Exhibit 2.1
REORGANIZATION AGREEMENT
AMONG
XXXXXXX COMPUTER ASSOCIATES, INC.
("Xxxxxxx"),
SYSTEM ACQUISITION CORP.
("SAC").
GREYSTONE TECHNOLOGY CORPORATION
("Company")
AND
XXXXXX X. XXXXX and K.S. BHASKAR
("Shareholders")
REORGANIZATION AGREEMENT
REORGANIZATION AGREEMENT made as of this 5th day of February, 1998 among
Greystone Technology Corporation, a corporation organized under the laws of the
State of Delaware ("Company"), Xxxxxx X. Xxxxx and K. S. Bhaskar
("Shareholders") and Xxxxxxx Computer Associates, Inc., a corporation organized
under the laws of the Commonwealth of Pennsylvania ("Xxxxxxx"), and System
Acquisition Corp., a corporation organized under the laws of the State of
Delaware and wholly-owned subsidiary of Xxxxxxx ("SAC").
BACKGROUND
Shareholders own 1,928,292 shares of common stock, $.01 par value (the
"Company Stock") of, in the amounts set forth in Schedule A hereto,
representing all of the issued and outstanding shares of capital stock of
Company. Xxxxxxx desires to acquire Company through a merger of SAC with and
into the Company (the "Merger"), with the Company being the surviving
corporation (the "Surviving Corporation"), pursuant to the terms and
conditions set forth herein and in an Agreement of Merger in the form
attached hereto as Exhibit A (the "Agreement of Merger") in a transaction
intended, for federal income tax purposes, to qualify as a reorganization
under the provisions of Section 368(a)(2)(E) of the Internal Revenue Code of
1986, as amended (the "Code") and, for accounting purposes, to be accounted
for as a "pooling of interests", upon the other terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, representations and warranties made in this Agreement,
Xxxxxxx, SAC, Company and Shareholders, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definition. For convenience certain terms in this
Agreement shall have the following meanings (such terms as well as any other
terms defined elsewhere in this Agreement shall be equally applicable to both
the singular and plural terms defined), respectively:
"Accounts Receivable" shall mean all of Company's accounts
receivable and notes receivable created or arising in respect of the sale of
services, products or other assets.
"Accredited Investor" shall have the meaning assigned to that term
in Rule 501 under the Securities Act.
"Additional Purchaser Shares" shall have the meaning assigned to it
in Section 2.1(b) hereof.
"Affiliate" shall mean, as to any specified person, (a) any other
person controlling, controlled by or under common control with such
specified person, (b) any officer, director or partner of such specified
person, (c) any other person of which such specified person is an officer,
employee, agent, director, shareholder or partner or (d) any member of the
Family Group of such specified person or of any individual who is an
Affiliate of such specified person by reason of clause (a) or (b) of this
definition. The term "control," with respect to any person, means
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of such person, whether through the ownership
of voting securities or a partnership interest, by contract or otherwise.
"Family Group" means, as to any individual, such individual's spouse,
ancestors, lineal descendants and trusts for the benefit of any of the
foregoing, provided that all the income beneficiaries and remaindermen of any
such trust are such individual's spouse, ancestors or lineal descendants.
"Agreement of Merger" shall have the meaning assigned to it in the
"Background" above.
"Assets" shall mean, collectively, all of Company's assets,
properties and rights of every kind and description, tangible and intangible,
wherever situated, including without limitation (i) those assets and
properties reflected on the Balance Sheet, with only such changes therein as
shall have occurred in the regular and ordinary course of Company's business
consistent with past practice since the Balance Sheet Date, and (ii) all
rights of Company under all agreements, contracts, commitments, leases,
plans, bids, quotations, proposals, licenses, permits, authorizations,
instruments and other documents to which it is a party or by which it has
rights.
"Balance Sheet" shall mean a balance sheet of Company as of the
last day of the month preceding the month in which the Closing occurs (the
"Balance Sheet Date") prepared in accordance with generally accepted
accounting principles consistently applied (and in a manner consistent with
Company's historical preparation of financial statements).
"Cash" shall mean all of Company's cash and cash equivalents as of
the Closing Date.
"Closing" shall mean the consummation of the transactions
contemplated to occur hereunder on the Closing Date pursuant to Article III
hereof.
"Closing Date" shall have the meaning assigned to it in Section 3.1(a)
hereof.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act or Exchange
Act.
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"Company Stock" shall have the meaning assigned to it in "Background"
above.
"Company Stock Option" shall mean any option to purchase shares of
Company Stock under Company's 1994 Stock Option Plan.
"Condition" shall mean the assets, liabilities, business, operations,
results of operations or condition (financial or otherwise) of Company.
"Equipment" shall mean all of Company's furniture, fixtures,
machinery, equipment, motor vehicles, office equipment, computers, tools and
replacement parts, wherever located, all of the Equipment on the date hereof
being listed on Schedule 4.10(c) hereof.
"Escrow Agent" shall mean PNC Bank, National Association acting in its
capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" shall mean the Escrow Agreement among Shareholders,
Xxxxxxx and the Escrow Agent substantially in the form attached hereto as
Schedule 1.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the related rules and regulations of the Commission (or of any
other Federal agency then administering the Exchange Act) thereunder, all as
the same shall be in effect at the time.
"Financial Statement Date" and "Financial Statements" shall have the
meanings assigned in Section 4.12(a) hereof.
"Hazardous Substances" means any toxic or hazardous gaseous, liquid
or solid material or waste the existence of which is recognized by
governmental authorities to pose a hazard to the environment or human health
or safety including (i) any "hazardous substances" as defined by the federal
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.Sections 9601 et seq., (ii) any "extremely hazardous substance",
"hazardous chemical", "toxic chemical" or "toxic substance" as those terms
are defined by the federal Emergency Planning and Community Right-to-Know
Act, 42 U.S.C.11001 et seq., and the federal Toxic Substance Control Act,
(iii) any "hazardous waste" as defined under the federal Solid Waste Disposal
Act, as amended by the Resource Conversation and Recovery Act, 42 U.S.C.
Sections 6901 et seq., (iv) any "pollutant," as defined under the federal
Water Pollution Control Act, 33 U.S.C. Sections 1251 et seq., as any of such
laws in clauses (i) through (iv) may be amended from time to time, (v) any
"hazardous air pollutant" as defined under the federal Clean Air Act, 42
U.S.C. Sections 7401 et seq. and (vi) any regulated substance or waste under
any laws or court orders that currently exist or that may be enacted,
promulgated or issued in the future by any federal, state or local
governmental authorities concerning protection of the environment.
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"Intellectual Property and Information" shall mean all the
following of Company, as it relates to Company: patents, applications for
patents, trademarks, trademark registrations, applications for trademark
registrations, trade names, service marks, service xxxx registrations,
applications for service xxxx registrations, copyrights, copyright
registrations, applications for copyright registrations, computer programs,
trade secrets, product related artwork and know-how.
"Knowledge" shall have the meaning assigned to it in Section 13.2
hereof.
"Liabilities" shall mean any and all obligations or liabilities of
any nature whatsoever, express or implied, matured or unmatured, disputed,
liquidated, unliquidated, absolute, fixed or contingent, known or unknown.
"Lien" shall mean mortgage, lien, security interest, pledge,
encumbrance, restriction on transferability, default of title, charge or
claim of any nature whatsoever or any property or property interest.
"Merger" shall have the meaning assigned to it in "Background" above.
"Merger Consideration" shall mean 84,050 shares of Xxxxxxx Stock.
"Permitted Liens" shall mean those Liens for taxes not yet due and
payable and those Liens identified on Schedule 4.9 hereto that will remain as
Liens against or affecting the Assets following the Closing.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust, university, or unincorporated
organization, or a government, or any agency or political subdivision thereof.
"Prepaid Items" shall mean all of Company's prepaid expenses,
including but not limited to advances and deposits listed on Schedule 4.6(g)
hereto.
"Xxxxxxx Stock" shall have the meaning assigned to it in Section 2.1
hereof.
"Shareholders Documents" shall mean the documents of Shareholders
described in Section 3.1(b) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the related rules and regulations of the Commission (or any Federal
agency then administering the Securities Act), all shall be in effect at the
time.
"Subsidiary" or "Subsidiaries" means any Person of which the
Company and/or any of its other Subsidiaries (as herein defined) directly or
indirectly owns at the time at least
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fifty percent (50%) of the outstanding voting shares, units or interests of
every class of such Person other than directors' qualifying shares.
"Surviving Corporation" shall have the meaning assigned to it in
"Background" above.
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ARTICLE II
THE MERGER
Section 2.1. Merger. Subject to the terms and conditions herein set
forth, Company and SAC shall be merged in accordance with the Agreement of
Merger. Company shall continue as the surviving Delaware corporation
(sometimes hereinafter, the "Surviving Corporation") and shall continue its
existence under the laws of the State of Delaware, and the separate corporate
existence of SAC shall cease. The manner of converting the shares of Company
Stock into shares of Xxxxxxx'x common stock, no par value (the "Xxxxxxx
Stock"), and the amount of securities of Xxxxxxx to be paid or delivered to
the Shareholders in exchange for or upon surrender of their shares of Company
Stock shall be as follows:
(a) At the Effective Time (as defined in the Agreement of Merger),
SAC shall cause to be issued to each Shareholder or into escrow pursuant to
the Escrow Agreement such number of shares of Xxxxxxx Stock as shall be
necessary to effect the Merger in the manner herein provided.
(b) Each share of Company Stock issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive that number of shares of Xxxxxxx Stock set forth in Schedule A
hereto. No fractional shares shall be issued. Any shares of Company Stock
held in the treasury of Company shall be cancelled.
(c) Each share of capital stock of SAC issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into a
share of Company Stock.
(d) At the Effective Time, all then outstanding options to
purchase shares of Company Stock issued under the Company's 1994 Stock Option
Plan, not exercised as of the Effective Time, will be assumed by Xxxxxxx in
accordance with Section 7.11.
Section 2.2. Approval by Shareholders. At or prior to the Closing,
the Board of Directors and the Shareholders of Company shall duly approve
this Agreement and the Agreement of Merger and the Board of Directors and
sole stockholder of SAC shall duly approve this Agreement and the Agreement
of Merger. Simultaneously with the consummation of the Closing, a
Certificate of Merger and any other instruments or documents required to make
the Merger effective shall be filed with the appropriate governmental
agencies or authorities in accordance with the provisions of the Delaware
General Corporation Law.
Section 2.3. Merger Closing. At the Closing, Xxxxxxx (i) shall
deliver to Shareholders 75,645 Shares of Purchaser Common Stock (the "Closing
Shares") and (ii) shall deliver to the Escrow Agent, on behalf of the
Shareholders, 8,405 Shares of Xxxxxxx Common Stock (the "Escrow Shares"), for
deposit and disposition pursuant to the Escrow Agreement.
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ARTICLE III
CLOSING
Section 3.1. Closing
(a) General. Unless otherwise agreed to by the parties hereto, the
closing under this Agreement (the "Closing") will be held at the offices of
Xxxxxxx commencing at 10:00 a.m. on February 5, 1998, or such other date and
time as shall be mutually agreed to in writing by Xxxxxxx and Shareholders (the
"Closing Date").
(b) Delivery. At the Closing and as a condition to Closing:
(i) Xxxxxxx and the Surviving Corporation shall deliver the
Merger Consideration to the Shareholders and the Escrow Agent in the amounts set
forth in Schedule A hereto, all registered in the names of the Shareholders and
in due and proper form;
(ii) Company and SAC shall consummate the Merger as provided in
Section 2.1 and the Agreement of Merger; and
(iii) the parties shall deliver to each other the respective
agreements, legal opinions and other documents specified with respect to them in
Articles VIII and IX.
(c) Expenses. Each party shall be responsible for the payment of
costs it has incurred and will incur in connection with the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
Except as specifically otherwise stated below, Company and Shareholders
jointly and severally represent and warrant to Xxxxxxx and SAC as follows:
Section 4.1. Organization and Qualification. Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and in good corporate standing as a
foreign corporation authorized to transact business and to own and lease
property in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties owned or leased by it
requires such qualification in order to avoid liability or disadvantage,
except where the failure to be so qualified would not have a material adverse
effect on Company. All of such jurisdictions are listed on Schedule 4.1.
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Section 4.2. Capitalization of Company. As of the date hereof, the
total authorized capital stock of Company consists of (a) 2,118,400 shares of
Common Stock, par value $.01 per share (the "Common Stock") and (b) 881,600
shares of Non-Voting Common Stock, par value $.01 per share (the "Non-Voting
Common Stock"), of which 1,046,692 shares of Common Stock and 881,600 shares
of Non-Voting Common Stock are validly issued and outstanding, fully paid and
nonassessable and owned by Shareholders as set forth in Schedule A hereto.
There are no existing agreements, subscriptions, options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire from
Company at any time, or upon the happening of any event, any shares of the
capital stock of Company whether or not presently issued or outstanding; no
outstanding securities of Company which are convertible into shares of
Company; and no agreements, subscriptions, options, warrants, calls,
commitments or rights to purchase or otherwise acquire from Company any such
securities so convertible, except as noted on Schedule 4.2.
Section 4.3. Stock Ownership. Each Shareholder severally (but not
jointly with the other Shareholder) represents and warrants that he is the
lawful owner of record and beneficially of the number of shares of the
Company Stock set forth opposite his respective name in Schedule A hereto,
free and clear of all pledges, liens, claims and encumbrances of every kind,
including, without limitation, any agreements, subscriptions, options,
warrants, calls, commitments or rights of any character granting to any
person, firm or corporation any interest in or right to acquire from such
Shareholder at any time, or upon the happening of any event, any shares of
the Company Stock. Each Shareholder severally (but not jointly with the
other Shareholder) represents and warrants that he has full legal power and
all authorization required by law to transfer and deliver the Company Stock
owned by him in accordance with this Agreement.
