1
EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
BETWEEN
eSOFT, INC.,
eSOFT ACQUISITION CORPORATION
AND
TECHNOLOGIC, INC.
DATED AS OF SEPTEMBER 10, 1999
================================================================================
2
TABLE OF CONTENTS
ARTICLE I THE MERGER.........................................................................1
1.1 The Merger.........................................................................1
1.2 The Closing........................................................................1
1.3 Effective Time.....................................................................2
1.4 Subsequent Actions. ..............................................................2
ARTICLE II ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.................2
2.1 Articles of Incorporation..........................................................2
2.2 Bylaws.............................................................................2
ARTICLE III DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION................................2
3.1 Directors of the Surviving Corporation.............................................2
3.2 Officers...........................................................................2
ARTICLE IV EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND THE COMPANY...................3
4.1 Merger Sub Stock...................................................................3
4.2 The Company Securities.............................................................3
4.3 Exchange of Certificates Representing the Company Common Stock.....................4
4.4 Adjustment of Exchange Ratio.......................................................6
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................6
5.1 Existence, Good Standing, Corporate Authority, Compliance With Law.................6
5.2 Authorization, Validity, and Effect of Agreements..................................6
5.3 Capitalization.....................................................................7
5.4 Other Interests....................................................................7
5.5 No Violation.......................................................................7
5.6 Financial Statements...............................................................8
5.7 Absence of Undisclosed Liabilities.................................................8
5.8 Absence of Certain Changes or Events...............................................8
5.9 List of Properties, Contracts, Etc................................................10
5.10 Title to Assets...................................................................12
5.11 Adequacy of Assets................................................................12
5.12 Condition of Inventory, Property, Plant, and Equipment............................13
5.13 Accounts Receivable and Accounts Payable..........................................13
5.14 Litigation........................................................................13
5.15 Taxes.............................................................................13
5.16 Proprietary Rights................................................................14
5.17 Royalties.........................................................................16
5.18 Year 2000 Compliance..............................................................16
5.19 Labor Relations. ................................................................17
5.20 Certain Employee Matters. .......................................................17
5.21 Transactions With Affiliates......................................................17
5.22 Permits; Compliance With Laws.....................................................17
5.23 Environmental Matters.............................................................18
5.24 Fees and Liabilities to Certain Creditors.........................................18
5.25 Books and Records.................................................................18
5.26 ERISA.............................................................................18
5.27 Pooling of Interests Treatment....................................................19
5.28 Insurance.........................................................................20
5.29 Disclosure........................................................................20
i
3
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........................20
6.1 Existence; Good Standing; Corporate Authority; Compliance with Law................20
6.2 Authorization, Validity, and Effect of Agreements.................................21
6.3 Capitalization....................................................................21
6.4 No Violation......................................................................21
6.5 SEC Documents.....................................................................21
6.6 No Consent or Approval Required...................................................22
6.7 Absence of Change.................................................................22
6.8 Brokerage.........................................................................22
6.9 Accounts Receivable and Accounts Payable..........................................22
6.10 Litigation........................................................................22
6.11 Proprietary Rights................................................................23
6.12 Royalties.........................................................................23
6.13 Year 2000 Compliance..............................................................23
6.14 Labor Relations. ................................................................23
6.15 Certain Employee Matters. .......................................................23
6.17 ERISA.............................................................................24
6.18 Pooling of Interests Treatment....................................................24
ARTICLE VII COVENANTS.........................................................................25
7.1 Written Consent of Stockholders...................................................25
7.2 Notification to Stockholders......................................................25
7.3 Blue Sky..........................................................................25
7.4 Board Nomination..................................................................25
7.5 Notices to Holders of Company Options.............................................25
7.6 Filings; Other Action.............................................................25
7.7 Reserved. ........................................................................25
7.8 Publicity.........................................................................25
7.9 Listing Application...............................................................25
7.10 Further Action....................................................................25
7.11 Release of Certain Guaranties.....................................................26
7.12 Expenses..........................................................................26
7.13 Fees to Brokers...................................................................26
7.14 Pooling...........................................................................26
7.15 Publication of Financials.........................................................26
7.16 Tax Matters.......................................................................26
7.17 Employment Agreements.............................................................26
7.18 Banking Matters...................................................................27
7.19 Termination of 401(k) Plan........................................................27
ARTICLE VIII CONDITIONS........................................................................27
8.1 Conditions to Each Party's Obligation to Effect the Merger........................27
8.2 Conditions to Obligation of the Company to Effect the Merger......................28
8.3 Conditions to Obligation of Parent and Merger Sub to Effect the Merger............28
ARTICLE IX ESCROW; LIMITS ON LIABILITY.......................................................30
9.1 Delivery of Parent Common Stock to the Escrow Agent...............................30
9.2 Dividends Declared After the Effective Time.......................................30
9.3 Survival of Representations.......................................................30
9.4 Indemnity.........................................................................31
9.5 Application by Parent to Escrow Agent for Payment of Claims.......................31
ii
4
9.6 Distribution of Deferred Merger Consideration to the Company's Stockholders.......31
9.7 Unclaimed Funds...................................................................31
9.8 Limits on Liability...............................................................31
ARTICLE X GENERAL PROVISIONS................................................................31
10.1 Confidentiality...................................................................31
10.2 Notices...........................................................................32
10.3 Assignment, Binding Effect........................................................32
10.4 Entire Agreement..................................................................32
10.5 Amendment.........................................................................32
10.6 Governing Law.....................................................................33
10.7 Counterparts......................................................................33
10.8 Headings..........................................................................33
10.9 Interpretation....................................................................33
10.10 Waivers...........................................................................33
10.11 Incorporation of Exhibits.........................................................33
10.12 Severability......................................................................33
10.13 Enforcement of Agreement..........................................................33
10.14 Subsidiaries......................................................................33
10.15 Consent...........................................................................34
EXHIBIT A
A-1 Xxxxx Employment Agreement
A-2 Xxxxx Employment Agreement
EXHIBIT B Escrow Agreement
EXHIBIT C Opinion of Parent Counsel
EXHIBIT D Opinion of Company Counsel
EXHIBIT E Stockholders Agreement
EXHIBIT F Optionholders Agreement
iii
5
INDEX OF DEFINITIONS
activities.............................................................................................18
Agreement...............................................................................................1
CERCLA.................................................................................................18
Certificate.............................................................................................3
Closing.................................................................................................1
Closing Date............................................................................................2
Commission.............................................................................................22
Company.................................................................................................1
Company Balance Sheet...................................................................................8
Company Common Stock....................................................................................3
Company Insurance Coverage.............................................................................20
Company Material Adverse Effect.........................................................................8
Company Real Property..................................................................................11
Deferred Merger Consideration Fund.....................................................................31
Deferred Merger Consideration...........................................................................4
Dissenting Share........................................................................................3
Documentation..........................................................................................11
Effective Time..........................................................................................2
Environmental Requirement..............................................................................19
ERISA..................................................................................................19
ERISA Affiliate........................................................................................19
Escrow Agent............................................................................................4
Escrow Agreement.......................................................................................28
Exchange Act...........................................................................................22
Exchange Agent..........................................................................................4
Exchange Fund...........................................................................................4
Exchange Ratio..........................................................................................3
GBCC....................................................................................................1
hazardous waste........................................................................................24
hazardous waste........................................................................................18
Hazardous Material.....................................................................................19
Initial Merger Consideration............................................................................4
knowledge...............................................................................................7
Material Contracts.....................................................................................12
Merger..................................................................................................1
Merger Sub..............................................................................................1
Multiemployer Plan.....................................................................................19
Multiple Employer Plan.................................................................................19
Multiple Employer Plan.................................................................................25
Option..................................................................................................3
Options.................................................................................................3
parachute payments.....................................................................................14
Parent..................................................................................................1
Parent Common Stock.....................................................................................3
Parent Material Adverse Effect.........................................................................23
Parent Preferred Stock.................................................................................22
Parent Real Property...................................................................................24
Parent Reports.........................................................................................22
Parent Stock Option.....................................................................................3
Pension Plan...........................................................................................20
iv
6
Plan...................................................................................................19
Product................................................................................................17
Proprietary Rights......................................................................................9
RCRA...................................................................................................18
Regulatory Filings......................................................................................8
Securities Act.........................................................................................22
Software...............................................................................................11
Stock Option Plans......................................................................................3
Stockholders Agreement.................................................................................31
Subsidiary.............................................................................................34
Surviving Corporation...................................................................................1
System.................................................................................................16
Taxes..................................................................................................14
tools..................................................................................................11
Unfunded Pension Liability.............................................................................20
Year 2000 Compliant....................................................................................17
v
7
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 10, 1999 between eSoft, Inc., a Delaware corporation ("Parent"), eSoft
Acquisition Corporation, a Georgia corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Technologic, Inc., a Georgia corporation (the
"Company").
