1
EXHIBIT 99.2
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into on November 17, 2000,
among Applied Medical Devices, Inc., a Colorado corporation ("AMDI"), Applied
Medical Merger Corp., a Delaware corporation ("Merger Corp."), XXXXX Systems,
Inc., a Delaware corporation ("XXXXX") and Xxxxxxx X. XxXxxxx (the "Principal
Shareholder").
RECITALS
A. The Principal Shareholder owns an aggregate of approximately 20% of the
outstanding capital stock of XXXXX.
B. The respective Boards of Directors of AMDI, Merger Corp. and XXXXX xxxx
it advisable and in the best interest of each corporation and their respective
shareholders that XXXXX and AMDI merge with and into Merger Corp. pursuant to
this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the respective
covenants and provisions herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. THE MERGER.
1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, XXXXX and AMDI shall be merged with and into Merger Corp.
(the "Merger"). Following the Merger, the separate corporate existences of XXXXX
and AMDI shall cease and Merger Corp. shall continue as the surviving party in
the Merger (Merger Corp. is sometimes referred to as the "Surviving
Corporation").
1.2 EFFECTIVE TIME OF THE MERGER. At the Closing, AMDI, XXXXX and Merger
Corp. shall file Articles of Merger in such form as is required by and executed
in accordance with the applicable provisions of the Colorado Business
Corporation Act and the Delaware General Corporation Law. The Merger shall
become effective at such time as the Articles of Merger are duly filed with the
Delaware Secretary of State or at such time as AMDI, Merger Corp. and XXXXX
shall agree and as shall be specified in the Articles of Merger (the "Effective
Time of the Merger").
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION.
(i) The Certificate of Incorporation of Merger Corp. as in effect
immediately prior to the Effective Time of the Merger shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law, except that the name of the
Surviving Corporation shall be changed to XXXXX Systems, Inc.
(ii) At the Effective Time of the Merger, the Bylaws as in effect
immediately prior to the Effective Time of the Merger shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
2
(iii) Directors and officers of the Surviving Corporation shall be
the persons listed in Schedule 1.3(iii), and each person shall hold his or her
respective office or offices from and after the Effective Time of the Merger
until his or her successor shall have been elected and shall have qualified or
as otherwise provided in the Bylaws of the Surviving Corporation.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF AMDI, XXXXX
AND MERGER CORP. The respective designations and numbers of outstanding shares
of each class of capital stock of AMDI and XXXXX as of the date of this
Agreement are as follows:
(i) The authorized capital stock of AMDI consists of 75,000,000
shares of common stock, of which 65,977,800 shares are issued and outstanding
(the "AMDI Stock"). An additional 7,330,850 shares of AMDI Stock are reserved
for issuance for services, and there are warrants outstanding to purchase an
additional 9,028,700 shares of AMDI Stock.
(ii) The authorized capital stock of XXXXX consists of 5,000,000
shares of common stock, $.01 par value, of which 4,104,412 shares are issued and
outstanding (the "XXXXX Stock"), and 1,000,000 shares of preferred stock, $.01
par value, of which no shares are issued and outstanding. XXXXX has adopted a
2000 Stock Incentive Plan which authorizes 2,000,000 shares of XXXXX Stock, of
which options to purchase up to 1,430,000 shares of XXXXX Stock have been
granted or are reserved for grants to employees of XXXXX.
(iii) The authorized capital stock of Merger Corp. consists of
50,000,000 shares of common stock, $.001 par value, of which 100 shares are
issued and outstanding (the "Merger Corp. Stock"), and 10,000,000 shares of
preferred stock, $.001 par value, of which no shares are issued and outstanding
and of which none will be issued and outstanding at the Effective Time of the
Merger.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
General Corporation Law. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of Merger Corp. shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of AMDI and XXXXX
shall be merged with and into Merger Corp., and Merger Corp., as the Surviving
Corporation shall be fully vested therewith.
1.6 CONVERSION OF XXXXX STOCK. At the Effective Time of the Merger and
without any action on the part of the holders of the XXXXX Stock, each share of
XXXXX Stock shall be converted into 3.2 shares of Merger Corp. Stock. No
fractional shares shall be issued. If a holder of the XXXXX Stock would
otherwise be entitled to a fractional share, it shall be rounded up to one whole
share.
1.7 CONVERSION OF AMDI STOCK. At the Effective Time of the Merger and
without any action on the part of the holders of the AMDI Stock, each share of
AMDI Stock shall be converted into .0222 shares of Merger Corp. Stock. No
fractional shares shall be issued. If a holder of the AMDI Stock would otherwise
be entitled to a fractional share, it shall be rounded up to one whole share. At
the Effective Time of the Merger, Merger Corp. will issue 147,574 shares of
Merger Corp. Stock for the services referred to in Section 1.4(i).
-2-
3
1.8 OUTSTANDING MERGER CORP. STOCK. At the Effective Time of the Merger
the 100 shares of Merger Corp. Stock which are currently outstanding will be
deemed cancelled.
1.9 EXCHANGE PROCEDURE; DELIVERY OF CERTIFICATES OF AMDI STOCK AND XXXXX
STOCK.
(a) As of the Effective Time of the Merger, Merger Corp. shall
deposit, or shall cause to be deposited, with Olde Monmouth Stock Transfer Co.,
Inc. or such other party reasonably satisfactory to XXXXX and AMDI (the
"Exchange Agent"), for the benefit of the holders of AMDI Stock and XXXXX Stock,
for exchange in accordance with this Article 1, certificates representing the
shares of Merger Corp. Stock to be issued pursuant to this Article 1 in exchange
for outstanding shares of AMDI Stock and XXXXX Stock.
(b) Promptly after the Effective Time of the Merger, the Exchange
Agent shall mail to each holder of record of AMDI Stock and XXXXX Stock: (i) a
letter of transmittal (the "Letter of Transmittal") which shall specify that
delivery shall be effected, and risk of loss and title to certificates shall
pass, only upon delivery of certificates to the Exchange Agent and shall be in
such form and have such other provisions as Merger Corp. may reasonably specify
and (ii) instructions for use in effecting the surrender of the certificates
evidencing the AMDI Stock and XXXXX Stock in exchange for certificates
representing shares of Merger Corp. Stock. Upon surrender of a certificate for
cancellation to the Exchange Agent together with such Letter of Transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Merger Corp. Stock
surrendered as provided in this Article 1, and the certificate of AMDI Stock or
XXXXX Stock so surrendered shall be cancelled.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared or made after the Effective Time of
the Merger with respect to the Merger Corp. Stock with a record date after the
Effective Time of the Merger shall be paid with respect to the shares
represented by any certificate for AMDI Stock or XXXXX Stock until such
certificate is surrendered for exchange as provided in this Article 1.
1.10 WARRANTS. At the Effective Time of the Merger, all warrants then
outstanding to purchase AMDI Stock shall remain outstanding following the
Effective Time of the Merger and cease to represent a right to acquire shares of
AMDI Stock and shall be converted automatically into warrants to purchase shares
of Merger Corp. Stock with the number of shares and exercise price to be
proportionately adjusted to reflect the exchange ratio set forth in Section 1.7.
1.11 OPTIONS. XXXXX has granted or reserved for grant, options to
purchase up to 2,000,000 shares of XXXXX Stock at exercise prices ranging from
$2.50 to $2.75 per share. At the Effective Time of the Merger, all options then
outstanding to purchase XXXXX Stock shall remain outstanding following the
Effective Time of the Merger and cease to represent a right to acquire shares of
XXXXX Stock and shall convert automatically into options to purchase the same
number of shares of Merger Corp. Stock at the same exercise price per share as
the options to purchase XXXXX Stock prior to the Effective Time of the Merger
and shall otherwise be subject to the same terms and conditions as under XXXXX'x
2000 Stock Incentive Plan. It is the intention of the parties that the options
qualify following the Effective Date of the Merger as incentive stock options as
-3-
4
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") to the extent permitted under Section 422 of the Code and to the extent
the options qualified as incentive stock options prior to the Effective Time of
the Merger.
2. CLOSING.
Subject to the terms and conditions of this Agreement, the closing of
the transactions contemplated by this Agreement (the "Closing") will take place
on the second business day after the satisfaction or waiver (subject to
applicable law) of the conditions set forth in Sections 8 and 9, unless another
time or date is agreed to in writing by the parties hereto (the actual time and
date of the Closing being referred to herein as the "Closing Date"). The Closing
shall be held at the offices of Xxxxxx Xxxxx, LLP, 0000 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxxxxx 00000, unless another place is agreed to in writing by
the parties hereto.
3. REPRESENTATIONS AND WARRANTIES OF XXXXX AND THE PRINCIPAL SHAREHOLDER
CONCERNING XXXXX.
Except as provided in the XXXXX Disclosure Letter (as defined below) to
be delivered pursuant to Section 10.2, XXXXX and the Principal Shareholder
jointly and severally represent and warrant to AMDI and Merger Corp. that all of
the following representations and warranties in this Section 3 are true at the
date of this Agreement and shall be true at the time of Closing. As used in this
Agreement, the "XXXXX Disclosure Letter" shall mean the disclosure letter
delivered by XXXXX and the Shareholder regarding XXXXX pursuant to this Section
3 upon execution of this Agreement.