Section 4.4. Subsidiaries, Interest in Other Entities. Schedule 4.4
hereto lists all subsidiaries of Company (individually, a "Subsidiary," and
collectively, the "Subsidiaries"). Each Subsidiary is a corporation duly
organized, validly existing and in good corporate standing under the laws of
its jurisdiction of incorporation listed on Schedule 4.4, has all requisite
corporate power and authority to conduct its business as it has been and is
now being conducted and to own, lease and operate the properties and assets
used in connection therewith, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction, as set forth on
Schedule 4.4, wherein the conduct of its business or the ownership or leasing
of its properties and assets requires such qualification, except where the
failure to be so qualified would not have a material effect on Company. The
authorized, issued and outstanding shares of the capital stock of each
Subsidiary are as listed on Schedule 4.4, and all of the issued and
outstanding shares of each Subsidiary are owned of record and beneficially by
Company or another Subsidiary, as indicated on Schedule 4.4, free and clear
of all pledges, liens, claims and encumbrances of every kind, including,
without limitation, any agreements, subscriptions, options, warrants, calls,
commitments or rights of any character granting to any person, firm or
corporation any interest in or right to acquire from Company or any
Subsidiary, at any time, or upon the happening of any event, any shares of
the issued and outstanding capital stock of any
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Subsidiary. All of the issued and outstanding shares of the capital stock of
each Subsidiary have been duly authorized and are validly issued, fully paid
and nonassessable. There are no existing agreements, subscriptions, options,
warrants, calls, commitments or rights of any character to purchase or
otherwise acquire from any Subsidiary at any time, or upon the happening of
any event, any shares of the capital stock of such Subsidiary whether or not
presently issued or outstanding; no outstanding securities of any Subsidiary
which are convertible into shares of such Subsidiary; and no agreements,
subscriptions, options, warrants, calls, commitments or rights to purchase or
otherwise acquire from any Subsidiary any such securities so convertible.
Section 4.5 INTENTIONALLY LEFT BLANK.
Section 4.6. Due Authorization. Each Shareholder severally (but not
jointly with the other Shareholder) represents and warrants that he has the
right, power and authority to enter into and perform this Agreement, and this
Agreement constitutes the valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms.
Section 4.7. Conflict with Other Instruments; Absence of Restrictions.
The execution, delivery and performance of this Agreement by Company and
Shareholders will not contravene any provision of Company's certificate of
incorporation or by-laws and, except as set forth on Schedule 4.8, will not
result in a breach of, or constitute a default under, any agreement or other
document to which Company is a party or by which Company is bound, or any
decree, order or rule of any domestic or foreign court or governmental agency
or any provision of applicable law which is binding on Company, or result in
the creation or imposition of any Lien on any of Company or give to others
any interest or rights therein or create in any third party the right to
modify, terminate or accelerate (or to make a claim for damages in respect
of) any instrument or contract to which Company is a party or by which
Company is bound. Each Shareholder severally (but not jointly with the other
Shareholder) represents and warrants that the execution, delivery and
performance of this Agreement by Company and such Shareholder will not result
in a breach of, or constitute a default under, any agreement or other
document to which such Shareholder is a party or such Shareholder is bound,
or any decree, order or rule of any domestic or foreign court or governmental
agency or any provision of applicable law which is binding on such
Shareholder.
Section 4.8. Government and Third-Party Approvals. Each Shareholder
severally (but not jointly with the other Shareholder) represents and
warrants that, except as listed on Schedule 4.8, no consent by, approval or
authorization of or filing, registration or qualification with any federal,
state or local authority, or any foreign governmental authority, or any
corporation, person or other entity (including any party to any contract or
agreement with each Shareholder, respectively, or Company) is required (a)
for the execution, delivery or performance of this Agreement or (b) in
connection with such Shareholder's or Company's consummation of the
transactions contemplated hereby, to the extent that the failure to obtain
such consent, approval or authorization, or to make such filing, registration
or qualification, would have a material adverse effect on Company, Xxxxxxx or
SAC.
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Section 4.9. Title to Assets and Related Matters. Company has good,
valid and marketable title to all of its Assets, whether tangible or
intangible, and whether consisting of real or personal property, and all such
Assets are held free and clear of mortgages, liens, pledges, claims, charges,
security interests or other encumbrances or limitations of any nature
whatsoever, except as noted on Schedule 4.9.
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Section 4.10. Other Representations Regarding Company's Assets.
(a) Accounts Receivable. Except as set forth on Schedule 4.10,
all of the Accounts Receivable (i) have arisen solely in the ordinary course
of business of Company; (ii) represent valid obligations due to Company and
are enforceable in accordance with their terms; and (iii) are collectible on
or before the 90th day following the Closing Date in the ordinary course of
business in the aggregate recorded amounts thereof in accordance with their
terms.
(b) Cash Accounts. Schedule 4.10(b) lists each bank and mutual
fund account and safe deposit box of Company and each person authorized to
sign checks or withdraw funds from such accounts and to have access to such
safe deposit boxes.
(c) Equipment. Except as set forth on Schedule 4.10(c), the items
of Equipment listed on Schedule 4.10(c) are in good working order and fit for
their intended use (ordinary wear and tear excepted). The Equipment includes
all of the equipment currently owned by Company.
(d) Intentionally left blank.
(e) Intellectual Property and Information. The Intellectual
Property and Information includes all of Company's intellectual property
rights which are used or useful in operating Company's business. Company
owns exclusively or has a valid right to use the Intellectual Property and
Information being used to conduct its business as now operated and the
conduct of its business as now operated does not and, to Company's and
Shareholders' knowledge, will not conflict with or infringe upon the
intellectual property rights of others. A complete list of licenses other
than standardized end-user software licenses and registrations of and
applications for registrations of such Intellectual Property and Information
is attached hereto as Schedule 4.10(e). Except as set forth on Schedule
4.10(e), no claim is pending or, to Company's and Shareholders' knowledge,
threatened against Company and/or its officers, employees and consultants to
the effect that any such Intellectual Property and Information owned or
licensed by Company, or which Company otherwise has the right to use, is
invalid or unenforceable by Company. Except pursuant to the terms of any
licenses specified on Schedule 4.10(e), Company has no obligation to
compensate any person or entity for the use of any such Intellectual Property
and Information, and Company has not granted any person or entity any license
or other right to use any of the Intellectual Property and Information of
Company, whether requiring payment of royalties or not.
Company has taken all reasonable measures to protect and preserve the
security, confidentiality and value of its Intellectual Property and
Information and other confidential information. Those employees and
consultants of Company involved in the design, review, evaluation or
development of products, Intellectual Property and Information or other
confidential information have executed a nondisclosure and assignment of
inventions agreement sufficient to protect the confidentiality and value of
Company's Intellectual Property and
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Information and other confidential information and to vest in Company
exclusive ownership of such Intellectual Property and Information and other
confidential information. To Company's and Shareholders' knowledge all
material trade secrets and other confidential information of Company are
presently valid and protectible and are not part of the public domain or
knowledge, nor, to Company's and Shareholders' knowledge, have they been
used, divulged or appropriated for the benefit of any person other than
Company or otherwise to the detriment of Company, and no such employee or
consultant is subject to any contractual or legal restrictions which might
interfere with the use of their best efforts to promote the interests of
Company. To Company's and Shareholders' knowledge, no employee or consultant
of Shareholder has used any trade secrets or other confidential information
of any other person in the course of their work for Company. Except as set
forth on Schedule 4.10(e), Company is the exclusive owner of all right, title
and interest in its Intellectual Property and Information and other
confidential information as purported to be owned by it, and such
Intellectual Property and Information and other confidential information are,
to Company's and Shareholders' knowledge, valid and in full force and effect.
Neither Company nor any of its employees or consultants has received notice
of, and to the best of Shareholders' knowledge there are no, claims that
Company's Intellectual Property and Information and other confidential
information or the use or ownership thereof by Company infringes, violates or
conflicts with any such right of any third party. To Company's and
Shareholders' knowledge, no university, hospital, government agency (whether
federal or state) or other organization which sponsored research and
development conducted by Company has any claim of right to or ownership of or
other encumbrance upon the Intellectual Property and Information and other
confidential information of Company.
(f) Computer Software.
(i) Performance. Each of the computer software products
sold, licensed, distributed, marketed or used by Company (the "Software
Products") performs, to a material extent, in accordance with specifications,
documentation and other written material used in connection with the sale,
license, distribution, marketing or use thereof and is free of material
defects in programming and operation. Schedule 4.10(f)(i) contains a
complete list of Software Products.
(ii) Development. Except set forth on Schedule 4.10(f)(ii),
no employee of Company is in default under any term of any employment
contract, agreement or arrangement relating to the Software Products, any
noncompetition or confidentiality arrangement or any other contract or
restrictive covenant relating to the Software Products or their development
or exploitation. Except as set forth on Schedule 4.10(f)(ii), the Software
Products do not include any inventions of employees of Company made prior to
the time such employees became employees of Company or made outside of the
scope of such employees' employment, nor any property of any previous
employer of such employee. Except as set forth on Schedule 4.10(f)(ii), no
person other than employees of Company participated in the development of any
of the Software Products.
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(iii) Title. All right, title and interest in and to the
Software Products is owned by Company, free and clear of all Liens, except as
indicated on Schedule 4.10(f)(iii). No government funding was utilized in
the development of any of the Software Products. The sale, license,
distribution, marketing or use of the Software Products by Company does not
violate in any material respect any rights of any other person, and Company
has not received any communication alleging such violation. Company has no
obligation to compensate any person for the sale, license, distribution,
marketing or use of the Software Products. Other than as set forth on
Schedule 4.10(f)(iii), Company has not granted to any other person any
license, option or other right in or to any of the Software Products, except
for non-exclusive, royalty-bearing, end-user licenses granted by Company
pursuant to license agreements, substantially in the forms attached as part
of Schedule 4.10(f)(iii) (the "End-User Licenses").
(iv) Maintenance. Company has no obligation to any other
person to maintain, modify, improve or upgrade any of the Software Products,
which obligation could have a material adverse effect on Company, except for
any such obligation set forth in an End-User License or under a maintenance
agreement substantially in the form attached as Schedule 4.10(f)(iv).
(v) Protection of Proprietary Nature of Software Products.
Company has kept secret and has not disclosed the source code for the
Software Products to any person other than certain employees of Company.
Company has taken all reasonable measures to protect the security,
confidentiality and value of the Software Products. All employees and
consultants of Company who are involved in the design, review, evaluation or
development of any Software Products, or who otherwise have access to source
and object codes for the Software Products, have executed a nondisclosure and
assignment of inventions agreement sufficient to protect the confidentiality
and value of the Software Products and to vest in Company exclusive ownership
of the Software Products.
(g) Prepaid Items. All of Company's prepaid expenses are set
forth in Schedule 4.10(g).
Section 4.11. INTENTIONALLY LEFT BLANK.
Section 4.12. Additional Information.
(a) Financial Statements. Schedule 4.12 consists of the unaudited
consolidated financial statements of Company (the "Financial Statements") for
its fiscal year ended September 30, 1997 (the "Financial Statement Date")
(consisting, in each case, of a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of shareholder's equity and
retained earnings and a consolidated statement of cash flows). The Financial
Statements were prepared in accordance with generally accepted accounting
principles and practices consistently applied throughout the periods reported
upon and fairly and accurately present the financial condition and the
results of the operations of Company as at the respective
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dates thereof and for the periods reported therein, except that footnotes
have not been included and the statements are subject to normal year-end
adjustments.
(b) Absence of Liabilities. On the Financial Statement Date,
Company has no Liabilities and no basis for any such Liability exists other
than (i) any reflected in the Financial Statements or in this Agreement or in
any Schedule hereto or (ii) any arising since the Financial Statement Date in
the ordinary course of business of Company and in compliance with the
covenants and agreements of Company herein contained.
Section 4.13. Permits and Approvals. Schedule 4.13 contains a true and
correct description of all material licenses, permits, approvals,
authorizations, consents and registrations issued in favor of Company, all of
which are in full force and effect, and Company is currently being operated
in compliance with the terms of each of the foregoing in all material
respects.
Section 4.14. Compliance with Law. In all material respects, Company
has complied with each, and is not in violation of any, law, ordinance or
governmental rule or regulation necessary to the ownership of its or, the
operation of the business or otherwise.
Section 4.15. Compliance with Environmental Laws. With respect to
Company and the Assets: (a) Company has materially complied with each, and
is not in material violation of any, federal, state or local law, statute,
regulation, permit provision or ordinance, relating to the use, generation,
handling, storage, transportation, release, treatment or disposal of
Hazardous Substances (the "Environmental Laws"); and (b) there are no
locations at any facilities owned, leased or operated by Company where
Hazardous Substances have entered into the soil, surface water or groundwater
in material amounts due to acts or omissions of Company. There are no
on-site or, to the knowledge of Company, off-site locations to which Company
has transported Hazardous Substances or arranged for their transportation
from facilities owned, leased or operated by Company, which site is the
subject of any federal, state or local enforcement action or other
investigation under any Environmental Laws, which may lead to claims against
Company's Shareholders or Xxxxxxx for clean-up costs, remedial work, damages
to natural resources or for personal injury claims, including, but not
limited to, claims under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"). To the
knowledge of Company, no polychlorinated biphenyls or substances containing
polychlorinated biphenyls are present on facilities owned, leased or operated
by Company in connection with the business or the Assets, and, to the
knowledge of Company, no asbestos or materials containing asbestos are
present on facilities owned, leased or operated by Company in connection with
the business or the Assets. To the knowledge of Company, the Assets are free
from the presence of radon gas or the presence of the radioactive decay
products of radon or any other radioactive contaminant.