RECITALS
A. The Boards of Directors of Parent, Merger Sub and the Company each
have determined that a business combination among Parent, Merger Sub and the
Company is fair to and in the best interests of their respective companies and
stockholders and accordingly, have agreed to effect the merger provided for
herein upon the terms and subject to the conditions set forth herein.
B. In connection with the merger provided for herein, a total of
1,500,000 shares of Parent's common stock will be issued or reserved for
issuance. Of such shares, 1,425,000 shares will be issued in exchange for all of
the issued and outstanding shares of the Company's common stock or will be held
in reserve for issuance upon the exercise of options to purchase Parent's common
stock, and 75,000 shares will be issued to the Company's investment bankers in
satisfaction of their fees.
C. This merger is intended (but not conditioned on) for financial
accounting purposes to qualify as a pooling of interests and intended for tax
purposes to qualify as a non-taxable reorganization under Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (the "Code").
D. Parent, Merger Sub, and the Company desire to make certain
representations, warranties, and agreements in connection with the merger.
E. As an inducement to the agreement of Parent and Merger Sub to effect
the merger provided for herein, certain officers and key employees of the
Company have agreed to execute employment and non-competition agreements as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants, and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereinafter defined), Merger Sub shall be merged with
and into the Company in accordance with this Agreement, and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). The
Company shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation"), and as of the Effective Time, shall
be a wholly owned subsidiary of Parent. The Merger shall have the effects
specified in Article 11 of the Georgia Business Corporation Code (the "GBCC").
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place at the offices of
Xxxxx, Xxxxxx & Xxxxxx LLP at 000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx
00000 at 10:00 a.m., local time, on (i) the later of the second business day
following the date on which the last to be satisfied or waived of the conditions
set forth in Article VIII (other than those conditions that by their nature are
to be satisfied at the
8
Closing, but subject to the satisfaction or, where permitted, waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement, or
September 10, 1999, or (ii) or at such other time, date, or place as Parent and
the Company may mutually agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article VIII shall have been fulfilled or waived in accordance herewith, on the
Closing Date, the parties hereto shall execute and file a Certificate of Merger
meeting the requirements of Section 14-2-1105 of the GBCC. The Merger shall
become effective at the time of filing of the Certificate of Merger with the
Secretary of State of the State of Georgia in accordance with the GBCC, or at
such later time which the parties hereto shall have agreed upon and designated
in such filing as the effective time of the Merger (the "Effective Time").
1.4 SUBSEQUENT ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in the
Surviving Corporation's right, title or interest, in, to or under any of the
rights, properties, privileges, franchises or assets of either of its
constituent corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger, or otherwise to carry out the
intent of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either of the constituent corporations of the Merger, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties, privileges,
franchises or assets in the Surviving Corporation or otherwise carry out the
intent of this Agreement.
ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS OF
THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of Merger
Sub in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
2.2 BYLAWS. At the Effective Time, the Surviving Corporation shall take
such action as is necessary to amend and restate the Bylaws of the Surviving
Corporation to be the same as the Bylaws of Merger Sub hereto, until duly
amended in accordance with applicable law.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS OF THE SURVIVING CORPORATION. Parent, as the sole
shareholder of the Surviving Corporation, shall take such action as is necessary
to elect as directors of the Surviving Corporation immediately following the
Effective Time: Xxxxx Xxxxx, Xxxxxxx Xxxx and Xxxxxx Xxxxxx, until their
successors are duly appointed or elected in accordance with applicable law.
3.2 OFFICERS. The Surviving Corporation shall take or cause to be taken
such action as is necessary to elect as the officers of the Surviving
Corporation immediately following the Effective Time: Xxxxxxx Xxxx, President,
Xxxxx Xxxxx, Vice President and Xxxxxx Xxxxxx, Secretary, until their successors
are duly appointed or elected in accordance with applicable law.
-2-
9
ARTICLE IV
EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB
AND THE COMPANY
4.1 MERGER SUB STOCK. At the Effective Time, each share of common
stock, no par value, of Merger Sub outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Parent, be converted into and exchanged for one validly issued, fully paid
and non-assessable share of common stock, no par value, of the Surviving
Corporation.
4.2 THE COMPANY SECURITIES.
(a) Subject to the provisions of Article IX hereof, at the
Effective Time, each share of common stock of the Company ("Company Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than any share of Company Common Stock as to which any stockholder has exercised
its dissenters rights under the GBCC (a "Dissenting Share")) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive .308659 (the "Exchange Ratio") of one
validly issued, fully paid and non-assessable share of common stock of Parent,
$.01 par value ("Parent Common Stock").
(b) Each Dissenting Share shall not be converted as set forth
in Section 4.2(a) above, but shall be converted into the right to receive such
consideration from Parent as may be determined to be due with respect to such
Dissenting Share pursuant to the GBCC; provided, however, that each Dissenting
Share in respect of which a claim for appraisal is irrevocably withdrawn after
the Effective Time shall be deemed to be converted, as of the Effective Time,
into the right to receive shares of Parent Common Stock at the Exchange Ratio,
subject to the provisions of Article IX hereof.
(c) As a result of the Merger and without any action on the
part of the holder thereof, at the Effective Time, all shares of the Company
Common Stock shall cease to be outstanding and shall be canceled and retired,
and each holder of shares of the Company Common Stock shall thereafter cease to
have any rights with respect to such shares of the Company Common Stock, except
the right to receive, without interest, the Parent Common Stock in accordance
with Sections (4.2(a), 4.3(b), 4.3(e) and Article IX hereof (and cash in lieu of
any fractional shares pursuant to Section 4.3(c) hereof) upon the surrender of a
certificate (a "Certificate") representing such shares of the Company Common
Stock or, with respect to a Dissenting Share, the right to receive such
consideration per Dissenting Share as such holders of Dissenting Shares may be
determined to be entitled pursuant to the GBCC.
(d) Each share of the Company Common Stock issued and held in
the Company's treasury at the Effective Time shall, by virtue of the Merger,
cease to be outstanding and shall be canceled and retired without payment of any
consideration therefor.
(e) All options to purchase Company Common Stock
(individually, a "Company Option" and collectively, the "Company Options")
outstanding at the Effective Time under any Company stock option plan or
agreement (the "Company Stock Option Plans") shall, at the Effective Time,
automatically and without further action on the part of any holder thereof, be
converted into an option to purchase Parent Common Stock (individually, a
"Parent Stock Option" and collectively, the "Parent Options"). Each option
granted by Parent hereunder shall be exercisable upon the same terms and
conditions as under the applicable Company Stock Option Plan and the applicable
option agreement issued thereunder (including any acceleration of vesting
provisions), except that (i) each such Company Option shall be exercisable for
that whole number of shares of Parent Common Stock (to the nearest whole share)
determined by multiplying the number of shares of the Company Common Stock
subject to such Company Option immediately prior to the Effective Time times the
Exchange Ratio, (ii) the exercise price per share with respect to the Parent
Options shall be calculated by dividing the exercise price per share of the
Company Common Stock subject to such Company Options in effect immediately prior
to the Effective Time by the Exchange Ratio. No fractional shares shall be
issued; provided, however, that Parent shall pay cash in lieu of any fractional
share that is equal to the product of such fractional interest times the last
sales price of Parent Common Stock on the Closing Date as reported by the Nasdaq
quotation system. Except as set forth on Schedule 4.2(e) of
-3-
10
the Company Disclosure Schedule attached to this Agreement (the "Company
Disclosure Schedule"), from and after the date of this Agreement, no additional
options shall be granted by Company under the Company Stock Option Plans or
otherwise.