3.1 DUE ORGANIZATION. XXXXX is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has the requisite power and authority to carry on its business as it is now
being conducted. XXXXX is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except (i) as set
forth on Schedule 3.1 to the XXXXX Disclosure Letter or (ii) where the failure
to be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of XXXXX taken as a whole (as used herein with respect to XXXXX, or with respect
to any other person, a "Material Adverse Effect"). Schedule 3.1 to the XXXXX
Disclosure Letter sets forth the jurisdiction in which XXXXX is incorporated and
contains a list of all jurisdictions in which XXXXX is authorized or qualified
to do business. True, complete and correct copies of the Articles of
Incorporation and Bylaws, each as amended, of XXXXX (the "XXXXX Charter
Documents") have been made available to AMDI and Merger Corp. The stock records
of XXXXX as heretofore made available to AMDI and Merger Corp., are correct and
complete in all material respects. There are no minutes or other records or
proceedings of XXXXX which have not been made available to AMDI and Merger
Corp., and all of such minutes or other records of proceedings are correct and
complete in all respects.
3.2 SUBSIDIARIES. XXXXX has no other subsidiaries than the subsidiaries
listed in Schedule 3.2 to the XXXXX Disclosure Letter.
-4-
5
3.3 CAPITAL STRUCTURE. The authorized and outstanding capital stock of
XXXXX is as set forth in Section 1.4(ii). All of the outstanding shares of
common stock have been duly authorized and are validly issued, fully paid and
non-assessable. Except as listed in Schedule 3.3, XXXXX has no common stock or
other shares of capital stock reserved for or otherwise subject to issuance. The
names of all of the holders of the XXXXX Stock and the number of shares owned by
each holder are set forth in Schedule 3.3. Except as listed in Schedule 3.3 or
as set forth above, there are no pre-emptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements or commitments to issue or
sell any shares of capital stock or other securities of XXXXX or any securities
or obligations convertible or exchangeable into or exercisable for, or giving
any person a right to subscribe for or acquire, any securities of XXXXX, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. XXXXX does not have outstanding any bonds, debentures, notes or
other debt obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote). There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to XXXXX. There are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of the capital stock of XXXXX.
3.4 PREDECESSOR STATUS; ETC. Set forth in Schedule 3.4 to the XXXXX
Disclosure Letter is an accurate list of all names of all predecessor companies
of XXXXX, including the names of any entities acquired by XXXXX (by stock
purchase, merger or otherwise) or owned by XXXXX or from whom XXXXX previously
acquired material assets, in any case, from the earliest date upon which any
person acquired his or her stock in XXXXX. Except as disclosed on Schedule 3.4
to the XXXXX Disclosure Letter, XXXXX has not been, within such period of time,
a subsidiary or division of another corporation or a part of an acquisition
which was later rescinded.
3.5 SPIN-OFF BY XXXXX. Except as set forth on Schedule 3.5 to the XXXXX
Disclosure Letter, there has not been any sale, spin-off or split-up of material
assets of either XXXXX or any other person or entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, XXXXX ("Affiliates") since its inception.
3.6 FINANCIAL STATEMENTS. Schedule 3.6 to the XXXXX Disclosure Letter
includes copies of the following financial statements (the "XXXXX Financial
Statements") of XXXXX: XXXXX'x audited Balance Sheet as of December 31, 1999 and
audited Statements of Income and Comprehensive Income, Stockholders' Equity and
Cash Flows for the fiscal year ended December 31, 1999 and, unaudited Balance
Sheet as of September 30, 2000 and unaudited Statements of Income and
Comprehensive Income, Stockholders' Equity and Cash Flows for each of the nine
month periods ended September 30, 2000 and 1999 (September 30, 2000 being
hereinafter referred to as the "Balance Sheet Date"). The XXXXX Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 3.6 to the XXXXX Disclosure
Letter). Except as set forth on Schedule 3.6 to the XXXXX Disclosure Letter,
such Balance Sheets present fairly in all material respects the financial
position of XXXXX as of the dates indicated thereon, and such Statements of
Income and Comprehensive Income, Stockholders' Equity and Cash Flows present
fairly in all material respects the results of operations for the periods
-5-
6
indicated thereon, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
3.7 LIABILITIES AND OBLIGATIONS. Schedule 3.7 to the XXXXX Disclosure
Letter includes accurate lists as of September 30, 2000 (the "Balance Sheet
Date") of (i) all material liabilities of XXXXX which are not reflected on the
Balance Sheet of XXXXX at the Balance Sheet Date or otherwise reflected in the
XXXXX Financial Statements at the Balance Sheet Date which by their nature would
be required in accordance with GAAP to be reflected in the Balance Sheet, and
(ii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements. Except as set forth on Schedule 3.7
to the XXXXX Disclosure Letter, since the Balance Sheet Date XXXXX has not
incurred any material liabilities of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise, other
than liabilities incurred in the ordinary course of business. Schedule 3.7 to
the XXXXX Disclosure Letter also includes, in the case of those contingent
liabilities related to pending or threatened litigation, or other liabilities
which are not fixed or otherwise accrued or reserved, a good faith and
reasonable estimate of the maximum amount which XXXXX reasonably expects will be
payable. For each such contingent liability or liability for which the amount is
not fixed or is contested, XXXXX has provided to AMDI the following information:
(a) A summary description of the liability together with the
following:
(i) copies of all relevant documentation relating thereto;
(ii) amounts claimed and any other action or relief sought; and
(iii) name of claimant and all other parties to the claim, suit
or proceeding;
(b) The name of each court or agency before which such claim, suit
or proceeding is pending; and
(c) The date such claim, suit or proceeding was instituted; and
(d) A good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability. If
no estimate is provided, the estimate shall for purposes of this Agreement be
deemed to be zero.
3.8 PERMITS AND INTANGIBLES.
(i) XXXXX holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect on XXXXX'x business and Schedule 3.8 to the XXXXX Disclosure
Letter includes an accurate list and summary description of all such licenses,
franchises, permits and other governmental authorizations, including permits (it
being understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 3.9 to the XXXXX Disclosure
Letter), titles
-6-
7
(including motor vehicle titles and current registrations), fuel permits,
licenses, franchises and certificates, as well as (a) registered or unregistered
trademarks, trade names, patents, patent applications and inventions and
discoveries that may be patentable, (b) copyrights owned or held by XXXXX or any
of its employees (including interests in software or other technology systems,
programs and intellectual property). The licenses, franchises, permits and other
governmental authorizations listed on Schedules 3.8 and 3.9 to the XXXXX
Disclosure Letter are valid, and XXXXX has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. XXXXX has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 3.8 and 3.9 of
the XXXXX Disclosure letter and is not in violation of any of the foregoing
except where such non-compliance or violation would not have a Material Adverse
Effect on XXXXX. Except as specifically provided in Schedule 3.8 to the XXXXX
Disclosure Letter, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to XXXXX by, any such licenses, franchises, permits
or government authorizations.
(ii) The patents, the marks and copyrights, as well as the know how,
trade secrets, confidential information, customer lists, software, technical
information, data, process technology, plans and drawings owned, used or
licensed by XXXXX (collectively, the "Trade Secrets") are all those necessary to
enable XXXXX to conduct and to continue to conduct its business as it is
currently conducted. Schedule 3.8 of the XXXXX Disclosure Letter also contains a
description of all material Trade Secrets owned or used by XXXXX. Except as set
forth on Schedule 3.8 to the XXXXX Disclosure Letter (a) all of the patents,
marks, copyrights and Trade Secrets (collectively, the "Intellectual Property")
are owned, or used under valid licenses by XXXXX, and are free and clear of all
liens and other adverse claims; (b) XXXXX has not infringed on or
misappropriated, is not now infringing on or misappropriating, and has not
received any notice that it is infringing on, misappropriating, or otherwise
conflicting with the intellectual property rights of any third parties; (c)
there is no claim pending or threatened against XXXXX with respect to the
alleged infringement or misappropriation by XXXXX or a conflict with, any
intellectual property rights of others; (d) the operation of any aspect of the
business in the manner in which it has heretofore been operated or is presently
operated does not give rise to any such infringement or misappropriation; and
(e) there is no infringement or misappropriation of the Intellectual Property by
a third party or claim, pending or threatened, against any third party with
respect to the alleged infringement or misappropriation of the Intellectual
Property by such third party.
3.9 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.9 to the
XXXXX Disclosure Letter, and except where any failure to comply or action would
not have a Material Adverse Effect, (i) XXXXX has complied with and is in
compliance with all Federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances including petroleum and petroleum products (as such terms
are defined in any applicable Environmental Laws); (ii) XXXXX has obtained and
adhered to all necessary permits and other
-7-
8
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, an accurate list of all of which
permits and approvals is set forth on Schedule 3.9 to the XXXXX Disclosure
Letter, and have reported to the appropriate authorities, to the extent required
by all Environmental Laws, all past and present sites owned and operated by
XXXXX where Hazardous Wastes or Hazardous Substances have been treated, stored,
disposed of or otherwise handled; (iii) there have been no releases or threats
of releases (as defined in Environmental Laws) at, from, in or on any property
owned or operated by XXXXX except as permitted by Environmental Laws; (iv) there
is no on-site or off-site location to which XXXXX has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which is reasonably likely to lead to any claim against XXXXX for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) XXXXX has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
3.10 PERSONAL PROPERTY. Schedule 3.10 to the XXXXX Disclosure Letter
includes an accurate list of (i) all personal property owned by XXXXX with an
individual value in excess of $25,000 acquired since September 30, 2000 and (ii)
all leases and agreements in respect of personal property, including, in the
case of each of (i) and (ii), (1) true, complete and correct copies of all such
leases and (2) an indication as to which assets are currently owned, or were
formerly owned, by shareholders, relatives of shareholders, or Affiliates of
XXXXX. Except as set forth on Schedule 3.10 to the XXXXX Disclosure Letter, (x)
all material personal property used by XXXXX in its business is either owned by
XXXXX or leased by XXXXX pursuant to a lease included on Schedule 3.10 to the
XXXXX Disclosure Letter, (y) all of the personal property listed on Schedule
3.10 to the XXXXX Disclosure Letter is in good working order and condition,
ordinary wear and tear excepted and (z) all leases and agreements included on
Schedule 3.10 to the XXXXX Disclosure Letter are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
3.11 MATERIAL CONTRACTS AND COMMITMENTS. Schedule 3.11 to the XXXXX
Disclosure Letter includes an accurate list as of or on the date hereof, of all
material written or oral leases, agreements or other contracts or legally
binding contractual rights or contractual obligations or contractual commitments
relating to or in any way affecting the operation or ownership of the business
of XXXXX (the "Material Contracts"), including but not limited, those of a type
described below:
(i) Any consulting agreement, employment agreement,
change-in-control agreement, and collective bargaining arrangements with any
labor union and any such agreements currently in negotiation or proposed;
(ii) Any contract for capital expenditures or acquisition, or
construction of fixed assets in excess of $25,000.
