Endispute, and
the arbitrator's ruling shall be in accordance with law and the terms of this
Agreement. The arbitrator shall not have the power to amend this Agreement in
any respect.
(d) No later than twenty (20) calendar days after a demand for
arbitration is served, the Parties shall jointly select and appoint a single,
disinterested individual to act as the arbitrator. In the event that the
Parties do not agree on the selection of an arbitrator, JAMS/Endispute shall
select an arbitrator from its panel, from a short list of 5 to 10 names, as to
which each party shall have two preemptory challenges. The panel proposed and
the arbitrator chosen shall in any case possess experience relevant to disputes
relating to consulting and other personal services businesses and the
acquisitions of private businesses. Any arbitrator designated hereunder shall
not now or in the three years preceding such arbitration be an employee,
consultant, officer, director or shareholder of any party hereto or any
Affiliate of any Party to this Agreement or have now or in the three years
preceding such arbitration any business relationship with any party hereto or
any Affiliate of any party hereto.
(e) No later than ten (10) calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. The hearing shall commence no later
than thirty (30) calendar days after the arbitrator is appointed and shall
continue from day to day until completed.
(f) The arbitrator shall use his or her best efforts to rule on each
disputed issue within 30 days after the completion of the hearings described in
paragraph (d) above. The determination of the arbitrator as to the resolution
of any dispute shall be binding and conclusive upon all Parties; provided, that
the arbitrator may not award any punitive damages. All rulings of the
arbitrator shall be in writing, shall set forth the basis for the decision and
shall be delivered to the Parties.
(g) The prevailing party in any arbitration shall be entitled to an
award of reasonable attorneys' fees incurred in connection with the arbitration
and the disputed issues with respect thereto. The non-prevailing party shall
pay such fees, together with the fees of the arbitrator and the costs and
expenses of the arbitration. For purposes hereof, a party seeking payment of
any amount in arbitration shall be deemed to be the prevailing party if it is
determined that such party is entitled to receive at least 51% of the payment
initially claimed by it to be due to such party in such arbitration, and the
other party from which such payment is sought shall be deemed to be the
"prevailing party" if the other party is not so deemed to be the prevailing
party.
(h) Any arbitration pursuant to this Subsection 5.5 shall be
conducted in the Counties of Xxxx or Lake, State of Illinois. Any arbitration
award may be entered in and enforced
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by any court having jurisdiction thereof and the Parties hereby consent and
commit themselves to the jurisdiction of the courts of the State of Illinois
and the United States District Court for the Northern District of Illinois, at
Chicago, for purposes of the enforcement of any arbitration award.
5.6. Miscellaneous.
(a) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation, including any disclosures made necessary by Xxxxxxx'x
status as a public company (in which case the disclosing Party will advise the
other Party prior to making the disclosure) and shall insofar as may be
practicable reflect on such disclosure substantially all reasonable comments of
the other Parties.
(b) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the other documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof. Without limiting the generality of the foregoing, this
Agreement supersedes the letter of intent between Xxxxxxx and the Company dated
May 30, 1997.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign this Agreement or any of
such Party's rights, interests, or obligations hereunder without the prior
written approval of the other Parties.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) three
(3) business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) one day after receipt is
electronically confirmed, if sent by fax (provided that a hard copy shall be
promptly sent by first class mail), or (iii) one (1) business day following
deposit with a recognized national overnight courier service for next day
delivery, charges prepaid, and, in each case, addressed to the intended
recipient as set forth below:
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If to the Company: With a Copy To:
----------------- --------------
Resource Management International, Inc. Xxxxxx, Brand, Seymour & Xxxxxx LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000 Xxxxx 0000, 555 Capitol Mall
Sacramento, CA 95670 Xxxxxxxxxx, XX 00000
Fax: (916) - 000-0000 Fax: ( 000) 000-0000
Attn: Xxxxx X. Xxxxxxx Attn: D. Xxxxxx Xxxxx
If to the Shareholders, c/o With a Copy To:
--------------------------- --------------
Shareholders' Representative:
----------------------------
Resource Management International, Inc. Xxxxxx, Brand, Seymour & Xxxxxx LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000 Xxxxx 0000, 555 Capitol Mall
Sacramento, CA 95670 Xxxxxxxxxx, XX 00000
Fax: (916) - 000-0000 Fax: ( 000) 000-0000
Attn: Xxxxx X. Xxxxxxx Attn: D. Xxxxxx Xxxxx
If to Xxxxxxx or Acquisition: Copy to:
---------------------------- -------
The Xxxxxxx Group, Inc. Xxxxxxxx & Xxxxxx, Ltd.