(f) Parent shall take all corporate action (including all
necessary stockholder approvals) necessary to reserve for issuance a sufficient
number of shares of Parent Common Stock for delivery upon exercise of Parent
Options in accordance with Section 4.2(e). As soon as practicable following the
Closing Date, Parent shall file a registration statement on Form S-8 with the
Securities and Exchange Commission with respect to the shares of Parent Common
Stock subject to such Parent Options, and shall use reasonable efforts to have
such registration statement declared effective and to maintain the effectiveness
of such registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Parent Options
remain outstanding.
4.3 EXCHANGE OF CERTIFICATES REPRESENTING THE COMPANY COMMON STOCK.
(a) At or prior to the Effective Time, Parent shall deposit,
or shall cause to be deposited, with an exchange agent selected by Parent, which
shall be Parent's Transfer Agent or such other party reasonably satisfactory to
the Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock (other than Dissenting Shares), for exchange in accordance
with this Article IV, certificates representing ninety percent (90%) of the
shares of Parent Common Stock (together with any unpaid dividends or
distributions with respect thereto relating to record dates for such dividends
or distributions after the Effective Time, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 4.2 and paid in exchange for
outstanding shares of Company Common Stock other than Dissenting Shares (the
"Initial Merger Consideration").
(b) At or prior to the Effective Time, Parent shall deposit,
or shall cause to be deposited, with an escrow agent selected by Parent, which
escrow agent shall be reasonably satisfactory to the Company (the "Escrow
Agent"), for the benefit of the holders of shares of Company Common Stock, for
distribution in accordance with Article IX, certificates representing ten
percent (10%) of the shares of Parent Common Stock (together with any dividends
or other distributions with respect thereto relating to record dates for such
dividends or distributions after the Effective Time) to be issued pursuant to
Section 4.2 and paid in exchange for outstanding shares of Company Common Stock
(the "Deferred Merger Consideration"). Any dividends or distributions with
respect to the Deferred Merger Consideration relating to record dates for such
dividends or distributions after the Effective Time shall be deposited with the
Exchange Agent and shall constitute part of the Deferred Merger Consideration.
(c) Within 10 days after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record of shares of Company
Common Stock other than Dissenting Shares (i) a letter of transmittal that shall
specify that delivery shall be effected, and risk of loss and title to such
shares of the Company Common Stock shall pass, only upon delivery of the
Certificates representing such shares to the Exchange Agent and which shall be
in such form and have such other provisions as Parent may reasonably specify,
and (ii) instructions for use in effecting the surrender of such Certificates in
exchange for certificates representing shares of Parent Common 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 the shares represented by such Certificate
shall be entitled to receive in exchange therefor (w) a certificate representing
that number of whole shares of Parent Common Stock equal to the product of the
Exchange Ratio times the number of shares so surrendered (rounded down to the
nearest whole number), (x) cash in lieu of any fractional share that is equal to
the product of such fractional interest times the last sales price of Parent
Common Stock on the Closing Date as reported by the Nasdaq quotation system, (y)
unpaid dividends and distributions, if any, that such holder has the right to
receive in respect of the Initial Merger Consideration or the Deferred Merger
Consideration, after giving effect to any required withholding tax, and (z) the
right to receive a fractional interest in any Deferred Merger Consideration
payable to stockholders of the Company, all in accordance with Article IX
hereof, the numerator of which fractional interest is the number of shares
represented by the Certificate so surrendered and the denominator which is the
number of shares of Company Common Stock outstanding at the Effective Time. The
shares represented by the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash for unpaid dividends
and distributions, if any, payable to holders of shares of Company Common Stock.
In the event of a transfer of ownership of
-4-
11
Company Common Stock that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent Common
Stock may be issued to such a transferee if the Certificate representing such
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(d) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on Parent
Common Stock shall be paid with respect to any shares of Company Common Stock
represented by a Certificate until such Certificate is surrendered for exchange
as provided herein. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Common Stock and
not paid, less the amount of any withholding taxes that may be required thereon,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of Parent Common Stock, less the amount of any withholding taxes which
may be required thereon. Notwithstanding the foregoing, any dividends or other
distributions with respect to the Parent Common Stock comprising the Deferred
Merger Consideration that are declared after the Effective Time but prior to the
date any Deferred Merger Consideration is distributed to the Company's
stockholders in accordance with Article IX hereof, shall be paid by Parent to
the Escrow Agent and shall be distributed by the Escrow Agent in accordance with
Article IX.
(e) At or after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for certificates of shares of
Parent Common Stock deliverable in respect thereof pursuant to this Agreement,
together with a cash payment (net of any applicable tax withholdings) in lieu of
fractional shares, if any, in accordance with Section 4.3(c), and a cash payment
in accordance with Section 4.3(e) of dividends or distributions, if any, only if
the Certificate or Certificates that immediately prior to the Effective Time
represented such Company Common Stock are surrendered as provided in this
Article IV.
(f) No fractional shares of Parent Common Stock shall be
issued pursuant hereto. Parent shall pay in lieu of the issuance of any
fractional share of Parent Common Stock an amount that is equal to the product
of such fractional interest times the last sales price of Parent Common Stock on
the Closing Date as reported by the Nasdaq quotation system.
(g) Any portion of the Exchange Fund (including the proceeds
of any investments thereof and any shares of Parent Common Stock) that remains
unclaimed by the former stockholders of the Company one year after the Effective
Time shall be delivered to Parent. Any former stockholders of the Company who
have not theretofore complied with this Article IV shall thereafter look only to
Parent for payment of their shares of Parent Common Stock, and any unpaid
dividends and distributions on the Parent Common Stock deliverable in respect of
each share of the Company Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
(h) None of Parent, Merger Sub, the Company, the Surviving
Corporation, the Exchange Agent, the Escrow Agent, or any other person shall be
liable to any former holder of shares of Company Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(i) In the event any Certificate shall have been lost, stolen,
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen, or destroyed and, if required by
the Exchange Agent, the posting by such person of a bond in such reasonable
amount as the Exchange Agent may require as indemnity against any claim that may
be made against the Company, the Exchange Agent, Parent, or the Surviving
Corporation with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen, or destroyed Certificate the shares of Parent
Common Stock (and cash in lieu of fractional shares, if any) and unpaid
dividends and distributions on shares of Parent Common Stock deliverable in
respect thereof pursuant to this Agreement.
-5-
12
4.4 ADJUSTMENT OF EXCHANGE RATIO. If subsequent to the date of this
Agreement, but prior to the Effective Time, the outstanding shares of Parent
Common Stock or Company Common Stock, respectively, shall have been changed into
a different number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization, or other similar transaction, the Exchange Ratio
shall be appropriately adjusted to provide the holders of Company Common Stock
and Company Options the same economic effect as contemplated by this Agreement
prior to such event.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as of the date of this
Agreement as follows:
5.1 EXISTENCE, GOOD STANDING, CORPORATE AUTHORITY, COMPLIANCE WITH LAW.
(a) The Company is a corporation duly incorporated, validly
existing, and in good standing (including tax good standing) under the laws of
the State of Georgia. The Company is duly licensed or qualified to do business
as a foreign corporation and is in good standing (including tax good standing)
under the laws of the jurisdictions listed in Schedule 5.1 of the Company
Disclosure Schedule, which list contains all jurisdictions in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, in each case except as would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect (as defined in Section 5.8(a)).
(b) The Company has all requisite corporate power and
authority to own, operate, and lease its properties and carry on its business as
presently conducted and as proposed to be conducted.
(c) The Company is not in violation of any law, ordinance,
governmental rule or regulation to which it or any of its properties or assets
is subject, except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, nor is the Company in
violation of any order, judgment, or decree of any court, governmental
authority, or arbitration board or tribunal.
(d) The copies of the Company's Articles of Incorporation and
Bylaws, which have been delivered to Parent, include any and all amendments made
thereto at any time prior to the date of this Agreement and are true, correct,
and complete.