-8-
9
(iii) Any contract for the purchase, maintenance or acquisition, or
the sale or furnishing, of materials, supplies, merchandise, products,
machinery, equipment, parts or other property or services (except if such
contract is made in the ordinary course of business and requires aggregate
future payments of less than $25,000);
(iv) Any contract other than trade payables in the ordinary course
of business relating to the borrowing of money, or the guaranty of another
person's borrowing of money, including, without limitation, any notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(v) Any contract granting any person a lien on all or any part of
the assets of XXXXX;
(vi) Any contract for the cleanup, abatement or other actions in
connection with hazardous materials as defined under any Environmental Laws, the
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(vii) Any contract granting to any person an option or a first
refusal, first-offer or similar preferential right to purchase or acquire any
material assets of XXXXX;
(viii) Any contract with any agent, distributor or representative
which is not terminable by XXXXX upon thirty calendar days' or less notice
without penalty;
(ix) Any contract under which XXXXX is (1) a lessee or sublessee of
any machinery, equipment, vehicle or other tangible personal property, or (2) a
lessor of any tangible personal property owned by XXXXX, in either case having
an original value in excess of $25,000;
(x) Any contract under which XXXXX has granted or received a license
or sublicense or under which it is obligated to pay or has the right to receive
a royalty, license fee or similar payment;
(xi) Any contract concerning any Affiliates;
(xii) Any contract providing for the indemnification or holding
harmless of any officer, director, employee or other person, other than as
provided in the by-laws of XXXXX;
(xiii) Any contract for purchase or sale by XXXXX or the granting of
any options with respect to, or providing for any labor, services or materials
(including brokerage or management services) involving any real property on
which XXXXX conducts any aspect of its business involving aggregate future
payments of more than $25,000;
(xiv) Any contract limiting, restricting or prohibiting XXXXX from
conducting business anywhere in the United States or elsewhere in the world;
-9-
10
(xv) Any joint venture or partnership agreement;
(xvi) Any lease, sublease or associated agreements relating to the
property leased by XXXXX;
(xvii) Any material contract requiring prior notice, consent or
other approval upon a change of control in the equity ownership of XXXXX, which
contracts shall be separately identified on Schedule 3.11 to the XXXXX
Disclosure Letter;
(xviii) Any contract with a customer of XXXXX involving work to be
performed or product to be delivered, in each case subsequent to September 30,
2000, in excess of $25,000;
(xix) Any other contract, whether or not made in the ordinary course
of business, which involves future payments by XXXXX in excess of $25,000.
XXXXX has provided AMDI and Merger Corp. a true and complete copy of each
written Material Contract and a true and complete summary of each oral Material
Contract, in each case including all amendments or other modifications thereto.
Except as set forth on Schedule 3.11 to the XXXXX Disclosure Letter, each
Material Contract is a valid and binding obligation of, and enforceable in
accordance with its terms against, XXXXX, and the other parties thereto, and is
in full force and effect, subject only to bankruptcy, reorganization,
receivership and other laws affecting creditors' rights generally. Except as set
forth on Schedule 3.11 of the XXXXX Disclosure Letter, XXXXX has performed all
obligations required to be performed by it as of the date hereof and will have
performed all obligations required to be performed by it as of the Closing Date
under each Material Contract and neither XXXXX, nor any other party to any
Material Contract is in breach or default thereunder, and there exists no
condition which would, with or without the lapse of time or the giving of
notice, or both, constitute a breach or default thereunder. XXXXX has not been
notified that any party to any Material Contract intends to cancel, terminate,
not renew, or exercise an option under any Material Contract, whether in
connection with the transactions contemplated hereby or otherwise.
3.12 REAL PROPERTY. Schedule 3.12 to the XXXXX Disclosure Letter is a
correct and complete list, and a brief description of all real property leased
by XXXXX (the "Leased Real Property"), and all facilities thereon. Except as
lessee of Leased Real Property, XXXXX is not a lessee under or otherwise a party
to any lease, sublease, license, concession or other agreement, whether written
or oral, pursuant to which another person or entity has granted to XXXXX the
right to use or occupy all or any portion of any real property. XXXXX does not
have an ownership interest in any real property.
XXXXX has a valid leasehold interest in the Leased Property free and
clear of all liens, assessments or restrictions (including, without limitation,
inchoate liens arising out of the provision of labor, services or materials to
any such Real Property) other than (a) mortgages shown on the XXXXX Financial
Statements as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) liens for current taxes not yet due, and (c)
minor imperfections of title, such as utility and
-10-
11
access easements that do not impair the intended use of the Real Property, none
of which is substantial in amount, materially detracts from the value or impairs
the use of the property subject thereto, or impairs the operations of XXXXX, and
zoning laws and other land use restrictions or restrictive covenants that do not
materially impair the present use of the property subject thereto. The Real
Property constitutes all the real properties reflected on the XXXXX Financial
Statements or used or occupied by XXXXX in connection with its business or
otherwise.
With respect to the Leased Real Property, except as reflected on
Schedule 3.12 to the XXXXX Disclosure Letter:
(i) XXXXX is in exclusive possession thereof and no easements,
licenses or rights are necessary to conduct business thereon in addition to
those which exist as of the date hereof;
(ii) No portion thereof is subject to any pending condemnation
proceeding or proceeding by any public or quasi-public authority materially
adverse to the Leased Real Property and there is no threatened condemnation or
proceeding with respect thereto;
(iii) (a) the buildings, plants, improvements, structures and
fixtures at the Leased Real Property, including, without limitation, heating,
ventilation and air conditioning systems, roofs, foundations and floors, are in
good operating condition and repair; (b) the Leased Real Property is not in
violation of any health, safety, building, or environmental ordinances, laws,
codes or regulations; nor has any notice of any claimed violation of any such
ordinances, laws, codes or regulations been served on XXXXX;
(iv) The Leased Real Property is supplied with utilities and other
third-party services, such as water, sewer, electricity, gas, roads, rail
service and garbage collection, necessary for the current operation of the
business and such Leased Real Property is maintained in all material respects in
accordance with all laws applicable to XXXXX or the Leased Real Property;
(v) XXXXX is not a party to any written or oral agreement or
undertaking with owners or users of properties adjacent to the Leased Real
Property relating to the use, operation or maintenance of such facility or any
adjacent real property;
(vi) XXXXX is not a party to any lease, sublease, license,
concession or other agreement, whether written or oral, pursuant to which XXXXX
has granted to any party or parties the right to use or occupy all or any
portion of the Leased Real Property;
(vii) To the extent that XXXXX has responsibility under the lease(s)
for the Leased Real Property for compliance with the provisions of the ADA, all
alterations, rehabilitations, structures, or improvements in the Leased Property
comply with the ADA;
(viii) (a) There are no material defects in any improvements on or
to the Leased Real Property; (b) the Leased Real Property is free from regulated
quantities of asbestos; and (c) the Leased Real Property is free from flooding
and leaks.
-11-
12
3.13 INSURANCE. Schedule 3.13 to the XXXXX Disclosure Letter includes
(i) an accurate list of all insurance policies carried by XXXXX since its
inception, and (ii) an accurate list of all insurance loss claims or workers
compensation claims received since its inception and complete copies of the
foregoing items have been delivered to AMDI and Merger Corp. Such insurance
policies evidence all of the insurance that XXXXX has been required to carry
pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. All insurance policies for the current policy periods are in
full force and effect and shall remain in full force and effect through the
Closing Date. Since its inception, no insurance carried by XXXXX has been
canceled by the insurer and XXXXX has not been denied coverage.
3.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 3.14 to the XXXXX Disclosure Letter includes an accurate list of (i)
all officers, directors and key employees of XXXXX, (ii) all employment
agreements with such officers, directors and key employees and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of the Balance Sheet Date
and the date hereof. XXXXX has provided to AMDI and Merger Corp. true, complete
and correct copies of any employment agreements for persons listed on Schedule
3.14 to the XXXXX Disclosure Letter. Since the Balance Sheet Date, there have
been no increases in the compensation payable or any special bonuses to any
officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis consistent with past practices. Except as set
forth on Schedule 3.14 to the XXXXX Disclosure Letter, (i) XXXXX is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any arrangement with any labor union, (ii) no employees of XXXXX are represented
by any labor union or covered by any collective bargaining agreement, (iii) no
campaign to establish such representation is in progress and (iv) there is no
pending or threatened labor dispute involving XXXXX and any group of its
employees nor has XXXXX experienced any labor interruptions over the past three
years. XXXXX believes its relationship with its employees to be good.