Section 4.16. Additional Environmental Disclosures. Schedule 4.16
hereto contains lists or summary descriptions of the following insofar as
they affect or relate to facilities owned, leased or operated by Company:
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(a) All federal, state, and local permits relating to Hazardous
Substances held by Company or any Affiliate;
(b) All variances, notices of violation, compliance orders,
consent agreements or decrees or judgments against or involving Company
involving any environmental matters;
(c) All notices given by Company to any governmental body or
official about discoveries of problems associated with Hazardous Substances
at facilities owned, leased or operated by Company, including copies of all
spill reports, all reports submitted by Company pursuant to environmental
permits, information supplied in response to inquiries from federal, state or
local agencies, and any requests submitted to Company by the United States
Justice Department, the United States Environmental Protection Agency or
state agencies pursuant to CERCLA or RCRA regarding the hazardous wastes or
hazardous substances Company has generated in the past and where those wastes
and substances are disposed; and
(d) All underground storage tanks located on facilities owned,
leased or operated by Company.
Section 4.17. Litigation. No litigation, arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge of
Company or Shareholders, threatened against Company with respect to the
business or any of the Assets or the transactions contemplated by this
Agreement. Company is not a party to or subject to the provisions of any
judgment, order, writ, injunction, decree or award of any court, arbitrator
or governmental or regulatory official, body or authority which affects
Company's business or the Assets. Each Shareholder severally (but not
jointly) represents and warrants that he is not a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which affects Company's business or the Assets .
Section 4.18. Absence of Changes. Between the Financial Statement Date
and the Closing Date there has not been:
(a) Any material change in the Condition, except changes in the
ordinary course of business, none of which individually or in the aggregate
has been or will be prior to the Closing materially adverse to the business
or the Assets or could materially affect the Condition;
(b) Any damage, destruction or loss relating to the business or
the Assets, whether or not covered by insurance or any other event or
condition which has had or would have a material adverse effect, in the
aggregate, on the Assets or on the Condition;
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(c) Any claims relating to the business or the Assets not covered
by applicable policies of liability insurance within the maximum insurable
limits of such policies;
(d) Any cancellation of supply contracts or purchase orders
relating to the business in an amount exceeding $5,000 in any case or $15,000
in the aggregate;
(e) Any material deterioration in the Condition of Company;
(f) Any declaration, setting aside or payment of any dividend or
other distribution in respect of any shares of the Company Stock, or any
direct or indirect redemption, purchase or other acquisition of any such
shares; or
(g) Any increase in the compensation payable or to become payable
by Company to any of its officers, employees or agents, or any known payment
or arrangement made to or with any thereof other than as set forth on
Schedule 4.18(g).
Section 4.19. Contracts, Leases, Etc. Except as listed and described
on Schedule 4.19 hereto, or as otherwise disclosed herein, Company is not
party to any written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for the employment
of any person, including any consultant;
(b) agreement, contract, commitment or arrangement with any labor
union or other representative of employees;
(c) agreement, contract or commitment for the future purchase of,
or payment for, supplies or products which obligates Company to purchase
supplies or products not limited as to quantity or at a specified price
unrelated to the market price and which is not cancelable on 30 days notice
or less without penalty; or for the performance of services by a third party
which involves in any one case $5,000.00 and is not cancelable on 30 days
notice or less without penalty;
(d) agreement, contract or commitment to sell or supply products
or to perform services which obligates Company to sell products or perform
services on terms not limited as to quantity but limited as to price which is
not cancelable on 30 days' notice or less without penalty;
(e) representative, distribution, purchase or sales agency
agreement, contract or commitment;
(f) lease under which any Shareholder or Affiliate is either
lessor or lessee;
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(g) note, debenture, mortgage, pledge, charge, security agreement,
bond, conditional sale agreement, equipment trust agreement, letter of credit
agreement, loan agreement or other contract or commitment for borrowing or
lending of money (including, without limitation, loans to or from officers,
directors or any member of their immediate families), agreement or
arrangements for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person, except for annual bonuses accrued on the
financial statements or as otherwise disclosed in Schedule 4.24;
(h) agreement, contract or commitment for any charitable or
political contribution;
(i) agreement, contract or commitment for any capital expenditure
in excess of $5,000.00;
(j) agreement, contract or commitment limiting or restraining it
from engaging or competing in any lines of business with any person;
(k) license, franchise, distributorship or other similar
agreement, including those which relate in whole or in part to any patent,
trademark, trade name, service xxxx or copyright or to any ideas, technical
assistance or other know-how of or used by it in the operation of the
business;
(l) profit sharing, stock purchase, stock option, pension,
retirement, long-term disability, hospitalization, insurance or similar
material plans providing employee benefits;
(m) other agreement, contract or commitment requiring payments or
other consideration by or from Shareholder in excess of $5,000.00 during the
remainder of its term; or
(n) other material agreement, contract or commitment not made in
the ordinary course of business.
All of the foregoing agreements, contracts, commitments, leases and
other documents and undertakings are sometimes herein referred to as the
"Contracts."
Each of the Contracts is valid and enforceable in accordance with
its terms; to the knowledge of Company and Shareholders, the Company and, to
the knowledge of Company and Shareholders, the other parties thereto are in
compliance with the provisions thereof in all material respects; neither
Company nor, to the knowledge of Company or Shareholders, any other party is
in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained therein, which default would have a material
adverse effect on the Condition; no event has occurred which with or without
the giving of notice or lapse of time, or both, would constitute a default by
Company thereunder, which default would have a material adverse effect on the
Condition. Except as set forth on Schedule 4.19, none of the terms or
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provisions of any of the Contracts adversely affects the Condition or
includes a restriction on Company's ability to compete.
Section 4.20. Relationship With Customers and Suppliers. Company has
used its reasonable business efforts to maintain, and currently maintains, in
all material respects, good working relationships with all of its customers
and suppliers. Each of Company's contracts with its customers and related
customer relationships which have been terminated or cancelled during the one
year period ended October 31, 1997 are set forth and described on Schedule
4.20. Schedule 4.20 also contains a list of the names of each of the ten
customers who, in the aggregate, for the three fiscal years ending 1997, 1996
and 1995, were the largest dollar volume customers of products sold by
Company. Except as set forth on Schedule 4.20,none of such customers has
given Company written notice terminating, canceling or threatening to
terminate or cancel any contract or relationship with Company.
Section 4.21. Product and Service Warranties. Set forth on Schedule
4.21 are the standard forms of product and service warranties and guarantees
utilized by Company in connection with the operation of the business together
with all other material product and service warranties and guarantees used by
Company in connection with the operation of the business.
Section 4.22. Taxes. Company has duly and timely filed with the
appropriate governmental agencies (federal, state, local and foreign) all tax
and other returns required to be filed by it. Company has paid, or has made
sufficient provision for the payment of, all taxes required (a) to be paid by
it for all fiscal and other applicable tax periods which have ended or (b) to
be accrued for the portion of the current fiscal or other current applicable
tax period up to the day prior to the Closing Date, except as disclosed on
Schedule 4.22. No deficiencies for any taxes have been asserted in writing or
assessed against Company which remain unpaid and which individually or in the
aggregate are material to the Condition. Company's federal income tax
liabilities, if any, have not been audited by the Internal Revenue Service .
Section 4.23. Insurance. Schedule 4.23 sets forth a list of all
policies or binders of fire, liability, product liability, worker's
compensation, vehicular or other insurance held by or on behalf of Company
(specifying for each such insurance policy, except the policies for worker's
compensation and vehicular insurance, the insurer, the policy number or
covering note number with respect to binders, and each pending claim
thereunder of more than $5,000 and setting forth the aggregate amounts paid
out under each such policy through the date hereof). To the knowledge of
Company and Shareholders, such policies and binders are valid, in full force
and effect and sufficient to protect the business and the Assets against all
insured hazards. Company is not in default with respect to any material
provision contained in any such policy or binder and Company has not failed
to give any written notice or present any claim of which it has notice under
any such policy or binder in a timely fashion. Company has not received or
given a written notice of cancellation or non-renewal with respect to any
such policy or binder. Neither Company nor either Shareholder has any
knowledge of any material inaccuracy in any application for such policies or
binders, any failure to pay premiums when due or any similar
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state of facts which might form the basis for termination of any such
insurance. Company has not received written notice from any of its insurance
carriers that any insurance premiums will be materially increased in the
future or that any insurance coverage listed on Schedule 4.23 will not be
available in the future on substantially the same terms as now in effect.
Section 4.24. Employees. Schedule 4.24 lists each of the employees of
Company (collectively, the "Employees") and the annualized aggregate
compensation as salary, wages and bonuses of each such Employee from October
1, 1996 through September 30, 1997 (or, if such Employee was hired after
October 1, 1996, for the period beginning on the date of hire). In addition,
Schedule 4.24 lists (a) the base salary, as currently in effect, for each of
the Employees, (b) the bonus arrangements, if any, currently in effect for
each of the Employees, (c) the commission arrangements, if any, currently in
effect for each of the Employees and (d) the date on which the most recent
salary increase went into effect for each of the Employees and the amount of
each such increase.
Section 4.25. Strikes, Picketing, etc; Overtime, Back Wage, Vacation,
Discrimination, and Occupational Safety Claims. There has been no strike,
slowdown, picketing, work stoppage or labor dispute by any union or other
group of employees of Company for three years, and to Company's or
Shareholders' knowledge, no such action or dispute has been threatened.
Company has not made any loan or given anything in value, directly or
indirectly, to any officer, official, agent or representative of any labor
union or group of employees (other than regular salaries and wages). Company
has received no written notice of any outstanding claims against Company
(whether under federal, state or foreign law, under any employment agreement,
union labor contract or otherwise) asserted by any present or former employee
of Company on account of or for (a) overtime pay, other than overtime pay for
work done during the current payroll period; (b) wages or salary for any
period other than the current payroll period; (c) any amount of vacation pay
or pay in lieu of vacation time, other than vacation time or pay in lieu
thereof earned in or in respect of the current fiscal year; or (d) any
violation of any statute, ordinance or regulation relating to minimum wages
or maximum hours of work. Company has received no written notice that any
person or party has asserted or threatened to assert any claims against
Company under or arising out of any statute, ordinance or regulation relating
to discrimination or occupational safety in employment or employment
practices (including, without limitation, the Occupational Safety and Health
Act of 1970, as amended, the Fair Labor Standards Act, as amended, Title VII
of the Civil Rights Act of 1964, as amended, or the Age Discrimination in
Employment Act of 1967, as amended).
Section 4.26. Pension and Other Employee Benefit Plans. There is set
forth or identified in Schedule 4.26 all of the plans, funds, policies,
programs, arrangements or understandings sponsored or maintained by Company
which provide any employee of Company (or any dependent or beneficiary of any
such employee) with (a) retirement benefits; (b) severance or separation from
service benefits; (c) incentive, performance, stock, share appreciation or
bonus awards; (d) health care benefits; (e) disability income or wage
continuation benefits; (f) supplemental unemployment benefits; (g) life
insurance, death or survivor's benefits; (h) accrued
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sick pay or vacation pay; or (i) any other type of material benefit offered
under any arrangement subject to characterization as an "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and not excepted by Section 4 of
ERISA (the foregoing being collectively called "Employee Benefit Plans").
Except as described on Schedule 4.26, none of such Employee Benefit Plans is
an "employee benefit pension plan" or a "pension plan" as defined in Section
3(2) of ERISA. As to any Employee Benefit Plan identified in Schedule 4.26,
each of the following is true: (i) all amounts due from Company as
contributions to the date hereof have been paid or accrued on their books;
(ii) Company and any Affiliated Company (as hereinafter defined) have
performed or satisfied all material obligations required to be performed or
satisfied by them under, and are not in default under or in violation of, any
Employee Benefit Plan and, to Company's and Shareholders' knowledge, no other
party is in default thereunder or in violation thereof; (iii) Company and any
Affiliated Company are in compliance in all material respects with the
requirements (including reporting and disclosure requirements applicable to
them) prescribed by all statutes, orders or governmental rules or regulations
applicable to the Employee Benefit Plans, including, but not limited to,
ERISA and the Internal Revenue Code of 1986, as amended (the "Code"); (iv)
neither Shareholder nor any Affiliated Company or any other "disqualified
person" or "party in interest" (as defined in Section 4975 of the Code and
Section 3(14) of ERISA, respectively) has engaged in any "prohibited
transaction," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, which could reasonably be expected to subject any Employee
Benefit Plan (or its related trust), Company or any Affiliated Company,
Xxxxxxx, any shareholder, officer, director, partner or employee of Company,
any Affiliated Company or Xxxxxxx, or any trustee, administrator or other
fiduciary of any Employee Benefit Plan to the tax or penalty imposed under
Section 4975 of the Code or Section 502(i) of ERISA; and (v) there are no
material actions, suits or claims pending (other than routine claims for
benefits) or, to Company's knowledge, threatened, against any Employee
Benefit Plan or against the assets of any Employee Benefit Plan. For
purposes of this Section 4.26, "Affiliated Company" shall mean any member
(whether or not incorporated) of a group which is part of a controlled group
of corporations or under common control (within the meaning of the
regulations promulgated under Section 414 of the Code) and of which Company
is a member. Company does not maintain or participate in, and has never
maintained or participated in, any "multiemployer plans" as defined in
Section 3(37) of ERISA.