(e) The Company's corporate minute books are accurate as to
their content and include therein the Articles of Incorporation and Bylaws of
the Company with any amendments thereto. The meetings of the directors or
stockholders referred to in the corporate minute books were duly called and
held. The signatures appearing on all documents contained in the corporate
minute books are the true signatures of the persons purporting to have executed
the same and no minutes of meetings or written consents of the directors or
stockholders of the Company are omitted from such minute books that would
contain any resolutions or other actions that would be inconsistent with any of
the representations and warranties contained in Article V hereof or prevent or
limit any of the transactions contemplated by this Agreement. Schedule 5.1 of
the Company Disclosure Schedule sets forth a true and complete list of the names
of all directors of the Company and the names and offices held of all officers
of the Company as of the date hereof.
5.2 AUTHORIZATION, VALIDITY, AND EFFECT OF AGREEMENTS. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. The consummation
by the Company of the transactions contemplated hereby has been duly authorized
by all requisite corporate action of the Company. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, constitutes, and all agreements
and documents
-6-
13
contemplated hereby (when executed and delivered pursuant hereto for value
received) will constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, or other similar laws relating to creditors'
rights and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), including,
without limitation, possible unavailability of specific performance, other
injunctive relief or other equitable remedies and an implied covenant of good
faith and fair dealing.
5.3 CAPITALIZATION. As of the date hereof, the authorized capital stock
of the Company consists of 15,000,000 shares of Company Common Stock, $.001 par
value, and no shares of preferred stock. There are (i) 4,031,750 shares of the
Company Common Stock issued and outstanding, and (ii) 585,000 shares of Company
Common Stock issuable upon exercise of outstanding Company Options. Schedule 5.3
of the Company Disclosure Schedule correctly sets forth the name of each person
who holds of record shares of Company Common Stock, the number of shares of
Company Common Stock so held, and the number of whole shares of Parent Common
Stock to be issued in exchange for such shares of Company Common Stock in
connection with the Merger. No additional shares of capital stock of the Company
will be issued, except pursuant to the exercise of options outstanding under and
vesting in accordance with the terms of the Company Stock Option Plans. The
Company has no outstanding bonds, debentures, notes, or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. All issued and outstanding shares of the Company
Common Stock are duly authorized, validly issued, fully paid, nonassessable,
free of preemptive or rescission rights, and were issued in compliance with all
applicable federal and state securities laws. Schedule 5.3 of the Company
Disclosure Schedule correctly sets forth the name of each person who holds or
has rights to receive Company Stock Options, the number of shares of Company
Common Stock issuable in respect of such Company Stock Options, the exercise
prices and terms of such Company Stock Options, and whether or not such Company
Stock Options are intended to qualify as incentive stock options or
non-statutory stock options. Except for the Company Stock Options listed on
Schedule 5.3 of the Company Disclosure Schedule, there are not, at the date of
this Agreement, any authorized, issued, or outstanding options, warrants, calls,
subscriptions, convertible securities, conversion privileges, preemptive rights,
or other rights, agreements, or commitments (whether or not presently
exercisable) that obligate the Company to issue, transfer, or sell any shares of
capital stock or other securities convertible into or evidencing the right to
purchase or otherwise acquire any capital stock of the Company. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar plans, contracts, or rights with respect to the
Company that are effective as of the date hereof or that have been executed or
agreed to as of the date hereof with an effective date after the date hereof.
Except as provided in Schedule 5.3 of the Company Disclosure Schedule, there are
no stockholders' agreements, voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company to
which the Company is a party that are presently effective or have been executed
or agreed to as of the date hereof or, to the best knowledge of the Company, to
which any officer or director of the Company or any stockholder owned or
controlled by such officer or director is or will be a party, except in
accordance with the terms hereof. Except as provided in Schedule 5.3 of Company
Disclosure Schedule, there are no restrictions upon the sale, voting, or
transfer of any shares of Company Common Stock pursuant to the Company's
Articles of Incorporation, Bylaws, or other governing instruments (other than
restrictions typically applicable to unregistered stock under the Securities Act
and applicable state securities and "Blue Sky" laws). After the Effective Time,
the Surviving Corporation will have no obligation to issue, transfer, or sell
any shares of capital stock of the Company or the Surviving Corporation pursuant
to any Plan (as defined in Section 5.27). As used in this Agreement, except as
otherwise provided in Section 5.16(d), the "knowledge" of a person shall mean
the actual knowledge of an officer or senior manager of such person after
reasonable investigation.
5.4 OTHER INTERESTS. The Company does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust, or entity other than investments in
short term investment securities.
5.5 NO VIOLATION. Neither the execution and delivery by the Company of
this Agreement and all agreements and documents contemplated hereby nor the
consummation by the Company of the transactions contemplated hereby or thereby
in accordance with the terms hereof or thereof will: (i) conflict with or result
in a breach of any provisions of the Articles of Incorporation or Bylaws of the
Company; (ii) except as set forth in Schedule 5.5 of the Company Disclosure
Schedule, violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice
-7-
14
or lapse of time or both, would constitute a default) under, result in the
termination or in a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
obligations pursuant to, result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties of the Company under, or result
in being declared void, voidable, or without further binding effect, any of the
terms, conditions, or provisions of any note, bond, mortgage, indenture, loan
agreement, deed of trust, or any license, franchise, permit, lease, contract,
agreement or other instrument, commitment, or obligation to which the Company is
a party, or by which the Company or any of its properties is bound or affected;
(iii) violate any law, statute, rule, regulation, judgment, or decree applicable
to the Company; or (iv) other than the filings provided for in Article I,
filings required under the Securities Act, or applicable state securities and
"Blue Sky" laws or filings in connection with the maintenance of qualification
to do business in other jurisdictions (collectively, the "Regulatory Filings"),
require any consent, approval, or authorization of, or declaration, filing, or
registration with, any governmental or regulatory authority.
5.6 FINANCIAL STATEMENTS. The audited balance sheet and statement of
operations as of and for the twelve months ended December 31, 1997 and 1998,
accompanied by the audit report of BDO Xxxxxxx LLP, independent certified public
accountants, which are attached to Schedule 5.6 of the Company Disclosure
Schedule, were prepared in accordance with United States generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved except as otherwise set forth therein and present fairly the financial
condition of the Company as of such date and the results of operations of the
Company for the year then ended. The unaudited balance sheet of the Company as
of June 30, 1998 and 1999 and the related statement of operations for the six
months ended on such dates, which are attached to Schedule 5.6 of the Company
Disclosure Schedule, were prepared in accordance with GAAP consistently applied
except as otherwise set forth therein and present fairly the financial condition
of the Company as of such date and the results of operations of the Company for
the six months then ended, except that such interim financial statements are
subject to normal year-end adjustments that are not and are not expected to be,
individually or in the aggregate, material in amount and do not include certain
notes which may be required by GAAP. The balance sheet of the Company as of June
30, 1999 is referred to in this Agreement as the "Company Balance Sheet."
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the Company Balance Sheet or set forth in
Schedule 5.7 of the Company Disclosure Schedule, at the date of the Company
Balance Sheet, the Company did not have any obligation or liability of any kind
(whether accrued, absolute, contingent, unliquidated, civil, criminal, or
otherwise and whether due or to become due), whether or not any such liability
or obligation would have been required to be disclosed on a balance sheet
prepared in accordance with GAAP, that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect. A "Company
Material Adverse Effect" means a material adverse change in the business,
properties, financial condition, results of operations, or prospects of the
Company, taken as a whole. The Company Balance Sheet has accurate accruals of
all employee benefit costs, including, but not limited to, payroll, commissions,
bonuses, retirement benefits and vacation accruals.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet and except as set forth in Schedule 5.8(b) of the Company
Disclosure Schedule, except as specifically permitted or required by this
Agreement, the Company has not:
(i) declared, set aside, paid, or made any dividend
or other distribution on or in respect of any shares of its capital
stock or directly or indirectly redeemed, retired, purchased, or
otherwise acquired any such shares or any option, warrant, conversion
privilege, preemptive right, or other right or agreement to acquire the
same or any other securities convertible into or evidencing the right
to purchase or otherwise acquire the same;
(ii) made any amendments to its Articles of
Incorporation or Bylaws:
(iii) made any change in the number of shares of its
capital stock authorized, issued, or outstanding or authorized, issued,
granted, or made any option, warrant, conversion privilege, preemptive
right, or other right or agreement to acquire the same or any other
securities convertible into or evidencing the right to acquire the
same;
-8-
15
(iv) incurred any indebtedness for borrowed money;
(v) incurred any obligation or liability (contingent
or otherwise) except (i) normal trade or business obligations incurred
in the ordinary course of business, the performance of which will not,
individually or in the aggregate, have a Company Material Adverse
Effect and (ii) obligations under the contracts, agreements and leases
described in Schedule 5.9 of the Company Disclosure Schedule, the
performance of which will not, individually or in the aggregate, have a
Company Material Adverse Effect;
(vi) discharged or satisfied any lien or encumbrance
or paid any obligations or liability (fixed or contingent) other than
current liabilities paid to unrelated parties, wages paid to officers
and employees and director's fees paid to directors, each in the
ordinary course of business;
(vii) mortgaged, pledged, or subjected to any lien,
charge, or other encumbrance any of its properties or assets (tangible
or intangible) except for Permitted Liens (as defined in Section 5.10
below).