3.15 EMPLOYEE BENEFIT PLANS. Schedule 3.15 to the XXXXX Disclosure
Letter sets forth all employee benefit plans of XXXXX, including all employment
agreements and other agreements or arrangements containing "golden parachute" or
other similar provisions, and deferred compensation agreements. XXXXX has
delivered to AMDI and Merger Corp. true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 3.15 to the XXXXX Disclosure
Letter, XXXXX does not sponsor, maintain or contribute to any plan program, fund
or arrangement that constitutes an "employee pension benefit plan," nor has
XXXXX any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term "employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA.
XXXXX has not sponsored, maintained or contributed to any employee pension
benefit plan other than the plans set forth on Schedule 3.15 to the XXXXX
Disclosure Letter, nor is XXXXX required to contribute to any retirement plan
pursuant to the provisions of any collective bargaining agreement establishing
the
-12-
13
terms and conditions or employment of any employees of XXXXX. All accrued
contribution obligations of XXXXX with respect to any plan listed on Schedule
3.15 to the XXXXX Disclosure Letter have either been fulfilled in their entirety
or are fully reflected on the balance sheet of the XXXXX as of the Balance Sheet
Date.
3.16 COMPLIANCE WITH ERISA. All plans listed on Schedule 3.15 to the
XXXXX Disclosure Letter that are intended to qualify (the "Qualified Plans")
under Section 401(a) of the Code are, and have been so qualified and have been
determined by the Internal Revenue Service to be so qualified, and copies of
such determination letters are included as part of Schedule 3.15 to the XXXXX
Disclosure Letter. Except as disclosed on Schedule 3.16 to the XXXXX Disclosure
Letter, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed, and copies thereof are included as part of
Schedule 3.15 to the XXXXX Disclosure Letter. None of the XXXXX stockholders has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No plan listed in Schedule 3.15 to the XXXXX
Disclosure Letter has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and XXXXX has not
incurred any liability for excise tax or penalty due to the Internal Revenue
Service nor any liability to the Pension Benefit Guaranty Corporation.
(i) There have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to qualify
under Section 401(a) of the Code without notice to and approval by the Internal
Revenue Service;
(ii) No plan listed in Schedule 3.15 to the XXXXX Disclosure Letter,
subject to the provisions of Title IV of ERISA, has been terminated;
(iii) There have been no "reportable events" (as that phrase is defined
in Section 4043 of ERISA) with respect to any such plan listed in Schedule 3.15
to the XXXXX Disclosure Letter;
(iv) XXXXX has not incurred liability under Section 4062 of ERISA; and
(v) No circumstances exist pursuant to which XXXXX could have any direct
or indirect liability whatsoever (including, but not limited to, any liability
to any multiemployer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than XXXXX that is,
or at any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes XXXXX.
3.17 CONFORMITY WITH LAW; LITIGATION.
(i) Except to the extent set forth on Schedule 3.17 to the XXXXX
Disclosure Letter, XXXXX is not in violation of any law or regulation or any
order of any court or
-00-
00
Xxxxxxx, xxxxx, xxxxxxxxx or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it which would have a
Material Adverse Effect.
(ii) Except as set forth on Schedule 3.17 to the XXXXX Disclosure
Letter (which shall disclose the parties to, nature of and relief sought for
each matter to be disclosed), other than collection actions by XXXXX, in the
ordinary course of business on its own behalf, none of which is greater than
$25,000 and which in the aggregate do not exceed $50,000:
(a) There is no suit, action, proceeding, investigation, claim
or order pending or threatened against XXXXX, or with respect to any Employee
Plan, or any fiduciary of any such plan (or pending or threatened against any of
the officers, directors or employees of XXXXX with respect to the business or
currently proposed business activities of XXXXX, or to which XXXXX is otherwise
a party, or which may have or is likely to have a Material Adverse Effect,
before any court, or before any governmental authority, department, commission,
bureau, agency or other governmental department or arbitrator (collectively,
"Claims"), nor is there any basis for any such Claims.
(b) XXXXX is not subject to any unsatisfied or continuing
judgment, order or decree of any court or governmental authority, and XXXXX is
not otherwise exposed, from a legal standpoint, to any liability or disadvantage
which could have a Material Adverse Effect. Schedule 3.17 to the XXXXX
Disclosure Letter sets forth all closed litigation matters to which XXXXX was a
party during the preceding five years, the dates such litigation was commenced
and concluded, and the nature of the resolution thereof (including amounts paid
in settlement or judgment).
3.18 TAXES. XXXXX has timely filed all requisite federal, state and
other tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 3.18 to the
XXXXX Disclosure Letter, there are no examinations in progress or claims against
any of them for federal, state and other Taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for taxes, whether pending or threatened, has
been received. All Taxes, including interest and penalties (whether or not shown
on any tax return) owed by XXXXX, any member of an affiliated or consolidated
group which includes or included XXXXX, or with respect to any payment made or
deemed made by XXXXX herein have been paid. The amounts shown as accruals for
Taxes on the XXXXX Financial Statements are sufficient for the payment of all
Taxes of the kinds indicated (including penalties and interest) for all fiscal
periods ended on or before that date. Copies of (i) any tax examinations, (ii)
extensions of statutory limitations and (iii) the federal and local income tax
returns and franchise tax returns of XXXXX for the last three fiscal years, are
attached as Schedule 3.18 to the XXXXX Disclosure Letter.
3.19 NO VIOLATIONS. XXXXX is not in violation of any of its Charter
Documents. XXXXX is not in default under any lease, instrument, agreement,
license, or permit set forth on the Schedules to the XXXXX Disclosure Letter, or
any other material agreement to which it is a party or by which its properties
are bound (the "Material Documents"); and, except as set forth in Schedule 3.19
to the XXXXX Disclosure Letter, (a) the rights and benefits of XXXXX under the
Material Documents will not be adversely affected by the transactions
contemplated hereby and (b) the
-14-
15
execution of this Agreement and the performance of the obligations hereunder and
the consummation of the transactions contemplated hereby will not result in any
violation of, or breach of, or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 3.19 to the XXXXX Disclosure Letter, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 3.19 to the XXXXX Disclosure Letter, none of the Material
Documents prohibits the use or publication by XXXXX of the name of any other
party to such Material Document, and none of the Material Documents prohibits or
restricts XXXXX from freely providing services to any other customer or
potential customer of XXXXX.
3.20 GOVERNMENT CONTRACTS. Except as set forth on Schedule 3.20 to the
XXXXX Disclosure Letter, XXXXX is not now a party to any governmental contract
subject to price redetermination or renegotiation.
3.21 ABSENCE OF CHANGES. Since September 30, 2000, except as set forth
on Schedule 3.21 to the XXXXX Disclosure Letter, there has not been:
(i) Any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of XXXXX;
(ii) Any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of XXXXX;
(iii) Any change in the authorized capital of XXXXX or its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(iv) Any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other Merger Corp. of any of the capital stock of XXXXX;
(v) Any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by XXXXX to any of their respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in accordance
with past practice;
(vi) Any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting the
business of XXXXX;
(vii) Any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of XXXXX to any person, including,
without limitation, any of the stockholders and their affiliates;
-15-
16
(viii) Any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to XXXXX, including without limitation any indebtedness
or obligation of any stockholder or any affiliate thereof;
(ix) Any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of XXXXX or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(x) Any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of XXXXX;
(xi) Any waiver of any material rights or claims of XXXXX;
(xii) Any amendment or termination of any Material Documents or
other right to which XXXXX is a party;
(xiii) Any transaction by XXXXX outside the ordinary course of its
business;
(xiv) Any cancellation or termination of a Material Contract with a
customer or client prior to the scheduled termination date; or
(xv) Any other distribution of property or assets by XXXXX other
than in the ordinary course of business.
3.22 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.22 to the XXXXX
Disclosure Letter includes an accurate list as of the date of the Agreement of:
(i) the name of each financial institution in which XXXXX has accounts or safe
deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the
type of account and account number; and (iv) the name of each person authorized
to draw thereon or have access thereto. Schedule 3.22 to the XXXXX Disclosure
Letter also sets forth the name of each person, corporation, firm or other
entity holding a general or special power of attorney from XXXXX and a
description of the terms of such power.
3.23 RELATIONS WITH GOVERNMENTS. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $10,000 per year,
XXXXX has not made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause XXXXX to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended or any law of similar
effect.
3.24 DISCLOSURE. This Agreement, including the Exhibits and XXXXX
Disclosure Letter and the Schedules thereto, together with the other information
furnished to AMDI by XXXXX and the Shareholder in connection herewith, do not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
-16-
17
3.25 PROHIBITED ACTIVITIES. Except as set forth on Schedule 3.25 to the
XXXXX Disclosure Letter, XXXXX has not, between September 30, 2000 and the date
hereof, taken any of the actions (Prohibited Activities) set forth in Section
6.3.
3.26 NO CONFLICTS. Except as set forth on Schedule 3.26 to the XXXXX
Disclosure Letter, the execution, delivery and performance of this Agreement by
XXXXX and the consummation by XXXXX of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any term or provision
of, or (with or without notice or passage of time, or both) constitute a default
under, any indenture, mortgage, deed of trust, trust (constructive and other),
loan agreement or other agreement or instrument to which XXXXX is a party or
violate the provisions of any statute, or any order, rule or regulation of any
governmental body or agency or instrumentality thereof, or any order, writ,
injunction or decree of any court or any arbitrator, having jurisdiction over
XXXXX or the property of XXXXX.