Section 4.27. INTENTIONALLY LEFT BLANK.
Section 4.28. Contracts with Affiliates. There are no contracts,
obligations or arrangements between Company and any director, officer,
shareholder or employee of Company or any Affiliate of any such person
applicable to the business or the Assets except for those identified on
Schedule 4.28.
Section 4.29. INTENTIONALLY LEFT BLANK.
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Section 4.30. Directors and Officers. Schedule 4.30 sets forth a true
and complete list as of the date of this Agreement showing the names of each
of the Company's and each of Subsidiaries' officers and directors, each of
whom has been duly elected.
Section 4.31. Commission. Neither Company nor anyone on its behalf has
made any agreement or taken any action which may cause anyone claiming
through Company or Shareholders to become entitled to a commission as a
result of the Merger pursuant to this Agreement.
Section 4.32. Tax Matters; Pooling.
(a) Neither Company nor, to the knowledge of Shareholders, any of
its affiliates has taken or agreed to take any action that would prevent the
sale of the Company Stock from constituting a reorganization qualifying under
the provisions of Section 368(a)(2)(E) of the Code. The factual information
provided by Company to Xxxxxxx'x auditors was correct in all material
respects.
(b) Company is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the Code.
(c) Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Section 4.33. Statements and Other Documents Not Misleading. Neither
this Agreement, including all Schedules, nor any other financial statement,
document or other instrument heretofore or hereafter furnished to Xxxxxxx in
connection with the transactions contemplated hereby contains any untrue
statement of any material fact or omits to state any material fact required
to be stated in order to make such statement, document or other instrument
not misleading. The representations and warranties set forth in this Article
IV or in any schedule, exhibit, certificate or other document delivered in
connection with the transactions contemplated hereby constitute the only
representations and warranties given by Company or Shareholders concerning
Company in connection with this Agreement and the transactions contemplated
hereby, and Company and Shareholders hereby disclaim all other
representations and warranties, express or implied, of whatever kind or
nature, including, without limitation, warranties of merchantability or
fitness for a particular purpose, and Xxxxxxx and SAC hereby acknowledge that
they have relied solely on the representations and warranties made by Company
and Shareholders in this Agreement or in any schedule, exhibit, certificate
or other document delivered in connection with the transactions contemplated
hereby in connection with this transaction.
ARTICLE V
CERTAIN REPRESENTATIONS AND WARRANTIES RESPECTING SHAREHOLDERS'
INVESTMENT
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Section 5.1. Private Placement. Each Shareholder represents and
warrants that if the sale of the Company Stock is consummated, he or it (a)
will acquire the Xxxxxxx Stock for his or its own account, as principal and
not on behalf of other persons and for investment and not with a view to the
resale or distribution of all or any part of such shares; (b) understands
that the Xxxxxxx Stock constitutes "restricted securities" within the meaning
of the rules and regulations promulgated under the Securities Act, and that a
stop-transfer instruction will be issued by Xxxxxxx to its transfer agent
with respect to the Xxxxxxx Stock, that the Xxxxxxx Stock will not be
initially registered under the Securities Act and cannot be sold by him or it
unless they are registered under the Securities Act or unless an exemption
from registration is available, and that Xxxxxxx has no obligation to
register the Xxxxxxx Stock under the Securities Act, except as set forth
herein; (c) is aware that Rule 144 affords a limited exemption from
registration under the Securities Act for the public resale of restricted
securities and that under the terms of Rule 144, as currently in effect, the
Xxxxxxx Stock may be sold to the public without registration thereof only
after a period of one year has elapsed from the date of the exchange and then
only in limited amounts upon compliance with all of the other requirements of
Rule 144 and the Securities Act.
-22-
Section 5.2. Certificate Legend. Each Shareholder acknowledges that the
certificates representing the Xxxxxxx Stock will bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state
securities laws. These securities have been acquired for investment
and not with a view to distribution or resale. These securities may
not be offered for sale, sold, delivered after sale, transferred,
pledged or hypothecated in the absence of an effective registration
statement covering such shares under the Act and any applicable state
securities laws, or the availability, in the opinion (reasonably
satisfactory to the corporation) of counsel, of an exemption from
registration thereunder."
Section 5.3. Shareholder Sophistication. In connection with the proposed
sale of the Company Stock, each of Shareholders hereby individually represent
and acknowledge that such Shareholder (a) has such knowledge, sophistication and
experience in business and financial matters that such Shareholder is capable of
evaluating the merits and risks of an investment in the Xxxxxxx Stock, (b) fully
understands the nature, scope and duration of the limitations on transfer
contained in this Agreement; (c) can bear the economic risk of an investment in
the Xxxxxxx Stock and can afford a complete loss of such investment; (d) that
such Shareholder's principal residence during the past two years has been
located in the state set forth opposite Shareholder's name on Schedule A hereto;
and (e) that such Shareholder has received a copy of the following documents:
(i) the Xxxxxxx'x Annual Report to Shareholders for the year ended December 31,
1996, (b) the Xxxxxxx'x Proxy Statement for the Annual Meeting of Shareholders
held on May 29, 1997, and (c) the Xxxxxxx'x Annual Report on Form 10-K for the
year ended December 31, 1996 and Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997; and that such
Shareholder has obtained and reviewed Xxxxxxx'x financial statements referred
to herein. Each Shareholder represents and warrants that such Shareholder has
not relied on any purchaser representative, or on the Company or any other
Shareholder, in connection with the acquisition of shares of Xxxxxxx Stock
hereunder. Shareholders have had an adequate opportunity to ask questions and
receive answers from the officers of Xxxxxxx concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the officers and directors of Xxxxxxx, the plans
for the operations of the business of Xxxxxxx, and the business, operations and
financial condition of Xxxxxxx, and any plans for additional acquisitions and
the like. Shareholders have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction.
Section 5.4. Tax Treatment. Xxxxxxx makes no representations regarding
the tax consequences to Shareholders of the transactions contemplated by this
Agreement, or any representations that this transaction will qualify as a tax
free reorganization within the meaning of Section 368 of the Code. Shareholders
acknowledge that they have been advised of the tax consequences of the
transactions contemplated by this Agreement by their own tax advisers, and
-23-
that they are relying on their tax advisers in determining their respective tax
consequences in connection with the transactions contemplated in this Agreement.
Section 5.5. Pooling. Neither Company nor Shareholders or any of their
affiliates make any representations regarding the treatment of this transaction
for financial reporting purposes, including, without limitation, whether or not
the transaction will be treated as a "pooling of interest" for financial
accounting purposes in accordance with generally accepted accounting principles
and practices consistently applied and applicable Commission regulations.
Xxxxxxx acknowledges that it has been advised of the financial reporting
consequences of the transactions contemplated by this Agreement by its own
accountants and that it is relying on such accountants to determine the
financial reporting of the transactions contemplated herein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES RESPECTING XXXXXXX AND SAC
Xxxxxxx and SAC jointly and severally represent and warrant to Company and
Shareholders as follows:
Section 6.1. Organization. Each of Xxxxxxx and SAC is a corporation duly
formed, validly existing and in good standing under the laws of the Commonwealth
of Pennsylvania and the State of Delaware, respectively.
Section 6.2. Due Authorization. The execution and delivery of this
Agreement by each of Xxxxxxx and SAC and the purchase of the Company Stock and
performance of the obligations of each of Xxxxxxx and SAC contemplated hereby
have been duly and validly authorized by all necessary corporate action. Each of
Xxxxxxx and SAC has the right, power and authority to enter into and perform
this Agreement, and this Agreement constitutes the valid and binding obligations
of each of Xxxxxxx and SAC, enforceable against each of Xxxxxxx and SAC,
respectively, in accordance with its terms. The Xxxxxxx Stock to be exchanged
for the Company Stock pursuant to the terms of this Agreement will be duly
authorized and, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable.
Section 6.3. Conflict With Other Instruments. The execution, delivery
and performance of this Agreement by each of Xxxxxxx and SAC will not contravene
any provision of Xxxxxxx'x or SAC's respective charter or by-laws and will not
result in a breach of, or constitute a default under, any agreement or other
document to which Xxxxxxx or SAC is a party or by which Xxxxxxx or SAC is bound,
or any decree, order or rule of any court or governmental agency or any
provision of applicable law which is binding on Xxxxxxx or SAC.
Section 6.4. Government and Third-Party Approvals. No consent by,
approval or authorization of or filing, registration or qualification with any
federal, state or local authority, or any corporation, person or other entity
(including any party to any contract or agreement with
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Xxxxxxx or SAC) is required for the execution, delivery or performance of this
Agreement by Xxxxxxx or SAC or in connection with Xxxxxxx'x or SAC's
consummation of the transactions contemplated hereby and thereby.
Section 6.5. Litigation. No litigation, arbitration investigation or
other proceeding of or before any court arbitrator or governmental or regulatory
official, body or authority is pending or, to the knowledge of Xxxxxxx or SAC,
threatened against Xxxxxxx or SAC, respectively, or the transactions
contemplated by this Agreement and neither Xxxxxxx nor SAC knows of any basis
for such litigation, arbitration, investigation or proceeding.
Section 6.6. Tax Matters; Pooling.
(a) Neither Xxxxxxx, SAC nor, to the knowledge of Xxxxxxx or SAC, any
of their respective affiliates has taken or agreed to take any action that would
prevent the purchase of the Company Stock from constituting a reorganization
qualifying under the provisions of Section 368(a)(2)(E) of the Code, or from
being treated as a "pooling of interests" for financial accounting purposes in
accordance with generally accepted accounting principles consistently applied
and applicable Commission regulations. Each of Xxxxxxx and SAC has been advised
in writing as of the date of this Agreement by Xxxxxxx'x auditors that in
accordance with generally accepted accounting principles consistently applied
and applicable published rules and regulations of the Commission, Xxxxxxx and
SAC are eligible to be a party to a business combination accounted for as a
"pooling of interests" and that Xxxxxxx'x auditors are not aware of any matters
that preclude the use of pooling of interests accounting in connection with the
sale of the Company Stock, and the factual information provided by Xxxxxxx to
Xxxxxxx'x auditors in connection with such advice was correct in all material
respects.
(b) Neither Xxxxxxx nor SAC is an investment company as defined in
Section 368(a)(2)(f)(iii) and (iv) of the Code.
(c) Neither Xxxxxxx nor SAC is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Section 6.7. Investment Representations.
(a) Purchase for Investment. Each of Xxxxxxx and SAC represents that
it is its present intention to acquire the Company Stock to be acquired by it
for its own account (and it will be the sole beneficial owner thereof) and that
the Company Stock is being and will be acquired by it for the purpose of
investment and not with a view to distribution or resale thereof. Each of
Xxxxxxx and SAC further represents that it understands and agrees that, until
registered under the Securities Act or transferred pursuant to the provisions of
Rule 144 or Rule 144A as promulgated by the Commission, all certificates
evidencing any of the Company Stock, whether upon initial issuance or upon any
transfer thereof, shall bear a legend, prominently stamped or printed thereon,
reading substantially as follows:
-25-
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state
securities laws. These securities have been acquired for investment
and not with a view to distribution or resale. These securities may
not be offered for sale, sold, delivered after sale, transferred,
pledged or hypothecated in the absence of an effective registration
statement covering such shares under the Act and any applicable state
securities laws, or the availability, in the opinion (reasonably
satisfactory to the corporation) of counsel, of an exemption from
registration thereunder."
(b) Access to Information. Each of Xxxxxxx and SAC and their
representatives during the course of this transaction, and prior to the purchase
of any Company Stock, have had the opportunity to ask questions of and receive
answers from management of Company concerning the terms and conditions of the
offering of the Company Stock and the additional information, documents, records
and books relative to its business, assets, financial condition, results of
operations and liabilities (contingent or otherwise) of Company.
(c) General Access. Each of Xxxxxxx and SAC and their
representatives have received and read or reviewed, and are familiar with, this
Agreement and the other agreements executed or delivered herewith, including the
terms of the Company Stock, and confirms that all documents, records and books
pertaining to Xxxxxxx'x or SAC's investment in Company and requested by Xxxxxxx,
SAC or their representatives have been made available or delivered .
(d) Sophistication and Knowledge. Each of Xxxxxxx and SAC has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Company Stock. Each of
Xxxxxxx and SAC can bear the economic risks of this investment and can afford a
complete loss of its investment.
(e) Transfer Restrictions Imposed by Securities Laws. Each of
Xxxxxxx and SAC understands that: the Company Stock has not been registered
under the Securities Act and applicable state securities laws, and, therefore,
cannot be resold unless they are subsequently registered under the Securities
Act and applicable state securities laws or unless an exemption from such
registration is available; Xxxxxxx and SAC are and must be purchasing the
Company Stock for investment for their own account and not for the account or
benefit of others, and not with any present view toward resale or other
distribution thereof. Each of Xxxxxxx and SAC agrees not to resell or otherwise
dispose of all or any part of the Company Stock purchased by it, except as
permitted by law, including, without limitation, any regulations under the
Securities Act and applicable state securities laws; Company does not have any
present intention and is under no obligation to register the Company Stock under
the Securities Act and applicable state securities laws; and Rule 144 or Rule
144A under the Securities Act may not be available as a basis for exemption from
registration of the Company Stock thereunder.
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(f) Lack of Liquidity. Neither Xxxxxxx nor SAC has any present need
for liquidity in connection with its purchase of the Company Stock.