(viii) sold, assigned, leased, transferred or
otherwise disposed of, or agreed to sell, assign, lease, transfer or
otherwise dispose of, any of its tangible assets other than sales of
inventory in the ordinary course of business;
(ix) other than in the ordinary course of business,
sold, assigned, licensed, transferred, or otherwise disposed of, or
agreed to sell, assign, license, transfer or otherwise dispose of, any
of its patents, inventions, shop rights, know-how, trade secrets,
confidentiality agreements and confidential information, registered and
unregistered trademarks, service marks, logos, corporate names, trade
names, and other trademark rights, trade dress, or other designations
or combinations of such designations that are distinctive of its goods
or services and that are used by the Company in a manner that
identifies its goods or services and distinguishes them from the goods
or services of others, works of authorship and any registered or
unregistered copyright therein, Software or Documentation (as defined
in Section 5.9(e)), or other intangible assets, and all registrations
for, and applications for registration of, any of the foregoing
(collectively, "Proprietary Rights") or disclosed any of its
confidential Proprietary Rights to any person (other than Parent);
(x) entered into any transaction, contract, or
commitment other than in the ordinary course of business;
(xi) made any capital expenditures or any commitment
therefor in excess of $5,000 in the aggregate except as consented to by
Parent;
(xii) adopted or made any change in any executive
compensation plan, bonus plan, incentive compensation plan, deferred
compensation agreement, or other employee benefit plan or arrangement;
(xiii) entered into any employment or consulting
agreement or arrangement, or, except for normal bonuses pursuant to and
consistent with existing plans or programs, or wages or salary
increases consistent with past practices, granted or paid any bonus, or
made or granted any general wage or salary increase or any specific
increase in the wages or salary of any employee;
(xiv) suffered any casualty loss or damage, whether
or not such loss or damage shall have been covered by insurance;
(xv) canceled or compromised any debt or claim except
for adjustments made in the ordinary course of business that, in the
aggregate, are not material, or waived or released any rights that are
material;
-9-
16
(xvi) terminated, amended, or modified any agreement
or instrument described in Schedule 5.9 of the Company Disclosure
Schedule;
(xvii) entered into any transaction with any
stockholder, officer, director, or key employee of the Company or any
affiliate of any such person other than the payment of wages and
salaries and other benefits under employee benefit plans in existence
prior to December 31, 1998;
(xviii) made any loans or advances to, guaranties for
the benefit of, or investments in, any person (other than customary
wage or travel advances in accordance with past practices);
(xix) made cash charitable or political contributions
in excess of $5,000 in the aggregate;
(xx) lost any supplier or suppliers which loss or
losses, individually or in the aggregate, has had, or could reasonably
be expected to have, a Company Material Adverse Effect;
(xxi) lost any customer or customers which loss or
losses, individually or in the aggregate, has had, or could reasonably
be expected to have, a Company Material Adverse Effect;
(xxii) suffered the loss of services of any employee,
whether voluntarily or involuntarily, which loss or losses,
individually or in the aggretate, has had, or could reasonably be
expected to have, a Company Material Adverse Effect;
(xxiii) had any material change in its relations with
its employees;
(xxiv) merged or consolidated with, or acquired all
or substantially all of the assets, capital stock, or business of any
other person;
(xxv) introduced any material change with respect to
the operation of its business, including its method of accounting; or
(xxvi) agreed or committed to do any of the things
described in this Section 5.8.
5.9 LIST OF PROPERTIES, CONTRACTS, ETC. Schedule 5.9 of the Company
Disclosure Schedule sets forth a true and complete list of the following:
(a) all leases of real property to which the Company is a
party, identifying the parties thereto and including in each case a brief
description of the property covered thereby, the annual rental rate, and the
termination date (all real property covered by such leases being referred to
herein as the "Company Real Property");
(b) all leases of personal property to which the Company is a
party, that (i) provide for future annual payments in excess of $5,000 or (ii)
were entered into other than in the ordinary course of business, identifying the
parties thereto and including in each case, a brief description of the property
covered thereby, the annual rental rate and the termination date and identifying
any such leases with respect to which the obligations thereunder, in accordance
with GAAP, would be required to be capitalized on a balance sheet of the Company
or for which the amount of the asset and liability thereunder, as if so
capitalized, would be required to be disclosed in a note to such balance sheet;
(c) all addresses at which inventory or other property of the
Company is located;
(d) all Proprietary Rights, if any, having a cost of $5,000 or
more, used in the business or operations of the Company; identifying the owner
thereof and in the case of any license, the parties thereto, the method of
compensating the licensor thereunder and the termination date;
-10-
17
(e) all Software and Documentation owned by the Company or
used in and material to the business or operations of the Company, identifying
the owner thereof. As used herein: (i) "Software" means all computer programs,
in machine-readable object code and any and all corresponding source code, and
includes, without limitation: any and all printed listings, file formats,
interface or operating system designs, application programs, structure,
architecture, libraries, tools, functions, subroutines, and all components,
portions or modules thereof, and (ii) "Documentation" means all user manuals,
handbooks, on-line materials, development tools, specifications and any other
written or machine readable materials relating in any way to the Software, and
includes, without limitation: any and all Software specifications; programmer's
or developer's notes, and engineering or system design notes; instructions for
compiling or decompiling; and all pseudo-code, algorithms, diagrams or flow
charts whether or not directly incorporated in the Software. The Software and
Documentation owned by the Company, listed on Schedule 5.9 of the Company
Disclosure Schedule, includes the copyright registration number of all
registered copyrights therein. The list on Schedule 5.9 of the Company
Disclosure Schedule describes the extent to which the listed Software owned by
the Company is proprietary to the Company; if any such Software requires the use
of development tools, routines, libraries or the like ("tools") that are not
proprietary to the Company, such tools are identified in Schedule 5.9 of the
Company Disclosure Schedule; and if any such Software, or any portion thereof,
is required by law or any agreement to be dedicated to the public, owned or
co-owned, or licensed or otherwise authorized for use by the public or any other
person, such requirements are described in Schedule 5.9 of the Company
Disclosure Schedule;
(f) all employment and consulting agreements covering any
employee of, or consultant to, the Company that are in force as of the date
hereof;
(g) the names and current annual or monthly compensation rates
of all present employees of the Company;
(h) all deferred compensation agreements, employee stock
option plans, group life, hospitalization or disability insurance, severance
policies and other plans and arrangements providing benefits for employees of
the Company;
(i) all standard and non-standard product warranty terms and
conditions applicable to goods and services sold by the Company;
(j) all agreements with distributors or value-added resellers,
and all proposals made by the Company within the last ninety (90) days to any
distributors or value-added resellers that involve amounts over $10,000;
(k) all insurance coverage that relates to or covers the
properties, assets, business, or operations of the Company, including all
policies or binders of fire, liability, vehicular, title, workers' compensation,
and other insurance, specifying the insurer, the type of coverage, the amount of
coverage, any applicable deductibles, the expiration date and the policy number;
(l) all documents in the possession or control of the Company
pertaining to the environmental conditions (actual, potential, or threatened) of
any real property owned or leased by the Company including, without limitation,
all environmental reports, assessments, and audits and all notices, orders,
permits, or any other documents from any governmental authority that refer or
relate to any environmental condition of the Company Real Property or any
personal property owned or leased by the Company or that relate to any actual or
potential liabilities or obligations arising out of such environmental
conditions;
(m) the names and ages of (i) all retired employees, and (ii)
all employees on long-term disability of the Company, who are entitled to
receive health benefits;
(n) all bank accounts and safe deposit boxes of the Company,
indicating the names of the persons authorized to draw thereon;
-11-
18
(o) all written agreements (other than inside sales
representatives) of the Company with sales representatives, distributors,
authorized service centers or other customers;
(p) all loan agreements, credit agreements, indentures, and
other documents or instruments relating to the borrowing of money by the Company
and all promissory notes and other evidences of indebtedness of the Company,
including without limitation, all such documents and instruments relating to or
evidencing any stockholder loans to the Company;
(q) all guaranties of obligations of the Company under all
loan agreements, leases, and other documents and instruments to which the
Company is a party or by which it is bound, by any officer or director of the
Company or any affiliate of any of the foregoing; and
(r) all other contracts, agreements or commitments of the
Company that (i) provide for future annual payments by the Company in excess of
$5,000 or (ii) were entered into other than in the ordinary course of business.