3.27 CERTAIN BUSINESS RELATIONSHIPS WITH XXXXX. Except as listed in
Schedule 3.27, neither the Principal Shareholder nor any relative of the
Principal Shareholder or Affiliate of XXXXX has been involved in any business
arrangement or relationship with XXXXX since its inception, and neither the
Principal Shareholder, nor any relative of the Principal Shareholder or
Affiliate of XXXXX owns any asset, tangible or intangible, which is used in
XXXXX'x operations.
3.28 AUTHORIZATION. The representatives of XXXXX executing this
Agreement have the authority to enter into and bind XXXXX to the terms of this
Agreement and XXXXX has the full legal right, power and authority to enter into
this Agreement and the Merger.
4. REPRESENTATIONS AND WARRANTIES OF AMDI AND MERGER CORP.
Except as provided in the AMDI Disclosure Letter (as defined below) to
be delivered pursuant to Section 10.2, each of AMDI and Merger Corp. jointly and
severally represents and warrants to XXXXX and the Principal Shareholder that
all of the following representations and warranties in this Section 4 are true
at the date of this Agreement and shall be true at the time of Closing. As used
in this Agreement, the "AMDI Disclosure Letter" shall mean the disclosure letter
delivered by AMDI and Merger Corp. to XXXXX and the Principal Shareholder
regarding AMDI and Merger Corp. pursuant to this Section 4 upon execution of
this Agreement.
4.1 DUE ORGANIZATION. Merger Corp. is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. Merger Corp. is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except (i) as set forth on Schedule 4.1 to AMDI Disclosure Letter or
(ii) where the failure to be so authorized or qualified would not have a
material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise), of AMDI (as used herein with respect to
AMDI, or with respect to any other person, a "Material Adverse Effect").
Schedule 4.1 to the AMDI Disclosure Letter sets forth the jurisdictions in which
AMDI and Merger Corp. are incorporated and contains a list of all jurisdictions
in which AMDI and Merger Corp. are
-17-
18
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and Bylaws, each as amended, of AMDI (the "AMDI
Charter Documents") and true, complete and correct copies of Certificate of
Incorporation and Bylaws of Merger Corp. (the "Merger Corp. Charter Documents")
have been made available to XXXXX and the Principal Shareholder. The stock
records of AMDI and Merger Corp. as heretofore made available to XXXXX the
Principal Shareholder, are correct and complete in all material respects. There
are no minutes or other records or proceedings of AMDI and Merger Corp. which
have not been made available to XXXXX and the Principal Shareholder, and all of
such minutes or other records of proceedings are correct and complete in all
respects.
4.2 SUBSIDIARIES. The names and jurisdiction of incorporation of the
subsidiaries of AMDI are set forth in Schedule 4.2. Merger Corp. has no
subsidiaries.
4.3 CAPITAL STRUCTURE. The authorized and outstanding capital stock of
AMDI is as set forth in Section 1.4(i). The authorized and outstanding capital
stock of Merger Corp. is as set forth in Section 1.4(iii). All of the issued and
outstanding shares of the capital stock of AMDI and Merger Corp. have been duly
authorized and are validly issued, fully paid and non-assessable. Except as
listed in Schedule 4.3, each of AMDI and Merger Corp. has no common stock or
other shares of capital stock reserved for or otherwise subject to issuance.
Except as listed in Schedule 4.3 or as set forth above, there are no pre-emptive
or other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of AMDI or Merger Corp. or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any person a
right to subscribe for or acquire, any securities of AMDI or Merger Corp., and
no securities or obligations evidencing such rights are authorized, issued or
outstanding. Each of AMDI and Merger Corp. does not have outstanding any bonds,
debentures, notes or other debt obligations the holders of which have the right
to vote (or convertible into or exercisable for securities having the right to
vote). There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to AMDI or Merger Corp.
There are no voting trusts, proxies or other agreements or understandings with
respect to the voting of the capital stock of AMDI or Merger Corp.
4.4 PREDECESSOR STATUS; ETC. Set forth in Schedule 4.4 to AMDI
Disclosure Letter is an accurate list of all names of all predecessor companies
of AMDI since May 1, 1994, including the names of any entities acquired by AMDI
(by stock purchase, merger or otherwise) or owned by AMDI or from whom AMDI
previously acquired material assets, in any case, from the earliest date upon
which any person acquired his or her stock in AMDI. Except as disclosed on
Schedule 4.4 to AMDI Disclosure Letter, AMDI has not been, within such period of
time, a subsidiary or division of another corporation or a part of an
acquisition which was later rescinded.
4.5 SPIN-OFF BY AMDI. Except as set forth on Schedule 4.5 to AMDI
Disclosure Letter, there has not been any sale, spin-off or split-up of material
assets of either AMDI or any other person or entity that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, AMDI ("Affiliates") since its inception.
-18-
19
4.6 FINANCIAL STATEMENTS. Schedule 4.6 to AMDI Disclosure Letter
includes copies of the following financial statements (the "AMDI Financial
Statements") of AMDI: AMDI's audited Balance Sheets as of April 30, 2000 and
1999 and audited Statements of Income and Comprehensive Income, Stockholders'
Equity and Cash Flows for each of the fiscal years ended April 30, 2000 and 1999
and, unaudited Balance Sheet as of September 30, 2000 and unaudited Statements
of Income and Comprehensive Income, Stockholders' Equity and Cash Flows for each
of the four month periods ended September 30, 2000 and 1999 (September 30, 2000
being hereinafter referred to as the "Balance Sheet Date"). The AMDI Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 4.6 to AMDI Disclosure
Letter). Except as set forth on Schedule 4.6 to AMDI Disclosure Letter, such
Balance Sheets present fairly in all material respects the financial position of
AMDI as of the dates indicated thereon, and such Statements of Income and
Comprehensive Income, Stockholders' Equity and Cash Flows present fairly in all
material respects the results of operations for the periods indicated thereon,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount.
4.7 LIABILITIES AND OBLIGATIONS. Schedule 4.7 to AMDI Disclosure Letter
includes accurate lists as of September 30, 2000 (the "Balance Sheet Date") of
(i) all material liabilities of AMDI which are not reflected on the Balance
Sheet of AMDI at the Balance Sheet Date or otherwise reflected in AMDI Financial
Statements at the Balance Sheet Date which by their nature would be required in
accordance with GAAP to be reflected in the Balance Sheet, and (ii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements. Except as set forth on Schedule 4.7 to AMDI
Disclosure Letter, since the Balance Sheet Date AMDI has not incurred any
material liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than liabilities
incurred in the ordinary course of business. Schedule 4.7 to AMDI Disclosure
Letter also includes, in the case of those contingent liabilities related to
pending or threatened litigation, or other liabilities which are not fixed or
otherwise accrued or reserved, a good faith and reasonable estimate of the
maximum amount which AMDI reasonably expects will be payable. For each such
contingent liability or liability for which the amount is not fixed or is
contested, AMDI has provided to XXXXX and the Shareholder the following
information:
(a) A summary description of the liability together with the
following:
(i) copies of all relevant documentation relating thereto;
(ii) amounts claimed and any other action or relief sought;
and
(iii) name of claimant and all other parties to the claim, suit
or proceeding;
(b) The name of each court or agency before which such claim, suit
or proceeding is pending; and
-19-
20
(c) The date such claim, suit or proceeding was instituted; and
(d) A good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability. If
no estimate is provided, the estimate shall for purposes of this Agreement be
deemed to be zero.
4.8 ABSENCE OF CHANGES. Since September 30, 2000, except as set forth on
Schedule 4.21 to AMDI Disclosure Letter, there has not been:
(i) Any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of AMDI;
(ii) Any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of AMDI;
(iii) Any change in the authorized capital of AMDI or its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(iv) Any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other Merger Corp. of any of the capital stock of AMDI;
(v) Any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by AMDI to any of their respective
officers, directors, stockholders, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in accordance
with past practice;
(vi) Any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting the
business of AMDI;
(vii) Any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of AMDI to any person, including,
without limitation, any of the stockholders and their affiliates;
(viii) Any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to AMDI, including without limitation any indebtedness or
obligation of any stockholder or any affiliate thereof;
(ix) Any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of AMDI or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
-20-
21
(x) Any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of AMDI;
(xi) Any waiver of any material rights or claims of AMDI;
(xii) Any amendment or termination of any Material Documents or
other right to which AMDI is a party;
(xiii) Any transaction by AMDI outside the ordinary course of its
business;
(xiv) Any cancellation or termination of a Material Contract with a
customer or client prior to the scheduled termination date; or
(xv) Any other distribution of property or assets by AMDI other than
in the ordinary course of business.
4.9 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 4.9 to AMDI
Disclosure Letter includes an accurate list as of the date of the Agreement of:
(i) the name of each financial institution in which AMDI has accounts or safe
deposit boxes; (ii) the names in which the accounts or boxes are held; (iii) the
type of account and account number; and (iv) the name of each person authorized
to draw thereon or have access thereto. Schedule 4.9 to AMDI Disclosure Letter
also sets forth the name of each person, corporation, firm or other entity
holding a general or special power of attorney from AMDI and a description of
the terms of such power.
4.10 RELATIONS WITH GOVERNMENTS. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $10,000 per year since
1996, AMDI has not made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause AMDI to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended or any law of similar
effect.
4.11 DISCLOSURE. This Agreement, including the Exhibits and AMDI
Disclosure Letter and the Schedules thereto, together with the other information
furnished to XXXXX and the Principal Shareholder by AMDI and Merger Corp. in
connection herewith, do not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements herein and
therein, in light of the circumstances under which they were made, not
misleading.