000 Xxxx Xxxx Xxxx, Xxxxx 000 30 South Xxxxxx Drive - Suite 2900
Deerfield, IL 60015 Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: President Attn: Xxxxx X. Xxxx, Esq.
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is delivered to the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Xxxxxxx, the Company and RMI Shareholders holding (directly or through the
Escrow Fund) an aggregate Pro Rata Percentage of Xxxxxxx Common of 75.0%. The
Company may consent to any such amendment at any time prior to the Effective
Time with the prior authorization of its board of directors; provided,
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however, that after the RMI Shareholders have approved the Merger, no amendment
may be made which would have the effect of reducing the amount of Xxxxxxx
Common into which any share of Company Stock will be converted in the Merger
without the further approval of the Shareholders (or their legal
representatives) holding a majority of the outstanding shares of Company Stock
of all classes outstanding immediately prior to the Effective Time. No waiver
by any Party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent occurrence of such kind.
(i) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the invalid or unenforceable term or provision in
any other situation or in any other jurisdiction. If a final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(j) Expenses. Except as otherwise explicitly provided in this Agreement,
each of Xxxxxxx, the Company and the RMI Shareholders will bear his or its own
direct and indirect costs and expenses (including fees and expenses of legal
counsel, investment bankers, brokers or other representatives or consultants)
incurred in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby, whether or not such
transactions are consummated. The foregoing notwithstanding, if the Merger is
consummated, then fees and disbursements of legal counsel incurred by the
Company to effect the Merger shall be paid or reimbursed by the RMI
Shareholders and shall not be paid or accrued by the Company or become
post-Closing obligations of the Surviving Corporation.
(k) Construction. The Parties have jointly participated in the negotiation
and drafting of this Agreement. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumptions or burdens of proof shall
arise favoring any Party by virtue of the authorship of any of the provisions
of this Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The Parties
intend that each representation, warranty and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there
exists another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant. Each
defined term used in this Agreement has a comparable meaning when used in its
plural or singular form. Each gender-specific term used
52
58
herein has a comparable meaning whether used in a masculine, feminine or
gender-neutral form. The term "include" and its derivatives shall have the same
construction as the phrase "include, without limitation," and its derivatives.
The section headings contained in this Agreement are inserted for convenience
or reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
(l) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(m) Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
RMI ACQUISITION CO. RESOURCE MANAGEMENT
INTERNATIONAL, INC.
By: [SIG] By: [SIG]
----------------------- ----------------------
Title: President Title: President
-------------------- -------------------
THE XXXXXXX GROUP, INC.
By: [SIG]
-----------------------
Title:
--------------------
59
THE SHAREHOLDERS: COMPANY COMMON
---------------- --------------
Number of Number of
Name and Signature Class A Shares Class B Shares
------------------ -------------- --------------
Xxxxx X. Xxxxxxx 1,337 0
------------------
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx 321 0
------------------
Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxx
by Xxxxxx X. Xxxxxxx,
Attorney in Fact 225 25
------------------ --- --
Xxxxx X. Xxxxxx
TOTAL: 1,883 25
===== ==
THE SELLING SHAREHOLDERS:
-------------------------
Xxxxxxx X. Xxxxxxx
by Xxxxxx X. Xxxxxxx,
Attorney in Fact 22 0
-------------------------
Xxxxxxx X. Xxxxxxx
Xxxx X. Xxxxx 0 30
-------------------------
Xxxx X. Xxxxx
Xxxxxxx Xxxxx 0 20
-------------------------
Xxxxxxx Xxxxx
Xxxx X. Xxxxxx 0 20
-------------------------
Xxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxxx
by Xxxxxx X. Xxxxxxx,
Attorney in Fact 0 28
-------------------------
Xxxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxx 45 0
-------------------------
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
by Xxxxxx X. Xxxxxxx,
Attorney in Fact 25 0
------------------------- -- -
Xxxxxx X. Xxxxx
TOTAL: 92 98
== ==
54