True and correct copies of all documents, including all amendments
thereto, referred to above (collectively, the "Material Contracts") have been
delivered or made available to Parent upon specific request therefor. Each
Material Contract is a valid obligation of and enforceable against the Company
and, to the Company's knowledge, the other parties thereto, in accordance with
its terms for the period stated therein. There is no existing material breach,
default, or event of default by the Company or, to the knowledge of the Company,
by any other party, under any Material Contract. There is no event that with
notice or lapse of time would constitute a default by the Company under any
Material Contract, nor has any party thereto given notice of or, to the
Company's knowledge, made a claim with respect to any breach or default. To the
Company's knowledge, there are no material deficiencies in the Company's
performance under any Material Contract. The Company does not have any knowledge
of any existing laws, regulations, or decrees, that materially and adversely
affect, or may materially and adversely affect any of the Material Contracts or
that would have a Company Material Adverse Effect. Except as set forth in
Schedule 5.9 of the Company Disclosure Schedule, no third party consents to the
execution, delivery, and consummation of this Agreement, the documents
contemplated hereby or the transactions contemplated herein are required
pursuant to the terms of any Material Contract except for those that would not
reasonably be expected to have Company Material Adverse Effect. Except as set
forth in Schedule 5.9 of the Company Disclosure Schedule, each employment
agreement to which the Company is a party is in full force and effect, and
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby shall cause or result in any default,
termination, or acceleration of any provision in any such employment agreement
or give rise to the obligation of the Company to make any severance or change of
control payment.
5.10 TITLE TO ASSETS. Except as set forth in Schedule 5.10 of the
Company Disclosure Schedule (the "Permitted Liens"), the Company has good title,
free and clear of all liens, charges, and encumbrances (except for (a) liens for
non-delinquent taxes and assessments, (b) liens of landlords and other lessors
arising under statute, and (c) other liens, claims and encumbrances or charges
that do not materially detract from the value of, or impair the use, occupancy
or ownership of, the assets and properties of the Company), to, or a valid
leasehold interest in, all of the personal property (i) reflected on the Company
Balance Sheet or acquired by the Company subsequent to the date thereof (other
than assets that have been sold or otherwise disposed of in the ordinary course
of business since the date of the Company Balance Sheet) or (ii) used in the
business or operations of the Company. Except as set forth in Schedule 5.10 of
the Company Disclosure Schedule, neither the Company nor any predecessor to the
Company has owned, leased, or operated any real property other than the Company
Real Property.
5.11 ADEQUACY OF ASSETS. The Company owns or has a valid leasehold
interest in all assets, real and personal properties, contract rights and
licenses necessary for the continued operation of the Company in substantially
the same manner in which it has been and is now operating. Except as set forth
on Schedule 5.11: (a) the Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Proprietary Rights necessary
for the operation of the business of the Company as presently conducted, (b)
each Proprietary Right owned or used by Company immediately prior to the
Effective Time hereunder will be owned or available for use by Company on
substantially similar terms and
-12-
19
conditions immediately subsequent to the Effective Time hereunder, and (c)
Company has taken all commercially reasonable action to maintain and protect
each Proprietary Right that it owns or uses.
5.12 CONDITION OF INVENTORY, PROPERTY, PLANT, AND EQUIPMENT. Schedule
5.12 of the Company Disclosure Schedule sets forth a list of the fixed assets of
the Company, together with the depreciation schedule associated with such fixed
assets. The inventory of the Company consists of items of quality and quantity
usable and saleable in the ordinary course of business of the Company, except
for items reserved against or written off on the Company Balance Sheet. All
property, plant, and equipment used by the Company in the conduct of its
business has been maintained in accordance with standard industry practices and
is in good operating condition and repair, ordinary wear and tear excepted, and
there are no material defects in such property, plant, or equipment.
5.13 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The accounts receivable
reflected on the Company Balance Sheet and all accounts receivable of the
Company that arose thereafter are valid and arose out of bona fide transactions
in the ordinary course of business. Schedule 5.13 of the Company Disclosure
Schedule sets forth a list of any such accounts receivable that the Company
considers to be doubtful accounts. To the Company's knowledge, there are no
scheduled returns from any of the Company's distributors, value-added resellers
or customers that could reasonably be expected to have a Company Material
Adverse Effect.
5.14 LITIGATION. Except as set forth in Schedule 5.14 of the Company
Disclosure Schedule, there are no claims, actions, suits, investigations, or
proceedings (public or private) pending against or affecting the Company or any
of its properties or assets, at law or in equity, before or by any federal,
state, municipal, or other governmental or non-governmental department,
commission, board, bureau, agency, court, or other instrumentality, or
arbitrator or by any private person or entity. Except as set forth in Schedule
5.14 of the Company Disclosure Schedule, to the knowledge of the Company, there
are no claims, actions, suits, investigations, or proceedings (public or
private) threatened against or affecting the Company or any of its properties or
assets, at law or in equity, before or by any federal, state, municipal, or
other governmental or non-governmental department, commission, board, bureau,
agency, court, or other instrumentality, or arbitrator or by any private person
or entity, except for any of the foregoing which would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Schedule 5.14 of the Company Disclosure Schedule, there
are no existing orders, judgments, settlements, injunctions, or decrees of any
court or governmental agency that apply to the Company or any of its assets,
properties, business, or operations. Except as set forth in Schedule 5.14 of the
Company Disclosure Schedule, since January 1, 1994, no product liability,
warranty, or similar claims have been made against the Company except routine
claims in the ordinary course of business (i.e., claims relating to defective
products that have been satisfied by the Company solely by replacement of
products or adjustment or refunding of purchase price or substantially
equivalent credit on future orders) that, in the aggregate, would not have a
Company Material Adverse Effect. Except as set forth in Schedule 5.14 of the
Company Disclosure Schedule, since January 1, 1994 the Company has not entered
into any settlement agreements relating to the compromise or dismissal of any
litigation involving the Company or any of its properties or assets. Nothing
contained in any settlement agreement to which the Company is a party prevents
the Company in any way from carrying out its business as now conducted or as
presently contemplated to be conducted, in any market, geographical area, or
application, or interferes with the Company's utilization of its Proprietary
Rights.