4.12 PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.12 to AMDI
Disclosure Letter, each of AMDI and Merger Corp. has not, between September 30,
2000 and the date hereof, taken any of the actions (Prohibited Activities) set
forth in Section 6.3.
4.13 NO CONFLICTS. Except as set forth on Schedule 4.13 to the AMDI
Disclosure Letter, the execution, delivery and performance of this Agreement by
each of AMDI and Merger Corp. and the consummation by each of AMDI and Merger
Corp. of the transactions contemplated hereby will not conflict with or result
in a breach or violation of any term or provision
-21-
22
of, or (with or without notice or passage of time, or both) constitute a default
under, any indenture, mortgage, deed of trust, trust (constructive and other),
loan agreement or other agreement or instrument to which AMDI or Merger Corp. is
a party or violate the provisions of any statute, or any order, rule or
regulation of any governmental body or agency or instrumentality thereof, or any
order, writ, injunction or decree of any court or any arbitrator, having
jurisdiction over AMDI or Merger Corp. or the property of AMDI or Merger Corp.
4.14 CERTAIN BUSINESS RELATIONSHIPS WITH AMDI. Except as listed in
Schedule 4.14, no current officer or director of AMDI or Merger Corp. has been
involved in any business arrangement or relationship with AMDI or Merger Corp.
since May 1, 1997, and none of the officers or directors, nor any relative of
any officer or director or affiliate of an officer or director of AMDI or Merger
Corp., owns any asset, tangible or intangible, which is used in AMDI's or Merger
Corp.'s operations.
4.15 AUTHORIZATION. The representatives of each of AMDI and Merger Corp.
executing this Agreement has the authority to enter into and bind AMDI and
Merger Corp. to the terms of this Agreement and each of AMDI and Merger Corp.
has the full legal right, power and authority to enter into this Agreement and
the Merger, subject to the approval of the shareholders of AMDI as provided in
Sections 8.4 and 9.4.
5. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDER CONCERNING
THE TRANSACTION.
The Principal Shareholder represents and warrants to AMDI, as to
himself, that all of the following representations and warranties in this
Section 5 are true at the date of this Agreement and shall be true at the time
of Closing.
5.1 AUTHORIZATION. All action on the part of the Principal Shareholder
necessary for the authorization, execution and delivery of this Agreement and
the performance of all obligations of the Principal Shareholder hereunder has
been taken, and this Agreement constitutes a valid and legally binding
obligation of the Principal Shareholder, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
5.2 OWNERSHIP OF SHARES. The Principal Shareholder owns, of record and
beneficially, 811,765 shares of XXXXX stock and options to purchase 500,000
shares of XXXXX Stock, free and clear of all liens, claims, options and
encumbrances whatsoever. There are no outstanding options, warrants or rights to
purchase or acquire any of the shares of XXXXX Stock or options to purchase
XXXXX Stock owned by the Principal Shareholder.
5.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Principal Shareholder and the consummation by the Principal
Shareholder of the transactions contemplated hereby will not conflict with or
result in a breach or violation of any term or provision of, or (with or without
notice or passage of time, or both) constitute a default under, any indenture,
-22-
23
mortgage, deed of trust, trust (constructive and other), loan agreement or other
agreement or instrument to which the Principal Shareholder is a party or violate
the provisions of any statute, or any order, rule or regulation of any
governmental body or agency or instrumentality thereof, or any order, writ,
injunction or decree of any court or any arbitrator, having jurisdiction over
the Principal Shareholder or the property of the Principal Shareholder.
5.4 MERGER CORP. STOCK. The Merger Corp. Stock will be acquired by the
Principal Shareholder for his own account, not as a nominee or agent, and the
Principal Shareholder has no present intention of selling, granting any
participation in, or otherwise distributing Merger Corp. Stock.
5.5 DISCLOSURE OF INFORMATION. The Principal Shareholder has received
and had the opportunity to review the reports filed by AMDI with the Securities
and Exchange Commission and has had the opportunity to ask questions of, and
receive answers from, representatives of AMDI to obtain additional information
regarding AMDI and Merger Corp.
6. COVENANTS OF XXXXX AND THE SHAREHOLDERS PRIOR TO CLOSING.
6.1 ACCESS AND COOPERATION; DUE DILIGENCE. Between the date of this
Agreement and the Closing Date, XXXXX and the Principal Shareholder will afford
to the officers and authorized representatives of AMDI and Merger Corp. access
to all of the sites, properties, books and records of XXXXX and will furnish
AMDI and Merger Corp. such additional financial and operating data and other
information as to the business and properties of NISCO, AMDI and Merger Corp.
may from time to time reasonably request. The Principal Shareholder and XXXXX
will cooperate with each of AMDI and Merger Corp., its representatives, auditors
and counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement or necessary to complete the transactions contemplated hereunder
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing, XXXXX will, except as set forth on Schedule 6.2 to
the XXXXX Disclosure Letter:
(i) Carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(ii) Maintain its properties and facilities in as good working order
and condition as at present, ordinary wear and tear excepted;
(iii) Perform in all material respects all of its obligations under
agreements relating to or affecting its respective assets, properties or rights;
(iv) Use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
-23-
24
(v) Use its reasonable efforts to maintain and preserve its business
organization intact, retain its present key employees and maintain its
relationships with suppliers, customers and others having business relations
with it;
(vi) Maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(vii) Maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, without the knowledge and consent of
AMDI (which consent shall not be unreasonably withheld), provided that debt
and/or lease instruments may be replaced without the consent of AMDI if such
replacement instruments are on terms at least as favorable to XXXXX as the
instruments being replaced; and
(viii) Maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and customary
bonus and salary increases for employees in accordance with past practices.
6.3 PROHIBITED ACTIVITIES. Except as provided in Schedule 6.3, between
the date hereof and the Closing Date, XXXXX will not, without the prior written
consent of AMDI (which consent shall not be unreasonably withheld), engage in
any of the following (the "Prohibited Activities"):
(i) Make any change in its Charter Documents;
(ii) Issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the grant or exercise of options or warrants listed in Schedule
3.3 to the XXXXX Disclosure Letter;
(iii) Declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) Except as listed in Schedule 6.3, enter into any contract or
commitment or incur or agree to incur any liability or make any capital
expenditures, except if it is in the normal course of business (consistent with
past practice) and involves an amount not in excess of $100,000;
(v) Create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$50,000 necessary or desirable for the conduct of the businesses of XXXXX, (2)
(A) liens for taxes either not yet due or being contested in good faith and by
appropriate proceedings (and for which contested taxes adequate reserves have
been established and are being maintained) or (B) materialmen's, mechanics' or
other like liens arising in the ordinary
-24-
25
course of business (the liens set forth in clause (2) being referred to herein
as "Statutory Liens"), or (3) liens set forth on Schedule 3.7 and/or 3.11 to the
XXXXX Disclosure Letter;
(vi) Sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) Acquire any business;
(viii) Merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) Waive any material rights or claims of XXXXX, provided that
XXXXX may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(x) Commit a breach or amend or terminate any Material Documents or
right of XXXXX; or
(xi) Enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
6.4 NO SHOP. Neither XXXXX, nor any agent, officer, director, trustee or
any representative of any of the foregoing will, during the period commencing on
the date of this Agreement and ending with the earlier to occur of the Closing
Date or the termination of this Agreement in accordance with its terms, directly
or indirectly: (i) solicit or initiate the submission of proposals or offers
from any person for; (ii) participate in any discussions pertaining to; or (iii)
furnish any information to any person other than AMDI or its authorized agents
relating to, any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, XXXXX or a merger, consolidation or
business combination of XXXXX.
6.5 NOTIFICATION OF CERTAIN MATTERS. XXXXX and the Principal Shareholder
shall give prompt notice to AMDI and Merger Corp. of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of XXXXX contained herein or in
the XXXXX Disclosure Letter to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of XXXXX to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. The delivery of any notice pursuant to this Section
6.5 shall not be deemed to (i) modify the representations or warranties of the
party delivering such notice, (ii) modify the conditions set forth in Sections 7
and 8, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.6 FINAL FINANCIAL STATEMENTS. The Principal Shareholder shall provide
to AMDI and Merger Corp. for each calendar month prior to the Closing Date, the
unaudited balance sheets of XXXXX as of the end of all months following the
Balance Sheet Date, and the unaudited statement of income and comprehensive
income and cash flows for all months ended after the Balance Sheet Date,
disclosing no material adverse change in the financial condition or the results
of
-25-
26
its operations from the financial statements as of the Balance Sheet Date. Such
financial statements shall have been prepared in accordance with GAAP applied on
a consistent basis throughout the periods indicated (except as noted therein).
Except as noted in such financial statements, all of such financial statements
will present fairly the results of operations for the periods indicated therein.
7. COVENANTS OF AMDI AND MERGER CORP. PRIOR TO CLOSING.
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. Between the date of this
Agreement and the Closing Date, each of AMDI and Merger Corp. will afford to the
authorized representatives of XXXXX and the Principal Shareholder access to all
of the sites, properties, books and records of AMDI and Merger Corp. and will
furnish XXXXX and the Principal Shareholder such additional financial and
operating data and other information as to the business and properties of AMDI
and Merger Corp. as XXXXX and the Principal Shareholder may from time to time
reasonably request. AMDI and Merger Corp. will cooperate with XXXXX and the
Principal Shareholder, their representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement or
necessary to complete the transactions contemplated hereunder
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing, AMDI will, except as set forth on Schedule 7.2 to the
AMDI Disclosure Letter:
(i) Carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(ii) Perform in all material respects all of its obligations under
agreements relating to or affecting its respective assets, properties or rights;
(iii) Maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(iv) Maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, without the knowledge and consent of
XXXXX (which consent shall not be unreasonably withheld), provided that debt
and/or lease instruments may be replaced without the consent of XXXXX if such
replacement instruments are on terms at least as favorable to AMDI as the
instruments being replaced; and
(viii) Maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and customary
bonus and salary increases for employees in accordance with past practices.