(g) Suitability and Investment Objectives. The purchase of the
Company Stock by Xxxxxxx and SAC is consistent with the general investment
objectives of Xxxxxxx and SAC. Each of Xxxxxxx and SAC understands that the
purchase of the Company Stock involves a high degree of risk and there is no
established market for Company's capital stock.
(h) Accredited Investor Status. Each of Xxxxxxx and SAC is an
"Accredited Investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
Section 6.8. Commission. Neither Xxxxxxx nor SAC, nor anyone acting on
theirbehalf, has made any agreement or taken any action which may cause anyone
claiming through Xxxxxxx or SAC to become entitled to a commission as a result
of the purchase of the Company Stock pursuant to this Agreement.
Section 6.9. SEC Reports. Since January 1, 1994, Xxxxxxx has filed all
forms, reports and documents with the Commission required to be filed by it
pursuant to the federal securities laws or the rules and regulations of the
Commission thereunder, all of which complied in all material respects with all
applicable requirements of the Exchange Act (collectively, the "Xxxxxxx SEC
Reports"). None of the Xxxxxxx SEC Reports, including without limitation any
financial statements or schedules included therein, at the time filed contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 6.10. Statements and Other Documents Not Misleading. Neither this
Agreement, including all Schedules, nor any other financial statement, document
or other instrument heretofore or hereafter furnished to Shareholders in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of any material fact or omits or will omit to state any
material fact required to be stated in order to make such statement, document or
other instrument not misleading.
ARTICLE VII
CERTAIN COVENANTS AND OTHER MATTERS
Section 7.1. Corporate Examinations and Investigations. Company agrees to
cooperate (and to cause its officers, employees, consultants, agents, attorneys
and accountants to cooperate) fully with Xxxxxxx and with its counsel,
accountants and representatives in the conduct of their due diligence
investigation of Company from legal, environmental, insurance, valuation and
solvency perspectives and, in connection with such due diligence investigation,
to grant to Xxxxxxx and such representatives access during normal business hours
to the properties, records
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and, with the prior consent of Company (which shall not be unreasonably
withheld), employees, customers, creditors, vendors and suppliers of Company.
No investigation by Xxxxxxx shall diminish any of the representations,
warranties, covenants or agreements of Company or Shareholders under this
Agreement or reduce Xxxxxxx'x right to pursue such remedies at law or hereunder
as it would otherwise have in the absence of having conducted such
investigation.
Section 7.2. Confidentiality Agreement. Unless otherwise agreed to in
writing by Shareholders or as otherwise required by law, Xxxxxxx agrees for
itself, its agents and employees (a) to keep all Proprietary Information (as
hereafter defined) confidential and not to disclose or reveal any Proprietary
Information to any person other than its officers, directors, affiliates,
employees, attorneys, accountants, other agents and representatives who are
participating in the evaluation of Company and the transactions contemplated
hereby; and (b) not to use the Proprietary Information for any purpose other
than in connection with the evaluation and/or consummation of the transactions
contemplated hereby. As used herein, the term "Proprietary Information" means
confidential information about Company and Shareholders furnished to Xxxxxxx by
Company or Shareholders; provided, however, that Proprietary Information shall
not include information which (i) is or becomes generally available to the
public other than as a result of a disclosure by Xxxxxxx in violation of this
Agreement, (ii) was available to Xxxxxxx on a non-confidential basis prior to
its disclosure by Company or Shareholders or (iii) becomes available to Xxxxxxx
on a non-confidential basis from a person other than Company or Shareholders who
is not otherwise bound by a confidentiality agreement with Company or
Shareholders. The obligations of Xxxxxxx under this Section 7.2 shall terminate
upon the earlier of the Closing Date or one year from the date of this
Agreement. If the Closing is not consummated, Xxxxxxx will, upon the request of
Shareholders, destroy or return to Shareholders all Proprietary Information
which is in writing or can otherwise be destroyed or returned.
Section 7.3. Restriction on Certain Discussions and Actions. Company
agrees that until the Closing Date or until termination of this Agreement
pursuant to Article XIII it will refrain, and will direct and take all
reasonable steps to cause its officers, directors, affiliates, employees,
attorneys, accountants and other agents and representatives to refrain, from
taking any action, directly or indirectly, to solicit, encourage, initiate or
participate in any way in discussions or negotiations with, or furnish any
information with respect to the business or the Company Stock to, any person or
other entity (other than Xxxxxxx and its representatives) in connection with any
possible or proposed sale of capital stock, sale of a substantial portion of the
assets, merger or other business combination involving Company or the
acquisition of a substantial equity interest in Company or any similar
transaction involving the Company. Shareholders agree that they will not
(without Xxxxxxx'x prior written consent) disclose this Agreement or the matters
referred to herein to any other prospective acquirer of Company until the
Closing Date or until termination of this Agreement pursuant to Article XII.
Section 7.4 Conduct of Business Prior to the Closing. Prior to the
Closing:
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(a) Company shall conduct its business, operations, activities and
practices (including, without limitation, its maintenance and management of
Cash) in all material respects in the usual and ordinary course, consistent with
its past practices;
(b) Company shall not take or suffer or permit any action which would
render untrue any of the representations or warranties of Company or
Shareholders herein contained, and Company shall not omit to take any action the
omission of which would render untrue any such representation and warranty in
any material respect;
(c) Company shall preserve its business organization intact, use
reasonable best efforts to keep available to itself and to Xxxxxxx the present
services of its employees; preserve for itself and Xxxxxxx the goodwill of
Company's suppliers and customers and others with whom business relationships
pertaining to the business exist; maintain in all material respects its tangible
property pertaining to the business in the same condition as it now exists,
ordinary wear and tear excepted; maintain the insurance policies identified on
Schedule 4.23 in full force and effect; and maintain in full force and effect in
all material respects all agreements, licenses, permits, authorizations and
approvals necessary for the operation of the business;
(d) Company shall not grant or otherwise make, or agree to grant or
otherwise make, any increase in the compensation payable or to become payable by
it to any employees of Company;
(e) Company shall not sell or dispose of any of its assets used or
useful in the operation of the business (otherwise than in the ordinary course
of business consistent with past practice and as previously disclosed to
Xxxxxxx);
(f) Company shall not enter into any agreement not in the ordinary
course of business; and
(g) Company shall not cancel, waive or modify any claims or rights
owned by, or running in favor of, it, which claims or rights will be transferred
to Xxxxxxx.
Section 7.5. Notice to Xxxxxxx. Company covenants and agrees to provide
Xxxxxxx with immediate notice of any occurrence which could materially adversely
affect the Condition.
Section 7.6. No Voluntary Bankruptcy Filing. Company covenants and
agrees that it will not institute any bankruptcy, reorganization, arrangement or
insolvency proceedings for relief under any bankruptcy or similar law or laws
for the relief of debtors on or prior to the Closing Date.
Section 7.7. Removal of Liens. Company covenants and agrees to cause all
of the liens identified on Schedule 4.9 hereof to be removed from the Assets on
or immediately after the Closing Date.
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Section 7.8. Consents, Further Assurances. Consistent with the terms and
conditions hereof, each party hereto will use its reasonable best efforts to
execute and deliver such other documents and take such other actions as
reasonably requested by the other party to fulfill the conditions precedent to
the obligation of the other party to consummate the Merger, or as the other
party hereto may reasonably request in order to carry out this Agreement and the
transactions contemplated hereby. Xxxxxxx and Company shall use their
reasonable best efforts and will cooperate with each other to the extent
reasonably necessary to obtain all consents, approvals and waivers, if any, from
third parties required to consummate the transactions contemplated hereby or
which, if not obtained, would materially adversely affect the Condition.
Section 7.9. Stock Plans and Options.
(a) From and after the Effective Time, each outstanding Company Stock
Option, all of which are set forth in Schedule A, shall be assumed by Xxxxxxx
and shall pursuant to the terms of such options be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, the number of shares of Xxxxxxx Stock set forth in
Schedule A with respect to such Company Stock Option at the price per share set
forth in Schedule A with respect to such Company Stock Option. All other terms
of such Company Stock Options shall remain in effect.
(b) Company shall take all actions necessary so that following the
Effective Time no holder of a Company Stock Option or any participant in any
Employee Benefit Plan shall have any right thereunder to acquire capital stock
of Company, SAC or the Surviving Corporation. Company shall take all actions
necessary so that, as of the Effective Time, none of Company, SAC, the Surviving
Corporation of any of their respective subsidiaries is or will be bound by any
Company Stock Options, other options, warrants, rights or agreements which would
entitle any person, other than Xxxxxxx, SAC or its affiliates, to own any
capital stock of Company, SAC, the Surviving Corporation or any of their
respective subsidiaries or to receive any payment in respect thereof, except as
otherwise provided in Article II or Section 7.9(a).
ARTICLE VIII
CONDITIONS TO THE OBLIGATION OF XXXXXXX
The obligation of Xxxxxxx to proceed with the Closing under this Agreement
is subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, each of which may be waived by Xxxxxxx:
Section 8.1. Representations and Warranties True. The representations
and warranties of Company and each of the Shareholders contained in this
Agreement shall have been true and correct in all material respects when made
and shall be true and correct in all material respects at the Closing Date as
though made at such time, and Company and Shareholders shall have
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delivered to Xxxxxxx a certificate or certificates to that effect signed by the
President of Company and by each Shareholder, as applicable.
Section 8.2. Performance of Obligations. The obligations of Company and
each Shareholder to be performed by them on or before the Closing pursuant to
the terms of this Agreement shall have been duly performed and complied with in
all material respects and, at the Closing, Company and Shareholders shall have
delivered to Xxxxxxx a certificate or certificates to that effect signed by the
President of Company and by Shareholders, as applicable.
Section 8.3. Consents. All consents, approvals and waivers from third
parties (including, without limitation, lenders) and government agencies
required to consummate the transactions contemplated hereby, or requested by
Xxxxxxx in connection with the consummation of the transactions contemplated
hereby, shall have been obtained (unless otherwise waived by Xxxxxxx).
Section 8.4. Absence of Litigation. There shall not be any litigation or
proceeding, pending or threatened, (including, without limitation, any
litigation or proceeding arising under antitrust or securities laws), to
restrain or invalidate the sale and purchase of the Company Stock or the other
transactions contemplated herein, and no action or proceeding shall be pending
or, to Company's and Shareholders' knowledge, threatened against Company or
Shareholders, at law or in equity, before any federal or state court or
governmental commission or in arbitration or by or before any administrative
agency, which action or proceeding would adversely affect the Condition, nor
shall any judgments, consents, injunctions or any other judicial or
administrative mandates be outstanding against Company or Shareholders which
would adversely affect the Condition.
Section 8.5. Certified Resolutions. Xxxxxxx shall have received a copy
of the resolutions of the Board of Directors of Company, certified by the
Secretary of the Company, authorizing and approving the execution and delivery
of this Agreement and the consummation of the transactions contemplated herein
and therein.
Section 8.6. Certificate of Good Standing . Xxxxxxx shall have received
a good standing certificate of Company dated not more than ten days prior to the
Closing Date from the Secretary of State of the State of Delaware
Section 8.7. Absence of Liabilities. On the Closing Date, there shall be
no Liabilities relating to or respecting the business or the Company Stock,
except as disclosed in any Schedule to this Agreement, and except for such
contractual obligations as may arise on and after the Closing Date under the
agreements listed on Schedule 2.3, as evidenced by a certificate to such effect
signed by the President of Company and containing such supporting documentation
as Xxxxxxx shall request.
Section 8.8. INTENTIONALLY LEFT BLANK.
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Section 8.9. Delivery of Specified Documents. Shareholders shall have
delivered to Xxxxxxx all of the documents and instruments specified in
Section 3.1(b)(i) hereof on or prior to the Closing Date.
Section 8.10. Retention of Key Personnel. Xxxxxxx shall be reasonably
satisfied as to its ability to retain key operational and sales personnel of
Company including, without limitation, those individuals listed on
Schedule 8.10.
Section 8.11. Review of Open Purchase Orders and Sales Commitments.
Xxxxxxx shall have been afforded an opportunity to review purchase orders and
sales commitments open on the Closing Date pursuant to which Company is
purchasing services, supplies or other goods from third parties or pursuant to
which Company is selling or providing services, products or other goods to third
parties, respectively, and the obligations of Company, in order to confirm that
the goods or services ordered, and the amount to be paid or received thereunder,
are consistent with the purchasing and sales activities of Company over the
preceding 12 months.
Section 8.12. Opinion of Counsel for Company and Shareholders. Company
and Shareholders shall have delivered to Xxxxxxx an opinion of their counsel,
Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation, dated the date of the
Closing and reasonably satisfactory to Xxxxxxx and its counsel, in substantially
the form attached hereto as Exhibit C.
Section 8.13. INTENTIONALLY OMITTED.
Section 8.14. Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Safeguard Scientifics, Inc., counsel for
Xxxxxxx, in the exercise of their reasonable judgment, and Xxxxxxx or its
counsel shall have been furnished with such other documents as Xxxxxxx or its
counsel shall have reasonably requested.
ARTICLE IX
CONDITIONS TO THE OBLIGATION OF COMPANY AND SHAREHOLDERS
The obligation of Company and Shareholders to proceed with the Closing
under this Agreement is subject to the satisfaction, on or prior to the Closing,
of each of the following conditions, each of which may be waived by Company and
Shareholders:
Section 9.1. Representations and Warranties True. The representations
and warranties of Xxxxxxx and SAC contained in this Agreement and any closing
documents delivered by Xxxxxxx and SAC in connection with this Agreement shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects at the Closing Date as though made at such
time and, at the Closing, each of Xxxxxxx and SAC shall have
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delivered to Shareholders a certificate to that effect signed by its Senior Vice
President and Chief Financial Officer.