5.15 TAXES. Except as set forth in Schedule 5.15 of the Company
Disclosure Schedule, all returns and reports of all Taxes (as hereinafter
defined) required to be filed by the Company have been timely filed and are
true, correct, and complete in all material respects, and all Taxes payable
pursuant thereto have been timely paid. Except as set forth in Schedule 5.15 of
the Company Disclosure Schedule, no deficiency or adjustment in respect of any
Taxes that was assessed against the Company remains unpaid and no such claim or
assessment is pending or, to the knowledge of the Company, threatened. The
Company has made all withholding of Taxes required to be made under all
applicable federal, state, and local tax regulations and such withholdings have
either been paid on a timely basis to the respective governmental agencies or
set aside in accounts for such purpose or accrued, reserved against and entered
upon the books of the Company. There are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any tax return or
tax liability of the Company, and to the knowledge of the Company, there is no
proposed liability for any Taxes for which there is not an adequate reserve
reflected on the Company Balance Sheet. The Company has not filed any consent
with the Internal
-13-
20
Revenue Service described in Section 341(f) of the Code. The unpaid Taxes of the
Company (i) did not, as of the end of the most recent period for which financial
statements have been prepared, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income), and (ii) do not exceed that reserve as adjusted for the
passage of time through the Effective Time in accordance with the past custom
and practice of the Company in filing its Tax returns. The Company does not
reasonably expect any authority to assess any additional Taxes for any period
for which Tax returns have been filed. There is no dispute or claim concerning
any Tax liability of the Company either (i) claimed or raised by any authority
in writing, or (ii) as to which the Company has knowledge. The Company has
delivered to Parent correct and complete copies of all federal and state income
Tax returns of the Company, examination reports and statements of deficiencies
assessed against or agreed to by the Company for all years beginning in or after
1992. The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been a member of an affiliated group filing federal income Tax
Returns, and does not have any liability for the Taxes of any person (other than
the Company) under Treas. Reg. Section 1.1502-6 or any similar provision of
state, local or foreign law, as a transferee or successor, by contract or
otherwise. No item of income attributable to transactions occurring on or before
the Effective Time will be required to be included in taxable income by the
Company in a subsequent taxable year by reason of the Company reporting income
on the installment sales method of accounting, the cash method of accounting,
the completed contract method of accounting or the percentage of
complete-capitalized cost method of accounting. The Company has not made, and is
under no obligation to make, payments that are or, if made, would be, "parachute
payments" under Section 280G of the Code, and no such obligation will arise as a
result of this Agreement or other agreements entered into in connection with
this Agreement. "Taxes" shall mean all federal, state, county, local, foreign
and other taxes and governmental assessments, including but not limited to,
income taxes, estimated taxes, withholding taxes, transfer taxes, excise taxes,
sales taxes, real and personal property taxes, ad valorem taxes, payroll-related
taxes, employment taxes, franchise taxes and import duties, together with any
related liabilities penalties, fines or additions to tax and interest.
5.16 PROPRIETARY RIGHTS.
(a) Except as set forth on Schedule 5.16(a) of the Company
Disclosure Schedule: (i) to the Company's knowledge, the Company has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Proprietary Rights of third parties, (ii) the Company (and its
employees with responsibility for Proprietary Rights matters) has not received
any written charge, complaint, claims, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company must license or refrain from using any Proprietary Rights of
any third party), (iii) to the knowledge of the Company (and employees with
responsibility for Proprietary Rights matters), there is no basis for any as-yet
unasserted charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company must license or refrain from using any Proprietary Rights of
any third party), or (iv) to the knowledge of the Company (and employees with
responsibility for Proprietary Rights matters), no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Proprietary Rights of the Company.
(b) Schedule 5.16(b) of the Company Disclosure Schedule
identifies each material Proprietary Right that the Company owns. Schedule
5.16(b) of the Company Disclosure Schedule identifies each registration that has
been issued to Company with respect to any of its Proprietary Rights, identifies
each pending application for registration that the Company has made with respect
to any of its Proprietary Rights, identifies each item of copyrightable
Proprietary Rights (whether or not registration has been sought), and identifies
each license, agreement, or other permission which Company has granted to any
third party with respect to any of its Proprietary Rights and all agreements
relating to any of the Software owned by the Company, including any service,
nondisclosure or escrow agreements (together with any exceptions). The Company
has delivered or upon Parent's request has made available to Parent upon
specific request therefor correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). Schedule 5.16(b) of the Company Disclosure Schedule also identifies
each trade name or unregistered trademark used by Company in connection with its
business. Except as set forth in Schedule 5.16(b) of the Company Disclosure
Schedule, with respect to each Proprietary Right required to be identified in
Schedule 5.16(b) of the Company Disclosure Schedule and with respect to each
item of copyrightable Proprietary Rights:
-14-
21
(i) the Company possesses all right, title, and
interest in and to the Proprietary Right, free and clear of any lien,
license, or other restriction;
(ii) the Proprietary Right is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to
the knowledge of Company, threatened, that challenges the legality,
validity, enforceability, manufacture, use or the ability to authorize
the use (including use by way of reproduction of copies, distribution
of copies, preparation of derivative works, public performance or
display, or any other use of any kind or nature), sale or ownership of
the Proprietary Right; and
(iv) the Company has never agreed to indemnify any
person for or against any interference, infringement, misappropriation,
or other conflict with respect to the Proprietary Right.
(c) Schedule 5.16(c) of the Company Disclosure Schedule
identifies each Proprietary Right that any third party owns and that Company
uses pursuant to license, sublicense, agreement, or permission. The Company has
delivered or upon Parent's request made available to Parent correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). Except as set forth on Schedule 5.16(c) of the Company
Disclosure Schedule, with respect to each Proprietary Right required to be
identified in Schedule 5.16(c) of the Company Disclosure Schedule:
(i) the license, sublicense, agreement, or permission
covering the Proprietary Right is legal, valid, binding, enforceable
against the Company and, to the Company's knowledge, against the other
parties thereto, and in full force and effect;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable
against the Company and, to the Company's knowledge, against the other
parties thereto, and in full force and effect on substantially similar
terms following the Effective Time;
(iii) to the Company's knowledge, no party to the
license, sublicense, agreement, or permission is in breach or default,
and, to the Company's knowledge, no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement,
or permission has repudiated in writing any provision thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i) through
(iv) above are true and correct with respect to the underlying license;
(vi) to the Company's knowledge, the underlying
Proprietary Right is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(vii) to the Company's knowledge, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
is pending or, to the knowledge of Company, threatened, that challenges
the legality, validity, or enforceability of the underlying Proprietary
Right;
(viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission; and
-15-
22
(ix) no such licenses, agreements or permissions
commit the Company to continued maintenance, support, improvement,
upgrade or similar obligation with respect to any of the Proprietary
Rights, which obligation cannot be terminated by the Company upon
notice of ninety (90) days or less.
(d) Schedules 5.16(b) and 5.16(c) of the Company Disclosure
Schedule identify every material Proprietary Right used by the Company in the
conduct of its business. Except as set forth in Schedule 5.16(b) of the Company
Disclosure Schedule, all Software owned by the Company performs substantially as
described in all Documentation for such Software insofar as such Documentation
has to do with the performance, specifications or design of such Software; and
in addition, all Software owned by the Company that has been licensed to any
third party performs in accordance with the warranties, if any, given by the
Company in respect of such Software. Except as set forth in Schedule 5.16(c) of
the Company Disclosure Schedule, all Software owned by any third party and used
by the Company pursuant to license, sublicense, agreement or permission performs
in accordance with the warranties, if any, given by such third party to the
Company, and to the knowledge of the Company (and its employees with
responsibility for use and maintenance or service thereof) such Software
performs substantially as required for the conduct of the Company's business. It
is understood and agreed that "Software owned by the Company" shall include all
Software owned by the Company, whether developed in house by the Company or
purchased by the Company from any third party.
5.17 ROYALTIES. Except as set forth on Schedule 5.17 of the Company
Disclosure Schedule, all royalties, license fees, and other fees relating to the
Company's use of Proprietary Rights have been timely paid. Except as set forth
in Schedule 5.17 of the Company Disclosure Schedule, to the Company's knowledge,
the method used by the Company to calculate all royalties, license fees, and
other fees relating to the Company's use of Proprietary Rights is correct and
accurate and in accordance with the terms of any agreements the Company has with
any third party relating to the use of such party's Proprietary Rights.