7.3 PROHIBITED ACTIVITIES. Between the date hereof and the Closing Date,
AMDI will not, without the prior written consent of XXXXX, engage in any of the
following (the "Prohibited Activities"):
-26-
27
(i) Make any change in its Charter Documents;
(ii) Issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule 4.3 to
the AMDI Disclosure Letter;
(iii) Declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) Except as listed in Schedule 7.3, enter into any contract or
commitment or incur or agree to incur any liability or make any capital
expenditures, except if it is in the normal course of business (consistent with
past practice) and involves an amount not in excess of $50,000;
(v) Create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (1) with respect to purchase money liens incurred in connection
with the acquisition of equipment with an aggregate cost not in excess of
$50,000 necessary or desirable for the conduct of the businesses of AMDI, (2)
(A) liens for taxes either not yet due or being contested in good faith and by
appropriate proceedings (and for which contested taxes adequate reserves have
been established and are being maintained) or (B) materialmen's, mechanics' or
other like liens arising in the ordinary course of business (the liens set forth
in clause (2) being referred to herein as "Statutory Liens"), or (3) liens set
forth on Schedule 4.7 to the AMDI Disclosure Letter;
(vi) Sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) Negotiate for the acquisition of any business or the start-up
of any new business;
(viii) Merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) Waive any material rights or claims of AMDI, provided that AMDI
may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(x) Commit a breach or amend or terminate any Material Documents or
right of AMDI; or
(xi) Enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 NO SHOP. Neither AMDI, nor any agent, officer, director, trustee or
any representative will, during the period commencing on the date of this
Agreement and ending with
-27-
28
the earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly: (i) solicit or initiate the
submission of proposals or offers from any person for; (ii) participate in any
discussions pertaining to; or (iii) furnish any information to any person other
than XXXXX or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or a majority equity interest in,
AMDI or a merger, consolidation or business combination of AMDI.
7.5 NOTIFICATION OF CERTAIN MATTERS. AMDI shall give prompt notice to
XXXXX and the Principal Shareholder of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AMDI contained herein or in the AMDI Disclosure
Letter to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of AMDI to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. The delivery of any notice pursuant to this Section 7.5 shall not be
deemed to (i) modify the representations or warranties of the party delivering
such notice, (ii) modify the conditions set forth in Sections 8 and 9, or (iii)
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
7.6 FINAL FINANCIAL STATEMENTS. AMDI shall provide to XXXXX and the
Principal Shareholder for each calendar month prior to the Closing Date, the
unaudited consolidated balance sheets of AMDI as of the end of all months
following the Balance Sheet Date, and the unaudited consolidated statements of
income and cash flows for all months ended after the Balance Sheet Date,
disclosing no material adverse change in the financial condition or the results
of its operations from the financial statements as of the Balance Sheet Date.
Such financial statements shall have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations for the periods
indicated therein.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMDI AND MERGER CORP.
The obligations of AMDI and Merger Corp. with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of XXXXX and the Principal Shareholder contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date as though such representations and warranties had been made as of
that time; all the terms, covenants and conditions of this Agreement to be
complied with and performed by XXXXX and the Principal Shareholder on or before
the Closing Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date, and signed by XXXXX and the Principal Shareholder shall have been
delivered to AMDI and Merger Corp.
-28-
29
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to AMDI and its counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereunder and no governmental agency
or body shall have taken any other action or made any request of XXXXX or the
Principal Shareholder as a result of which AMDI or Merger Corp. deems it
inadvisable to proceed with the transactions hereunder.
8.4 CONSENTS AND APPROVALS. The Registration Statement referred to in
Section 10.1 shall have been declared effective by the Securities and Exchange
Commission. This Agreement shall have been duly adopted by the shareholders of
Merger Corp., AMDI and XXXXX. All necessary consents and approvals as listed in
Schedule 3.26 shall have been obtained. All necessary consent of and filings
with any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the transactions hereunder and no governmental agency or body shall have taken
any other action or made any request of XXXXX or the Principal Shareholder as a
result of which AMDI or Merger Corp. deems it inadvisable to proceed with the
transactions hereunder.
8.5 GOOD STANDING CERTIFICATES. The Principal Shareholder shall have
delivered to AMDI a certificate, dated as of a date no later than ten days prior
to the Closing Date, duly issued by the Secretary of State of XXXXX'x state of
incorporation that XXXXX is in good standing and that all state franchise and/or
income tax returns and taxes for each for all periods prior to the Closing have
been filed and paid.
8.6 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to XXXXX which would constitute a Material Adverse Effect.
8.7 OFFICER'S CERTIFICATE. AMDI and Merger Corp. shall have received a
certificate or certificates, dated the Closing Date and signed by the President
of XXXXX, certifying the truth and correctness of attached copies of its
Articles of Incorporation (including amendments thereto) and Bylaws (including
amendments thereto).
8.8 INCUMBENCY CERTIFICATE AND OTHER DOCUMENTS. AMDI and Merger Corp.
shall have received an incumbency certificate or certificates, dated the Closing
Date and signed by the Secretary of XXXXX certifying the names, titles and
signatures of the officers authorized to execute the documents referred to in
this Section 8 and such additional supporting documentation and other
information with respect to the transactions contemplated hereunder as AMDI,
Merger Corp. or its counsel may reasonably request.
8.9 EMPLOYMENT AGREEMENTS. At the Closing, the Principal Shareholder
will enter into a Non-Competition and Employment Agreement satisfactory to AMDI
and Merger Corp.
-29-
30
8.10 RELEASE OF OBLIGATIONS AND STOCK OPTIONS. AMDI and Merger Corp.
shall have obtained a release of each of the officers and directors of XXXXX
related to all matters involving XXXXX.
8.11 LOCK-UP AGREEMENTS. AMDI and Merger Corp. shall have obtained
lock-up agreements from the Principal Shareholder and all other persons who are
officers, directors and holders of 10% or more of the XXXXX Stock agreeing not
to sell any of their Merger Corp. Stock obtained in the Merger for a period
reasonably satisfactory to AMDI.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXX AND THE PRINCIPAL
SHAREHOLDER.
The obligations of XXXXX and the Principal Shareholder with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of AMDI and Merger Corp. contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of that time; all the terms, covenants and conditions of this
Agreement to be complied with and performed by AMDI and Merger Corp. on or
before the Closing Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date, and signed by AMDI and Merger Corp. shall have been delivered to XXXXX.
9.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to XXXXX and its counsel.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions hereunder and no governmental agency or body shall
have taken any other action or made any request of AMDI or Merger Corp. as a
result of which XXXXX and the Principal Shareholder deem it inadvisable to
proceed with the transactions hereunder.
9.4 CONSENTS AND APPROVALS. The Registration Statement referred to in
Section 10.1 shall have been declared effective by the Securities and Exchange
Commission. This Agreement shall have been duly adopted by the stockholders of
Merger Corp., AMDI and XXXXX. All necessary consents and approvals as listed in
Schedule 4.13 shall have been obtained. All necessary consent of and filings
with any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the transactions hereunder and no governmental agency or body shall have taken
any other action or made any request of AMDI or Merger Corp. as a result of
which the Principal Shareholder deem it inadvisable to proceed with the
transactions hereunder.
-30-
31
9.5 GOOD STANDING CERTIFICATES. Merger Corp. shall have delivered to
XXXXX and the Principal Shareholder certificates, dated as of the date no later
than 10 days prior to the Closing Date, duly issued by the Secretary of State of
Delaware that Merger Corp. is in good standing.
9.6 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to AMDI or Merger Corp. which would constitute a Material
Adverse Effect.
9.7 OFFICER'S CERTIFICATES. XXXXX and the Principal Shareholder shall
have received a certificate or certificates, dated the Closing Date and signed
by the President of each of AMDI and Merger Corp., certifying the truth and
correctness of attached copies of AMDI's Articles of Incorporation (including
amendments thereto), and Bylaws (including amendments thereto) and Merger
Corp.'s Certificate of Incorporation and Bylaws.
9.8 INCUMBENCY CERTIFICATE AND OTHER DOCUMENTS. XXXXX and the Principal
Shareholder shall have received an incumbency certificate or certificates, dated
the Closing Date, and signed by the Secretary of each of AMDI and Merger Corp.,
certifying the names, titles and signatures of the officers authorized to
execute the documents referred to in this Section 9 and such additional
supporting documentation and other information with respect to the transactions
contemplated hereunder as XXXXX and the Principal Shareholder or their counsel
may reasonably request.
9.9 EMPLOYMENT AGREEMENTS. At the Closing, the Principal Shareholder
will enter into a Non-Competition and Employment Agreement satisfactory to the
Principal Shareholder.
9.10 RELEASE OF OBLIGATIONS. XXXXX and the Principal Shareholder shall
have obtained a release of each of the officers and directors of AMDI and Merger
Corp. related to all matters involving AMDI and Merger Corp. except for
obligations pursuant to this Agreement.
9.11 NET ASSETS OF AMDI. As of the Closing Date, AMDI shall have net
assets of a minimum of $100,000.