Section 9.2. Performance of Obligations. Each of the obligations of
Xxxxxxx or SAC to be performed by it on or before the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with in all
material respects and, at the Closing, each of Xxxxxxx and SAC shall have
delivered to Shareholders a certificate to that effect signed by a President or
any Vice President.
Section 9.3. Absence of Litigation. There shall not be any litigation or
proceeding, pending or threatened (including, without limitation, any litigation
of proceeding arising under antitrust or securities laws), to restrain or
invalidate the sale and purchase of the Company Stock or the other transactions
contemplated herein which would, in the judgment of Shareholders, made in good
faith, involve expense or lapse of time that would be materially adverse to the
interests of Shareholders.
Section 9.4. Opinion of Counsel for Xxxxxxx. Xxxxxxx and SAC shall have
delivered to Shareholder an opinion of its counsel, Xxxx X. Xxxxxx, XX, Esq.,
dated the date of the Closing and satisfactory to Shareholders and their
counsel, in substantially the form attached hereto as Exhibit D.
Section 9.5. INTENTIONALLY OMITTED.
Section 9.6. Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional
Corporation, counsel for Company, in the exercise of their reasonable judgment,
and Company or its counsel shall have been furnished with such other documents
as Company or its counsel shall have reasonably requested.
ARTICLE X
POST-CLOSING COVENANTS OF SHAREHOLDERS
Section 10.1. Covenant Not to Compete.
(a) Each Shareholder will not, for a period of five years following
the Closing Date (the "Restricted Period"), compete, directly or indirectly,
with Xxxxxxx in the development, sale or support of M Technology software.
(b) A Shareholder shall be deemed to be competing, directly or
indirectly, as described in paragraph (a) hereof if such Shareholder shall
engage, directly or indirectly, in any of the business covered thereby, whether
for its own account or that of any other person, firm, corporation, partnership
or other business entity, and whether its participation shall be as a
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stockholder, general or limited partner, or investor possessing an ownership
interest exceeding five percent (5%) in any such entity, or as a director,
officer, employee, principal, agent, lender or in any other capacity.
(c) During the Restricted Period, each Shareholder shall not,
directly or indirectly: (1) solicit, divert, take away or induce customers
(wherever located) of Xxxxxxx to avail himself or itself of the services or
products of others which are competitive with any of Xxxxxxx'x services or
products or (2) solicit, employ or in any other fashion hire any employee of
Xxxxxxx unless such person shall have been discharged by Xxxxxxx, or otherwise
induce any employee of Xxxxxxx to leave the employ of Xxxxxxx.
Each Shareholder expressly acknowledges that damages alone will be an
inadequate remedy for any breach or violation of any of the provisions of this
Section 10.1, and that Xxxxxxx, in addition to all other remedies available at
law or hereunder, shall be entitled, as a matter of right, to injunctive relief,
including specific performance, with respect to any such breach or violation, in
any court of competent jurisdiction. If any of the provisions of this
Section 10.1 are held to be in any respect an unreasonable restriction upon such
Shareholder, then such Shareholder shall be deemed to extend only over the
maximum period of time, geographic area or range of activities as to which they
may be enforceable. In the event that a Shareholder shall be in violation of
the restrictive covenants in this Section 10.1, then the Restricted Period shall
be extended for a period of time equal to the period of time during which such
breach shall occur or have occurred.
Section 10.2. Restrictions on Resale to Preserve Accounting Treatment.
Xxxxxxx has informed Shareholders and Company that it is a material factor to
Xxxxxxx in entering into this Agreement that the transactions contemplated by
this Agreement be treated as a pooling for accounting purposes. Therefore,
notwithstanding any other provision of this Agreement, each Shareholder
represents, warrants and agrees that such Shareholder has not, and from the date
of this Agreement through the date on which Xxxxxxx has published and
disseminated consolidated financial results which include results of combined
operations of Xxxxxxx and Company for at least thirty days on a consolidated
basis following the Closing Date, will not (i) sell, assign, exchange, transfer,
encumber, pledge (if the sole recourse of the lender secured by the pledge of
such shares is to the pledged shares), distribute, appoint, or otherwise dispose
of (a) any shares of Xxxxxxx Stock received by such Shareholder, or (b) any
interest (including, without limitation, an option to buy or sell) in any such
shares of Xxxxxxx Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose; or (ii) engage in any transaction
with respect to any shares of Xxxxxxx Stock or any interest therein, the intent
or effect of which is to reduce the risk of owning shares of Xxxxxxx Stock
(including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The certificates
evidencing the Xxxxxxx Stock to be received by Shareholders will bear a legend
substantially in the form set forth below and containing such other information
as Xxxxxxx may deem necessary or appropriate:
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"The shares represented by this certificate may not be sold,
transferred or assigned, and the issuer shall not be required to give
effect to any attempted sale, transfer or assignment prior to the
publication and dissemination of financial statements by the issuer
which include the results of at least thirty (30) days of combined
operations of the issuer and Greystone Technology Corporation. Upon
the written request of the holder of this certificate, the issuer
agrees to remove this restrictive legend (and any stop order placed
with the transfer agents) when the requirement has been met."
ARTICLE X-A
REGISTRATION RIGHTS
Section 10A.1. Definitions. For purposes of this Article X-A:
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(b) The term "Registrable Securities" means (1) the Xxxxxxx Stock,
and (2) any Xxxxxxx Stock issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Xxxxxxx Stock, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which its rights under this Article X-A are not
assigned. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) such securities shall
have been distributed pursuant to Rule 144 or Rule 144A, (iii) such securities
are transferred to or become beneficially owned by Xxxxxxx or any affiliate
thereof (other than any bank or insurance company acting in the ordinary course
of its business), (iv) such securities shall have ceased to be outstanding, or
(v) such securities shall be eligible for resale under Rule 144(k).
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Xxxxxxx Stock which are, and the
number of Xxxxxxx Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
(d) The term "Holder" means any original holder of Registrable
Securities or any assignee thereof in accordance with Section 10A.9 hereof.
(e) The term "Form S-3" means such form under the Securities Act
as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted
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by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by Xxxxxxx with the SEC.
(f) The term "Managing Underwriter" means one or more nationally
recognized firms of investment bankers selected by the Shareholders and approved
by Xxxxxxx (such approval not to be unreasonably withheld).
Section 10A.2. Shelf Registration.
(a) Shelf Registration. As promptly as practicable after the Closing
Date, Xxxxxxx will file a shelf registration statement with the Commission
permitting the disposition of the Registrable Securities in accordance with the
intended methods thereof as specified in writing by Shareholders (the "Shelf
Registration"). Xxxxxxx will use its best efforts to have the Shelf
Registration declared effective by the Commission as soon as practicable after
the filing date or at such later time as may be specified by Shareholders on not
less than 20 days' notice.
(b) Underwritten Shelf Registration. Shareholders may, at any time,
request that Xxxxxxx supplement or amend the Shelf Registration to effect an
underwritten offering by a Managing Underwriter. Xxxxxxx shall provide prompt
notice of such request to the Holders of all Registrable Securities, and will as
promptly as practicable supplement or amend such Shelf Registration to the
extent required to permit the disposition in accordance with such request.
Xxxxxxx shall enter into an underwriting agreement in customary form used by
Xxxxxxx with such underwriter or underwriters, reasonably acceptable to Holders
of Registrable Securities, which shall include, among other provisions,
contribution and indemnities to the effect and to the extent provided in this
Article X-A. The Holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement. No Holder may
participate in such underwritten offering unless such Holder agrees to sell its
Registrable Securities on the basis provided in such underwriting agreement and
completes and executes all questionnaires, powers of attorney, indemnities and
other documents reasonably required under the terms of such underwriting
agreement.
(c) Registration Statement Form. Xxxxxxx may, if permitted by law,
effect the Shelf Registration by the filing of a registration statement on Form
S-3. However, if such registration involves an underwritten offering or other
special selling efforts and the Managing Underwriter at any time shall notify
Xxxxxxx in writing that, in the judgment of such Managing Underwriter, inclusion
of some or all of the information required in a more detailed form specified in
such notice is of material importance to the success of the underwritten
offering of such Registrable Securities, Xxxxxxx shall supplement or amend such
Shelf Registration to include such information or use such more detailed form as
is reasonably required by the Managing Underwriter.
Section 10A.3. Obligations of Xxxxxxx. With respect to the Shelf
Registration to be filed under Section 10A.2 to effect the registration of any
Registrable Securities, Xxxxxxx shall, as
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expeditiously as reasonably possible:
(a) Prepare and file with the Commission the Shelf Registration with
respect to such Registrable Securities and use its best efforts to cause the
Shelf Registration to become effective. As far in advance as practical before
filing such registration statement or any supplement or amendment thereto
(including any document incorporated therein by reference) Xxxxxxx will furnish
to Shareholders and their counsel copies of reasonably complete drafts of all
such documents proposed to be filed (including any and all exhibits), and
Shareholders and their counsel shall have the opportunity to comment in writing
on any information that is contained therein or omitted therefrom and Xxxxxxx
will make the changes reasonably requested by Shareholders and their counsel
with respect to such information prior to filing any such registration statement
or amendment.
(b) As expeditiously as reasonably possible, prepare and file with
the Commission such amendments and supplements to the Shelf Registration and the
prospectus used in connection with the Shelf Registration as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by the Shelf Registration until the earlier of (i)
such time as all of the Xxxxxxx Stock cease to be Registrable Securities and
(ii) such time as 36 months shall have elapsed from the effective date of the
Shelf Registration, plus an additional period equal to the number of days
occurring during the effectiveness of the Shelf Registration on which a Holder
of Registrable Securities is unable in accordance with Section 10A.6(b) to
dispose of such Registrable Securities pursuant to the Shelf Registration.
(c) As expeditiously as reasonably possible, furnish to the Holders
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use its best efforts to register and qualify securities covered
by the Shelf Registration under such other securities or Blue Sky laws of such
jurisdictions in accordance with the terms and conditions of such laws as shall
be reasonably requested by Shareholders, provided that Xxxxxxx shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) As expeditiously as reasonably possible, notify in writing, each
Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and, at the request of such Holder, as
promptly as practicable
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prepare and furnish to such Holder a reasonable number of copies of a prospectus
included in an effective post-effective amendment or the supplemented
prospectus.
(f) As expeditiously as reasonably possible, furnish, at the request
of any Holder of Registrable Securities on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing Xxxxxxx for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of Xxxxxxx, in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the
Holders of Registrable Securities.
Section 10A.4. Furnish Information. It shall be a condition precedent to
the obligations of Xxxxxxx to take any action pursuant to this Article X-A with
respect to the Registrable Securities of any selling Holder that such Holder
shall meet the following conditions:
(a) Each Holder shall furnish to Xxxxxxx such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Holder's Registrable Securities.
(b) All information specifically with respect to the Holder furnished
to Xxxxxxx by or on behalf of the Holder for use in connection with the
preparation of any registration statement relating to such Registrable
Securities shall be true and correct in all material respects and shall not omit
any material fact necessary to make such information, in light of the
circumstances under which it was made, not misleading.
(c) Each Holder will review carefully any registration statement
relating to such Registrable Securities and each amendment or supplement thereto
upon receipt thereof from Xxxxxxx and will promptly advise Xxxxxxx in writing
if: (i) the name and address of the Holder (if required to be disclosed) is not
properly set forth; (ii) the Holder knows of any arrangements made or to be made
by any person, or of any transaction already effected, to limit or restrict the
sale of the Registrable Securities during the period of the public distribution
or to stabilize the market for the Registrable Securities; or (iii) the Holder
has entered into any material arrangement with a broker-dealer for the sale of
Registrable Securities through a cross or block trade, special offering,
exchange distribution or secondary distribution or a purchase by a
broker-dealer.
(d) Each Holder shall not distribute any prospectus or other offering
material in connection with the offering and sale of the Registrable Securities
other than a prospectus or other material permitted by the Securities Act and
prepared by Xxxxxxx.
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(f) Each Holder of Registrable Securities will comply with Regulation
M under the Exchange Act.
(g) To assist Xxxxxxx in qualifying the Registrable Securities for
sale under applicable state securities laws, each Holder will advise Xxxxxxx of
each jurisdiction in which the Holder intends to offer or sell any or all
Registrable Securities, and agrees not to offer or sell any Registrable
Securities in any jurisdiction where the Registrable Securities are not
registered or exempt from registration.
(h) Each Holder other than Shareholders will inform Xxxxxxx in
writing of any and all sales, gifts or other transfers or dispositions of any
Registrable Securities or of any interest therein, whether pursuant to the Shelf
Registration or otherwise, within 15 calendar days following each such
disposition, such notification to include the date of the disposition, the
number of Registrable Securities which were disposed of, and other information
which Xxxxxxx may reasonably request. Each Shareholder will inform Xxxxxxx in
writing of any and all sales, pledges, gifts or other transfers or dispositions
of any Registrable Securities or of any interest therein, whether pursuant to
the Shelf Registration or otherwise, within 15 calendar days following each such
disposition, such notification to include the date of the disposition, the
number of Registrable Securities which were disposed of, the price and other
terms at which such Registrable Securities were disposed of, any discounts or
commissions paid to any broker-dealer, bank or other person in connection with
the disposition, the identity of any broker-dealer, bank or other person
involved in the disposition, the identity of any purchaser, pledgee, donee,
transferee or other successor in interest whose identity is known to be involved
in the transaction, and any other information which Xxxxxxx may reasonably
request.