10. ADDITIONAL AGREEMENTS.
10.1 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement as soon as
practicable after the date hereof. AMDI and Merger Corp., shall promptly prepare
and file with the Securities and Exchange Commission a proxy statement included
in a registration statement on Form S-4 or a similar form (the "Registration
Statement") and AMDI will take, in accordance with applicable law and its
Articles of Incorporation and Bylaws, all action necessary to convene a meeting
of its shareholders to consider and vote upon the adoption of this Agreement.
XXXXX and the Principal Shareholder shall cooperate with AMDI and Merger Corp.
in the preparation of the Registration Statement, including providing such
information about XXXXX and the Principal Shareholder and
-31-
32
their plans with respect to Merger Corp. after the Merger as may be reasonably
requested by AMDI and Merger Corp.
10.2 PUBLIC ANNOUNCEMENTS. The initial press release of AMDI with
respect to this Agreement shall be reviewed by XXXXX and the Principal
Shareholder. Thereafter, AMDI and Merger Corp. shall consult with XXXXX and the
Principal Shareholder prior to issuing any press releases or otherwise making
public announcements with respect to this Agreement and the transactions
contemplated by this Agreement, except as may be required by law.
10.3 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, common, proper or advisable under applicable legal
requirements, to consummate and make effective the transactions contemplated by
this Agreement. If at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, AMDI, Merger Corp.
XXXXX and the Principal Shareholder, as the case may be, shall take or cause to
be taken all such necessary or convenient action and execute, and deliver and
file, or cause to be executed, delivered and filed, all necessary or convenient
documentation.
11. TERMINATION OF AGREEMENT.
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) By mutual consent of all of the parties hereto;
(ii) By the Principal Shareholder and XXXXX, on the one hand, or by
AMDI or Merger Corp. on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
February 28, 2001, unless the failure of such transactions to be consummated is
due to the failure of the party seeking to terminate this Agreement to perform
any of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Closing Date; provided, also, that if the
Registration Statement has been filed, but not yet been declared effective by
the Securities and Exchange Commission and there is a good faith, reasonable
effort to obtain effectiveness, then the February 28, 2001 deadline shall be
extended to March 30, 2001; or
(iii) By the Principal Shareholder and XXXXX, on the one hand, or by
AMDI or Merger Corp., on the other hand, if a material breach of the
representations or a material breach or default shall be made by the other party
in the observance or in the due and timely performance of any of the covenants
or agreements contained herein, and the curing of such default shall not have
been made on or before the Closing Date, by the Principal Shareholder or XXXXX,
if the conditions set forth in Section 9 hereof have not been satisfied or
waived as of the Closing Date, or by AMDI or Merger Corp., if the conditions set
forth in Section 8 hereof have not been satisfied or waived as of the Closing
Date.
-32-
33
11.2 LIABILITIES IN EVENT OF TERMINATION. Termination of this Agreement
will in no way limit any obligation or liability of any party based on or
arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this Agreement
or in the Schedules delivered by such party, including, but not limited to,
legal and audit costs and out of pocket expenses.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE PRINCIPAL SHAREHOLDER. XXXXX and the
Principal Shareholder, jointly and severally, agree to indemnify and hold
harmless each of AMDI and Merger Corp. and their respective officers, directors,
agents and representatives against any and all losses, claims, damages,
liabilities, costs and expenses (including but not limited to, attorneys' fees
and other expenses of investigation and defense of any claims or actions),
directly or indirectly resulting from, relating to or arising out of: (i) any
breach of any covenant, agreement, warranty or representation of XXXXX or the
Principal Shareholder contained in this Agreement, (ii) any misstatement of a
material fact contained in this Agreement or in any of the documents executed in
connection with the transactions contemplated by this Agreement, including the
Registration Statement, but only if the misstatement relates to information
concerning the Principal Shareholder or XXXXX'x operations, or (iii) the
omission to state any fact necessary to make the statements contained in this
Agreement or in any of the documents executed in connection with the
transactions contemplated by this Agreement not misleading, but only if the
omission relates to information concerning the Principal Shareholder or XXXXX'x
operations.
12.2 INDEMNIFICATION BY AMDI AND MERGER CORP. Each of AMDI and Merger
Corp. agrees to indemnify and hold harmless the Principal Shareholder against
any and all losses, claims, damages, liabilities, costs and expenses (including
but not limited to, attorneys' fees and other expenses of investigation and
defense of any claims or actions) directly or indirectly resulting from,
relating to or arising out of: (i) any breach of any covenant, agreement,
warranty or representation of AMDI or Merger Corp. contained in this Agreement,
(ii) any misstatement of a material fact contained in this Agreement or in any
of the documents executed in connection with the transactions contemplated by
this Agreement, including the Registration Statement, but only if the
misstatement relates to information concerning AMDI or Merger Corp. or their
operations, or (iii) the omission to state any fact necessary to make the
statements contained in this Agreement or in any of the documents executed in
connection with the transactions contemplated by this Agreement not misleading,
but only if the omission relates to information concerning AMDI or Merger Corp.
or their operations.
12.3 INDEMNIFICATION NOTICE. Should any party (the "Indemnified Party")
suffer any loss, damage or expense for which another party (the "Indemnifying
Party") is obligated to indemnify and hold such Indemnified Party harmless
pursuant to this Section 12 of this Agreement, the following shall apply: If an
Indemnified Party intends to exercise its right to indemnification provided in
this Section 12, such Indemnified Party shall notify each Indemnifying Party in
writing of such Indemnified Party's intention to do so and the facts or
circumstances giving rise to the claim (the "Indemnification Claim"). An
Indemnification Claim, at the option of the Indemnified Party, may be asserted
as soon as any situation, event or occurrence has been noticed by the
Indemnified Party regardless of whether actual harm has been suffered or
out-of-pocket expenses incurred.
-33-
34
During the period of 15 days after notice by the Indemnified Party, each
Indemnifying Party shall be entitled to cure the defect or situation giving rise
to the Indemnification Claim to the satisfaction of the Indemnified Party. If
the Indemnifying Parties are unwilling or unable to cure the defect giving rise
to the Indemnification Claim during the 15-day period, the Indemnified Party
shall thereafter be entitled to indemnification as provided in this Section 12.
12.4 MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Indemnified Party with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any Indemnifying Party
under this Section 12, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing. Provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced. Any Indemnifying Party
will have the right to defend the Indemnified Party against the Third Party
Claim with counsel of its choice reasonably satisfactory to the Indemnified
Party so long as (i) the Indemnifying Party notifies the Indemnified Party in
writing within 15 days after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the Indemnified Party
from any adverse consequences the Indemnified Party may suffer resulting from or
caused by the Third Party Claim, (ii) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder, and
(iii) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently. The Indemnifying Party shall not consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party, which consent
shall not be withheld unreasonably.
13. GENERAL PROVISIONS.
13.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties of the parties hereto contained in this Agreement
or in any writing delivered pursuant hereto or at the Closing shall survive the
execution and delivery of this Agreement and the Closing and the consummation of
the transactions contemplated hereby (and any examination or investigation by or
on behalf of any party hereto) until the date one year after the Closing Date
except for claims in respect thereof pending at such time, which shall survive
until finally resolved or settled). No action may be commenced with respect to
any representation, warranty, covenant or agreement in this Agreement, or in any
writing delivered pursuant hereto, unless written notice, setting forth in
reasonable detail the claimed breach thereof, shall be delivered pursuant to
Section 13.7 to the party or parties against whom liability for the claimed
breach is charged on or before the termination of the survival period specified
in Section 13.1 for such representation, warranty, covenant or agreement.
13.2 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the
-34-
35
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
13.3 ENTIRE AGREEMENT. This Agreement and any attachments hereto, the
XXXXX Disclosure letter and the Schedules thereto (including the schedules,
exhibits and annexes attached hereto and thereto), the AMDI Disclosure Letter
and the Schedules thereto (including the schedules, exhibits and annexes
attached hereto and thereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the parties and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its terms
and may be modified or amended only by a written instrument executed by all
parties.
13.4 COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction, except as
provided in Schedule 13.5.
13.6 EXPENSES. Except as otherwise specifically provided herein, each
party to this Agreement shall bear its own direct and indirect expenses incurred
in connection with the negotiation and preparation of this Agreement and the
consummation and performance of the transactions contemplated hereby, including,
without limitation, all legal fees and fees of any brokers, finders or similar
agents.
13.7 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, or by telecopy or facsimile upon confirmation of receipt, (ii) on
the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (iii) on the 5th business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) If to AMDI or Merger Corp.:
Applied Medical Devices, Inc.
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Al Lager, President
Facsimile (000) 000-0000
-35-
36
with a copy to:
Xxxxxx Xxxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) If to XXXXX or the Principal Shareholder:
Xxxxxxx X. XxXxxxx
XXXXX Systems, Inc.
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxx, Esq.
P. X. Xxx 0000
Xxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
13.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Colorado.
13.9 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
13.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.11 TIME. Time is of the essence with respect to this Agreement.
13.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
-36-
37
13.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive, but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
13.14 CAPTIONS; CONSTRUCTION. The headings of this Agreement are
inserted for convenience only, and shall not constitute a part of this Agreement
or be used to construe or interpret any provision hereof. This Agreement has
been fully reviewed and negotiated by the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against any party under any rule of construction or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
APPLIED MEDICAL DEVICES, INC. THE PRINCIPAL SHAREHOLDER
By:
------------------------------- ------------------------------------
Name: Xxxxxxx X. XxXxxxx
Title:
APPLIED MEDICAL MERGER CORP. XXXXX SYSTEMS, INC.
By: By:
------------------------------- --------------------------------
Name: Name:
Title: Title:
-37-