Section 10A.5. Expenses of Registration. All expenses incurred in
connection with the Shelf Registration and any amendment or supplement thereof,
including (without limitation) all registration, filing, qualification,
printers' and accounting fees, fees and the fees and disbursements of counsel
for Xxxxxxx, and the fees and disbursements not to exceed $7,500of one counsel
for the Holders (which counsel shall be selected by a majority in interest of
Registrable Shares) shall be borne by Xxxxxxx but excluding (i) underwriting
discounts, broker fees and commissions and transfer taxes, if any, in respect of
Registrable Securities, which shall be payable by each Holder thereof and (ii)
all out-of-pocket expenses of underwriters, broker and dealers, including fees
and disbursements of counsel for underwriters, brokers and dealers.
Section 10A.6. Company Suspension.
(a) Upon receipt of any notice from Xxxxxxx of the happening of any
event of the kind described in Section 10A.3(e), such Holder will forthwith
discontinue such Holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities (it being
understood that such Holder's right to dispose of Registrable Securities by
other means in accordance with applicable securities laws shall not be
restricted
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hereby) until such Holder's receipt of the copies of the supplemented or amended
prospectus and, if so directed by Xxxxxxx, will deliver to Xxxxxxx (at Xxxxxxx'x
expense) all copies, other than permanent file copies, then in such Holder's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
(b) Upon receipt of any notice from Xxxxxxx that in the good faith
judgment of Xxxxxxx the filing or making of offers and sales pursuant to the
Shelf Registration would require the public disclosure of information, the
disclosure of which would not otherwise be required at that time and either
compiling such information would require unreasonable effort in the
circumstances or disclosure thereof would have a material adverse effect on
Xxxxxxx, Xxxxxxx shall have the right to suspend such sales or postpone such
filing for a period which shall not exceed 90 days (provided that no such notice
may be given beginning when Shareholders notify Xxxxxxx that marketing efforts
have begun by the Managing Underwriter on behalf of the Holders of Registrable
Securities in connection with an offering thereof and ending when such offering
is completed or abandoned); provided, however, that Xxxxxxx may not use the
right provided by this paragraph until 120 days have elapsed from the end of the
most recent suspension or postponement period initiated by Xxxxxxx and provided,
further, however, that immediately following disclosure of such information or
withdrawal or abandonment of the transaction requiring suspension or
postponement Xxxxxxx will make such filing or take such steps as are necessary
to permit such offers and sales, as the case may be.
Section 10A.7. Indemnification and Contribution. In the event any
Registrable Securities are included in a registration statement under this
Article X-A:
(a) To the extent permitted by law, Xxxxxxx will indemnify and hold
harmless each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any Violation or alleged Violation by Xxxxxxx of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and
Xxxxxxx will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Subsection 10A.7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of Xxxxxxx (which consent shall not be
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unreasonably withheld), nor shall Xxxxxxx be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
severally indemnify and hold harmless Xxxxxxx, each of its directors, each of
its officers who has signed the registration statement, each person, if any, who
controls Xxxxxxx within the meaning of the Securities Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Subsection 10A.7(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Subsection 10A.7(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that in no event shall any indemnity under this Subsection
10A.7(b) exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
10A.7 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 10A.7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 10A.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
10A.7.
(d) If the indemnification provided for in this Article X-A is
unavailable or
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insufficient to hold harmless an indemnified party under Section 10A.7(a) or
10A.7(b) above although applicable in accordance with its terms, then each such
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in Sections 10A.7(a)
or 10A.7(b) above (i) in such proportion as is appropriate to reflect the
relative benefits received by each indemnifying party from the offering or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of each
indemnifying party in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities or actions in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by Xxxxxxx and the Holders shall be deemed to be in the same respective
proportions as the total net proceeds from the offering (before deducting
expenses) received by Xxxxxxx and the selling Holders, bear to the aggregate
public offering price of the Registrable Securities sold. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this Section 10A.7(d) were to be determined by
pro-rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the first sentence of
this Section 10A.7(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to in the first sentence of this Section 10A.7(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing to defend or
defending against any action or claim which is the subject of this Section
10A.7(d). Notwithstanding the provisions of this Section 10A.7(d), no selling
Holder shall be required to contribute any amount in excess of the net proceeds
from the offering received by such Holder.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of Xxxxxxx and Holders under this Section 10A.7
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article X-A and otherwise.
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Section 10A.8. Reports Under Exchange Act. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit a Holder to sell securities of Xxxxxxx to the public without
registration, Xxxxxxx agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Commission Rule 144;
(b) file with the Commission in a timely manner all reports and other
documents required of Xxxxxxx under the Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by Xxxxxxx that it
has complied with the reporting requirements of Commission Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of Xxxxxxx and such other reports and documents so filed by
Xxxxxxx, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
Section 10A.9. Assignment of Registration Rights. The rights to cause
Xxxxxxx to maintain the registration of Registrable Securities pursuant to this
Article X-A may be assigned by a Holder (or a combination of Holders) to a
transferee or assignee of such securities who, after such assignment or
transfer, holds at least 5% of the Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided Xxxxxxx is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purpose of determining the number
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants
(natural or adopted) and siblings of such partners or spouses who acquire
Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership.
Section 10A.10. Termination of Registration Rights. The registration
rights granted and the obligations of Xxxxxxx pursuant to this Article X-A shall
terminate as to any Holder at such time as all Registrable Securities held by
such Holder can be sold within a given three-month period without compliance
with the registration requirements of the Securities Act pursuant to Rule 144.
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ARTICLE XI
SURVIVAL; INDEMNIFICATION; EXPENSES
Section 11.1. General Indemnification.
(a) Shareholders hereby jointly and severally agree to (i) indemnify,
defend and hold harmless Xxxxxxx and each of its directors, officers, employees,
affiliates, agents and shareholders from and against any and all losses,
damages, liabilities, costs and claims arising out of, based upon or resulting
from (A) any inaccuracy of any representation or warranty of Company or
Shareholders which is contained in or made pursuant to this Agreement (other
than any representation or warranty contained in Sections 4.3, 4.6, 4.7, 4.8 or
4.17 and expressly made by each Shareholder severally but not jointly) or in any
schedule, exhibit, certificate or other document delivered in connection with
the transactions contemplated hereby or (B) any breach by Company or
Shareholders or any of their agreements or obligations contained in or made
pursuant to this Agreement, and (ii) reimburse Xxxxxxx and each of its
directors, officers, employees, affiliates, agents and shareholders for any and
all reasonable fees, costs and expenses of any kind related thereto (including,
without limitation, any and all Legal Expenses). Shareholders hereby waive and
release any and all rights of contribution Shareholders may otherwise (but for
this provision) have against Company arising out of any inaccuracy of any
representation or warranty made by Shareholders and Company jointly and
severally hereunder, whether such rights of contribution arise under common law
or otherwise. As used in this Section 11.1, "Legal Expenses" of a person shall
mean any and all reasonable out-of-pocket fees, costs and expenses of any kind
incurred by such person and its counsel in investigating, preparing for,
defending against or providing evidence, producing documents or taking other
action with respect to any threatened or asserted claim.
(b) Each Shareholder hereby severally but not jointly agrees to (i)
indemnify, defend and hold harmless Xxxxxxx and each of its directors, officers,
employees, affiliates, agents and shareholders from and against any and all
losses, damages, liabilities, costs and claims arising out of, based upon or
resulting from any inaccuracy of any representation or warranty of such
Shareholder which is contained in or made pursuant to this Agreement in Sections
4.3, 4.6, 4.7, 4.8 and 4.17 and expressly made by each Shareholder severally but
not jointly, and (ii) reimburse Xxxxxxx and each of its directors, officers,
employees, affiliates, agents and shareholders for any and all reasonable fees,
costs and expenses of any kind related thereto (including, without limitation,
any and all Legal Expenses).
(c) Xxxxxxx hereby agrees to (i) indemnify, defend and hold harmless
Shareholders from and against any and all losses, damages, liabilities, costs
and claims arising out of, based upon or resulting from (A) any inaccuracy of
any representation or warranty of Xxxxxxx which is contained in or made
pursuant to this Agreement or in any schedule, exhibit, certificate or other
document delivered in connection with the transactions contemplated hereby or
(B) any breach of Xxxxxxx of any of its agreements or obligations contained in
or made
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pursuant to this Agreement and (ii) reimburse Shareholders for any and
all fees, costs and expenses of any kind related thereto (including, without
limitation, any and all Legal Expenses).
(d) Promptly after receipt by any person entitled to indemnification
under this Section 11.1 (an "indemnified party") of written notice of the
commencement of any action in respect of which the indemnified party will seek
indemnification hereunder, the indemnified party shall so notify in writing the
person(s) from whom indemnification hereunder is sought (collectively, the
"indemnifying party"), but any failure so to notify the indemnifying party shall
not relieve any such indemnifying party from any liability that it may have to
the indemnified party under this Section 11.1 except to the extent that the
indemnifying party's ability to defend such claim is materially prejudiced by
the failure to give such notice. The indemnifying party shall be entitled to
participate in the defense of such action and to assume control of such defense;
provided, however, that:
(i) the indemnified party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to assist in
the handling of such claim;
(ii) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any settlement of such
claim or ceasing to defend against such claim, which approval shall not be
unreasonably withheld except that it shall not be unreasonable to withhold
approval if, pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief would be imposed against the indemnified
party (and in no event shall an indemnified party be liable for any settlement
or compromise effected without its or his consent);
(iii) the indemnifying party shall not consent to the entry
of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release from liability in respect of such claim; and
(iv) the indemnifying party shall not be entitled to
control, but shall be entitled to participate at its own expense in the defense
of, and the indemnified party shall be entitled to have sole control at its own
expense over, the defense or settlement of any claim to the extent the claim
seeks an order, injunction or other equitable relief against the indemnified
party which, if successful, could, in the sole judgment of the indemnified
party, materially interfere with the business, operations, assets, condition or
prospects of the indemnified party, provided, the indemnified party shall give
notice to the indemnifying party of such judgment and assumption of control as
provided in Section 11.1(e) hereof.
(e) At any time, the indemnified party may assume control of the
defense of any such action by written notice to the indemnifying party. After
such written notice by the indemnifying party to the indemnified party of its
election to assume control, the indemnifying party shall not be liable to such
indemnified party hereunder for any Legal Expenses
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subsequently incurred by such indemnified party in connection with the defense
thereof, but shall be otherwise liable to the indemnified party as herein
provided.
(f) If the indemnifying party does not assume control of the defense
of such claims as provided in this Section 11.1, the indemnified party shall
have the right to defend such claim in any manner as it may deem appropriate at
the cost and expense of the indemnifying party, and the indemnifying party will
promptly reimburse the indemnified party thereof in accordance with this Section
11.1. The reimbursement of fees, costs and expenses required by this Section
11.1 shall be made by periodic payments during the course of the investigation
or defense, as and when bills are received or expenses incurred.
(g) Any other provision hereof to the contrary notwithstanding, no
party shall have any liability for indemnification pursuant to Section
11.1(a)(i)(A), Section 11.1(b)(i)(A) or Section 11.1(c)(i)(A) (other than as a
result of an inaccuracy in the representations and warranties contained in
Sections 4.31, 5.6 and 6.8) until the aggregate amount of the liability of such
party resulting from such inaccurate representations or warranties exceeds
$20,000 (the "Threshold Amount"), and then only to the extent of such excess.
This limitation shall not be applicable to an indemnification obligation arising
under any provision of Section 11.1 other than Section 11.1(a)(i)(A), Section
11.1(b)(i)(A) or Section 11.1(c)(i)(A). Once the liability of a party has
exceeded the Threshold Amount, such party shall thereupon become liable to each
indemnified party for all amounts which, but for the Threshold Amount, would
have been payable to such indemnified parties pursuant to the provisions of this
Article XI. Once the liability of a party has exceeded the Threshold Amount,
such party shall no longer be entitled to the benefit of the limitation provided
in this paragraph (g) notwithstanding payment in full by such party on account
of such liability.
(h) Any other provision hereof to the contrary notwithstanding, the
parties agree that the representations and warranties of the parties contained
in this Agreement and in any certificates delivered pursuant to this Agreement
shall survive for a period of six months after the Closing Date, regardless of
any investigation made by either party prior to the date hereof or prior to the
Closing Date. Xxxxxxx and Shareholders shall only be entitled to
indemnification under Section 11.1(a)(i)(A), 11.1(b)(i)(A) or Section
11.1(c)(i)(A) if a written notice describing the claim for which indemnification
is sought is signed by the President or any Vice President of Xxxxxxx or
Shareholders, as the case may be, and is submitted to Shareholders or Xxxxxxx,
as the case may be, not later than six months following the Closing Date. Any
claim for indemnification pursuant to Section 11.1(a)(i)(A), Section
11.1(b)(i)(A) or Section 11.1(c)(i)(A) not made prior to the expiration of such
six month period shall be extinguished, and all representations and warranties
with respect to which no claim is made prior to the expiration of such six month
period shall expire and be of no further force and effect. The maximum amount
recoverable by Xxxxxxx shall be the value of the Escrow Shares; to the extent
any claims are payable, the Escrow Shares shall be released to the Xxxxxxx on a
pro rata basis based on each Shareholder's percentage ownership at the time of
the Closing. In no event shall any
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Shareholder's indemnification obligations hereunder exceed such Shareholder's
pro rata portion of the Escrow Shares.
(i) Notwithstanding any provisions herein to the contrary:
(i) neither party shall be liable to the other party for any
misrepresentation, breach of any warranty or failure to fulfill any covenant or
agreement herein if such other party shall have had actual knowledge of the
facts upon which such misrepresentation, breach or failure to fulfill is based
at or prior to the Closing Date;
(ii) the liability of either party computed otherwise in
accordance with this Article XI shall be limited to the after-tax consequence to
the indemnified party (or the affiliated group of which such indemnified party
is a member) of any such damage, loss, liability, deficiency cost or expense
suffered or incurred by such indemnified party;
(iii) neither party shall have any liability to the other
party for misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement to be performed at or prior to the Closing Date except
pursuant to this Article XI;
(iv) neither party shall have any liability to the extent such
liability is covered by insurance of the other party.
(j) The indemnification provided under this Article XI shall
constitute the sole and exclusive remedy of Xxxxxxx, SAC, Shareholders and
Company as a result of any breach of this Agreement other than any loss, damage
or expense based upon fraud or intentional misrepresentation.
Section 11.2. Filing of Returns. Shareholders shall cause Company to
prepare and file, consistent with all past practice, all tax returns of Company
that are due on or before the Closing Date (determined with regard to
extensions). Xxxxxxx shall cause Company to prepare and file all other tax
returns of Company; provided, however, that to the extent that any such tax
return covers a pre-closing period, no position shall be taken on any such tax
return that would give rise to the indemnification obligation of Shareholders
hereunder without the prior consent of Shareholders. Without the prior written
consent of Shareholders, Xxxxxxx will not file any amended tax return with
respect to any taxable period subject to indemnification by Shareholders
hereunder and during the survival period thereof if such return would give rise
to the indemnification obligation of Shareholders hereunder.
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ARTICLE XII
TERMINATION
Section 12.1. Termination. This Agreement may be terminated prior to the
Closing as follows:
(a) at the election of Xxxxxxx, if any one or more of the conditions
set forth in Article VIII to its obligation to proceed with the Closing has not
been fulfilled on the Closing Date;
(b) at the election of Shareholders or Company, if any one or more of
the conditions set forth in Article IX to their obligation to proceed with the
Closing has not been fulfilled on the Closing Date;
(c) at the election of Xxxxxxx, if Shareholders have breached, or
Xxxxxxx reasonably believes that Shareholders have breached, any representation,
warranty, covenant or agreement contained in this Agreement, which breach cannot
be or is not cured by the Closing Date;
(d) at the election of Shareholders or Company, if Xxxxxxx has
breached, or Shareholders reasonably believe that Xxxxxxx has breached, any
representation, warranty, covenant or agreement contained in this Agreement,
which breach cannot be or is not cured by the Closing Date;
(e) at the election of Xxxxxxx, Shareholders or Company, if any legal
proceeding is commenced or threatened by any governmental or regulatory body or
other person (other than Xxxxxxx, Shareholders or Company) directed against the
consummation of the Closing and either Xxxxxxx, Shareholders or Company, as the
case may be, reasonably and in good xxxxx xxxxx it impractical or inadvisable to
proceed in view of such legal proceeding or threat thereof, taking into account
the potential expense and delay likely to be involved;
(f) at any time on or prior to the Closing Date, by mutual written
consent of Xxxxxxx, Shareholders and Company; or
(g) at the election of Xxxxxxx, Shareholders or Company, if the
Closing has not occurred on or prior to February 16, 1998.
If this Agreement so terminates, it shall become null and void and have no
further force and effect, except as provided in Section 12.2.
Section 12.2. Survival. If this Agreement is validly terminated pursuant
to Section 12.1 and the transactions contemplated hereby are not consummated as
described above, this Agreement shall become void and of no further force and
effect; provided, however, that if
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Xxxxxxx terminates this Agreement because any of the conditions contained in
Sections 7.1 or 7.2 have not been satisfied or if Shareholders terminate this
Agreement because any of the conditions contained in Sections 8.1 or 8.2 have
not been satisfied then the terminating party shall have the right to pursue all
of its legal remedies for breach of contract and damages; provided, further,
that if this Agreement is validly terminated pursuant to Section 12.1 and the
transactions contemplated hereby are not consummated as described above, the
provisions of Section 7.2 relating to the obligation of Xxxxxxx to keep
confidential and not to use certain information obtained by it from Shareholders
and to return documents and copies thereof to Shareholders and the provisions of
Section 12.3 relating to responsibility for expenses shall survive. No party
hereto shall have any liability to any other party in respect of a valid
termination of this Agreement pursuant to Section 12.1, except to the extent set
forth above.
Section 12.3. Expenses if No Closing. If the Closing does not occur and
the transactions contemplated hereby are not consummated, then, subject to the
right of a non-defaulting party to recover damages, costs and expenses from a
defaulting party pursuant to Section 12.1, all costs and expenses incurred in
connection with this Agreement shall be paid by the person incurring such
expenses; i.e., by Xxxxxxx if incurred by Xxxxxxx and by Shareholders if
incurred by Shareholders.
ARTICLE XIII
GENERAL
Section 13.1. No Tax Representations. Except as set forth in Sections
4.32 and 6.6, Shareholders and Xxxxxxx agree that no representation or warranty
has been made by them as to the tax consequences of the transactions
contemplated by this Agreement or the results of the allocation of the amount
of, or the consideration comprising, the Merger Consideration, that each is
engaging separate counsel with respect to such tax consequences, and that each
is assuming its own respective tax liability, if any, arising out of this
Agreement or the consummation of the transactions contemplated hereunder.
Section 13.2. Regarding the Representations and Warranties.
(a) Independence. Each of the representations and warranties made by
Shareholders in Articles IV and V, as applicable, is independent of the other
representations and warranties made therein, and each of the representations and
warranties made by Xxxxxxx in Article VI is independent of the other
representations and warranties made therein.
(b) Knowledge Qualification. Whenever a representation or warranty
is made herein based on the knowledge or best of knowledge of Company,
Shareholders, Xxxxxxx or SAC (as the case may be), such representation or
warranty is made based on the actual knowledge of Company, Shareholders,
Xxxxxxx or SAC (as the case may be), including any officer, director or employee
thereof, and on the knowledge which Company, Shareholders,
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Xxxxxxx or SAC (as the case may be) would have if it had conducted a diligent
inquiry into the subject matter or the representation or warranty.
Section 13.3. Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by each of the
parties and their respective successors and assigns. This Agreement may not be
assigned by either party without the prior written consent of the other party.
Section 13.4. Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
Section 13.5. Dispute Resolution.
(a) Good-Faith Negotiations. If any dispute arises under this
Agreement that is not settled promptly in the ordinary course of business, the
parties shall seek to resolve any such dispute between them, first, by
negotiating promptly with each other in good faith in face-to-face negotiations.
These face-to-face negotiations shall be conducted by the Shareholders and the
respective designated senior management representative of each corporate party.
If the parties are unable to resolve the dispute between them through these
face-to-face negotiations within 20 days (or such period as the parties shall
otherwise agree) following the date of notification (the "Notice Date") by one
party to the other of the existence of such dispute, then any such disputes
shall be resolved in the following manner.
(b) Mediation. The parties shall endeavor to resolve any dispute
arising out of or relating to this Agreement by mediation under the CPR
Mediation Procedures for Business Disputes. Unless otherwise agreed, the
parties will select a mediator from the CPR Panels of Neutrals and shall notify
CPR to initiate the selection process.
(c) Resolution of Disputes.
(i) Any action, suit or proceeding where the amount in
controversy as to at least one party, exclusive of interest and costs, exceeds
$1,000,000 ("Summary Proceeding"), arising out of or relating to this Agreement,
or any other agreement executed in connection herewith or the breach,
termination or validity thereof which has not been resolved by mediation as
provided herein within 90 days of the Notice Date, shall be litigated
exclusively in the Superior Court of the State of Delaware (the "Delaware
Superior Court") as a summary proceeding pursuant to Rules 124-131 of the
Delaware Superior Court, or any successor rules (the "Summary Proceeding
Rules"). Each of the parties hereto hereby irrevocably and unconditionally (A)
submits to the jurisdiction of the Delaware Superior Court for any Summary
Proceeding, (B) agrees not to commence any Summary Proceeding except in the
Delaware Superior Court, (C) waives, and agrees not to plead or to
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make, any objection to the venue of any Summary Proceeding in the Delaware
Superior Court, (D) waives, and agrees not to plead or to make any claim that
any Summary Proceeding brought in the Delaware Superior Court has been brought
in an improper or otherwise inconvenient forum, (E) waives, and agrees not to
plead or to make, any claim that the Delaware Superior Court lacks personal
jurisdiction over it, (F) waives its right to remove any Summary Proceeding to
the federal courts except where such courts are vested with sole and exclusive
jurisdiction by statute and (G) understands and agrees that it shall not seek a
jury trial or punitive damages in any Summary Proceeding based upon or arising
out of or otherwise related to this Agreement, or any other agreement executed
in connection herewith or the breach, termination or validity thereof, and
waives any and all rights to any such jury trial or to seek punitive damages.
In any Summary Proceeding brought under this Section 13.5(c)(i) or Section
13.5(c)(ii), Xxxxxxx shall bear all reasonable costs of travel incurred by
Shareholders and its counsel.
(ii) In the event any action, suit or proceeding where the
amount in controversy as to at least one party, exclusive of interest and
costs, does not exceed $1,000,000 (a "Proceeding"), arising out of or
relating to this Agreement, or any other agreement executed in connection
herewith or the breach, termination or validity thereof is brought, the
parties to such Proceeding agree to make application to the Delaware Superior
Court to proceed under the Summary Proceeding Rules. Until such time as such
application is rejected, such Proceeding shall be treated as a Summary
Proceeding and all of the foregoing provisions of this Section relating to
Summary Proceedings shall apply to such Proceeding.
(iii) If a Summary Proceeding is not available to resolve any
dispute hereunder, the controversy or claim shall be settled by arbitration
conducted on a confidential basis, under the U.S. Arbitration Act, if
applicable, and the then current Commercial Arbitration Rules of the American
Arbitration Association (the "Association") strictly in accordance with the
terms of this Agreement and the substantive law of the State of Delaware,
including such law in respect of the statute of limitations. The arbitration
shall be conducted at the Association's regional office located in Boston,
Massachusetts by three arbitrators, at least one of whom shall be knowledgeable
in software design, programming and implementation, one of whom shall be an
attorney and one of whom shall be a member of a large accounting firm familiar
with businesses engaged in software design, programming and implementation. The
arbitrators are not empowered to award damages in excess of compensatory damages
and each party hereby irrevocably waives any right to recover such damages with
respect to any such disputes. Judgment upon the arbitrators' aware may be
entered and enforced in any court of competent jurisdiction.
(d) Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but shall not be sought as a means to avoid or stay arbitration or
Summary Proceeding.
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(e) Each party is required to continue to perform its obligations
under this contract pending final resolution of any dispute arising out of or
relating to this contract, unless to do so would be impossible or impracticable
under the circumstances.
Section 13.6. Notices. All notices, requests, demands, waivers, consents,
approvals, or other communications which are required or permitted hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
reputable overnight courier service (such as Federal Express), sent by
telecopier, or sent by registered or certified mail, return receipt requested,
postage prepaid, to the addresses set forth below:
If to Xxxxxxx:
Xxxxxxx Computer Associates, Inc.
00 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
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If to Shareholder:
Xxxxxx X. Xxxxx
0 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Phone: 000-000-0000
K.S. Bhaskar
00 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Phone: 000-000-0000
With a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Phone: 000-000-0000
Fax: 000-000-0000
or to such other address or telecopier number as the party entitled to receive
such notice may, from time to time, specify in writing to the other party.
Unless otherwise specified herein such notices or other communications shall be
deemed effective (a) on the date delivered, if delivered personally or by
telecopier, (b) one Business Day after being delivered by reputable overnight
delivery service and (c) three Business Days after being sent by registered or
certified mail.
Section 13.7. Governing Law. This Agreement shall be governed as to its
validity, interpretation and effect by the laws of the State of Delaware.
Section 13.8. No Third Party Beneficiaries. Notwithstanding anything to
the contrary contained herein, no provision of this Agreement is intended to
benefit any person other than the signatories hereto nor shall any such
provision be enforceable by any other person.
Section 13.9. Severability. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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Section 13.10. Schedules. All Schedules referred to in this Agreement are
intended to be and are specifically incorporated by reference herein.
Section 13.11. Section Headings. All section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 13.12. Contents of Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the transaction contemplated
hereby and shall not be amended or terminated except by a written instrument
duly executed by each of the parties hereto. Any and all prior or
contemporaneous agreements or understandings between the parties regarding the
subject matter hereof are superseded in their entirety by this Agreement.
Section 13.13. Counterparts. This Agreement may be executed in two or more
fully executed counterparts, each of which shall be deemed an original, but all
of such counterparts together shall constitute but one and the same instrument.
Section 13.14. Public Announcements. Neither Shareholders nor Company
shall use Xxxxxxx'x name or refer to Xxxxxxx directly or indirectly in
connection with Xxxxxxx'x relationship with Company in any advertisement, news
release or professional or trade publication, or in any other manner, unless
otherwise required by law or with Xxxxxxx'x prior written consent.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
XXXXXXX COMPUTER ASSOCIATES, INC.
By:___________________________
Title:________________________
SYSTEM ACQUISITION CORP.
By:___________________________
Title:________________________
GREYSTONE TECHNOLOGY CORPORATION
By:___________________________
Title:________________________
______________________________
Xxxxxx X. Xxxxx
______________________________
K.S. Bhaskar
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