5.18 YEAR 2000 COMPLIANCE. Except as set forth on Schedule 5.18 of the
Company Disclosure Schedule, each system of the Company, comprised of software,
hardware, databases, or embedded control systems (microprocessor controlled,
robotic or other device) (collectively, a "System"), that constitutes any part
of, or is used in connection with the use, operation or enjoyment of any
material tangible or intangible asset or real property of the Company and each
product licensed, sold or otherwise distributed by the Company, including
software, hardware, databases, or embedded control systems (collectively, a
"Product") (a) is designed (or has been modified) to be used prior to and after
January 1, 2000, (b) will operate without error arising from the creation,
recognition, acceptance, calculation, display, reporting, storage, retrieval,
accessing, comparison, sorting, manipulation, processing or other use of dates,
or date-based, date-dependent or date-related data, including but not limited to
century recognition, day-of-the-week recognition, leap years, date values and
interfaces of date functionalities, and (c) will not be adversely affected by
the advent of the year 2000 or subsequent years, the advent of the twenty-first
century or the transition from the twentieth century through the year 2000 and
into the twenty- first century (collectively, items (a) through (c) are referred
to herein as "Year 2000 Compliant"). Except as set forth on Schedule 5.18 of the
Company Disclosure Schedule, all licenses for the use of any System-related
software, hardware, databases or embedded control system are certified by the
manufacturer to be Year 2000 Compliant and to contain the capabilities required
to enable Year 2000 Compliance within the Company's computer systems (hardware
and software), or the licenses permit the Company or a third party to make all
modifications, bypasses, de-bugging, work-around, repairs, replacements,
conversions or corrections necessary to permit the System to operate compatibly,
in conformance with their respective specifications, and to be Year 2000
Compliant. Except as set forth on Schedule 5.18 of the Company Disclosure
Schedule, no System that is material to the business, finances, or operations of
the Company receives data from or communications with any component or system
external to itself (whether or not such external component or system is the
Company's or any third party's) that is not itself Year 2000 Compliant excepting
the parts of the external component or system within which noncompliance to Year
2000 Compliance will have no effect on the data or communications sent to the
Company, nor on the Systems of the Company. Except as set forth on Schedule 5.18
of the Company Disclosure Schedule, the Company has no reason to believe that it
may incur material expenses arising from or relating to the failure of any of
its Systems or Products as a result of not being Year 2000 Compliant.
Notwithstanding anything in this Section 5.18 to the contrary, any
representation with respect to a System or Product that was developed wholly by
a third party and not by the Company shall be deemed to qualified in its
entirety to the Company's knowledge regarding the facts or events set forth in
such representation.
-16-
23
5.19 LABOR RELATIONS. There are no material controversies pending or,
to the knowledge of the Company, threatened, between the Company and any of its
respective employees, former employees, or applicants for employment. The
Company has complied in all respects with all laws relating to the employment of
labor, including any provisions thereof relating to wages, hours, equal
employment opportunity, collective bargaining, federal immigration law, and the
payment of social security and similar taxes, except as would not be reasonably
expected to have a Company Material Adverse Effect. The Company is not liable
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing, except as would not be reasonably expected to have a
Company Material Adverse Effect. None of the employees of the Company are
covered by any collective bargaining agreement and, to the knowledge of the
Company, there are no organizational efforts currently being made or threatened
involving any employees of the Company. All employee severance or change of
control policies covering any employee of the Company are described in Schedule
5.19 of the Company Disclosure Schedule and no such employee is entitled to any
severance or change of control benefits not described therein.
5.20 CERTAIN EMPLOYEE MATTERS.
(a) Except as set forth on Schedule 5.20(a) of the Company
Disclosure Schedule, all current and former members of management, key
(including sales and recruiting) personnel and consultants (whether employees or
independent contractors) of the Company have executed and delivered to the
Company a confidential information agreement restricting such person's right to
disclose confidential information of the Company. Except as set forth on
Schedule 5.20(a) of the Company Disclosure Schedule, all such members of
management, key personnel and consultants of the Company have been party to a
"work-for-hire" arrangement or Proprietary Rights agreement with the Company
pursuant to which either (i) in accordance with applicable federal and state
law, the Company has been accorded full, effective, exclusive and original
ownership of all tangible and intangible property thereby arising or (ii) there
has been conveyed to the Company by appropriately executed instruments of
assignment full, effective and exclusive ownership of all tangible and
intangible property thereby arising. No employee, agent, consultant or
contractor of the Company who has contributed to or participated in the
conception and development of Proprietary Rights of the Company has asserted in
writing or, to the Company's knowledge, threatened any claim against the Company
in connection with such person's involvement in the conception and development
of the Proprietary Rights of the Company and, to the knowledge of the Company,
no such person has a reasonable basis for any such claim.
(b) Schedule 5.20(b) of the Company Disclosure Schedule
identifies all employees, independent contractors and other personnel of the
Company, their respective rates of pay at the date hereof, and, with respect to
all xxxx consultants (employees or independent contractors), the billing rate of
each such consultant. Unless otherwise noted on Schedule 5.20(b) of the Company
Disclosure Schedule, each of the Company's personnel identified on Schedule
5.20(b) of the Company Disclosure Schedule is working full time and none of such
personnel has expressly stated to the Company's management that he or she
intends to resign or cease working with the Company after Closing. Other than
increases granted in the ordinary course of business, the Company has not
committed to increase in any manner the compensation of any of its personnel
beyond the amount identified on Schedule 5.20(b) of the Company Disclosure
Schedule.
(c) Except as set forth on Schedule 5.20(c) of the Company
Disclosure Schedule, all current and former (terminated within twelve (12)
months of the date hereof) members of management and key (including sales and
recruiting) personnel of the Company have executed and delivered to the Company
a nonsolicitation agreement restricting such person's right to solicit
employees, customers, clients and prospective customers and clients of the
Company during the term of such person's or entity's employment and for at least
six (6) months thereafter.
5.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in Schedule 5.21
of the Company Disclosure Schedule, the Company is not a party to any contract,
lease, agreement, or other commitment with any officer, director, or stockholder
of the Company or any affiliate of any such person, and there are no loans
outstanding from the Company to, or to the Company from, any such person or any
affiliate of any such person.
5.22 PERMITS; COMPLIANCE WITH LAWS. Schedule 5.22 of the Company
Disclosure Schedule contains a true, correct, and complete list of all permits,
licenses, consents, and authorizations of any government or governmental
authority
-17-
24
held by the Company. Except as set forth in Schedule 5.22 of the Company
Disclosure Schedule, the Company holds all permits, licenses, consents, and
authorizations issued by any government or governmental authority that are
necessary for the conduct of its business , except for any failure to hold that
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. The Company has not received any written notice
of any violation of any law, ordinance, regulation, or order applicable to the
Company or the business conducted by it. The conduct of the business of the
Company, as presently conducted, complies with all applicable laws, ordinances,
regulations, and orders, including, but not limited to, all laws, ordinances,
regulations or orders relating to the exportation or importation of Products ,
except for any noncompliance that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
5.23 ENVIRONMENTAL MATTERS. During the period in which the Company has
owned and/or occupied the Company Real Property, to the Company's knowledge,
there has been no "release or threatened release of a hazardous substance" (as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA")) or any other release, emission, disposal, or
discharge into the environment or any use, storage, transport or handling
(collectively, "activities") of Hazardous Material (as defined below) on, under,
about, or from the Company Real Property other than those activities that have
not resulted and could not reasonably be expected to result in any material
liability on the part of the Company. To the knowledge of the Company, all
"hazardous waste" (as defined in the Resource Conservation and Recovery Act of
1976, as amended ("RCRA") and the regulations thereunder) generated at the
Company's properties have been disposed of at sites that maintain valid permits
under RCRA and any other applicable Environmental Requirement (as defined
below). To the knowledge of the Company and except as set forth in Section 5.23
of the Company Disclosure Schedule, there are no underground tanks, PCBs, or
asbestos containing materials on the Company Real Property. Except as set forth
in Schedule 5.23 of the Company Disclosure Schedule, the Company does not have
any written notice of any pending formal or informal assertion by any
governmental agency or other person that the Company or any predecessor business
or owner or operator of the Company Real Property may be a responsible or
potentially responsible party in connection with any violation or obligation
arising under any Environmental Requirement at any site or facility (including
the Company Real Property itself.) "Hazardous Material" shall mean any substance
(i) the presence of which requires reporting, investigation or remediation under
any applicable statute, regulation, ordinance or order; or (ii) which is defined
as a "hazardous waste", "hazardous substance", pollutant or contaminant under
any statute, regulation, rule, or ordinance of any governmental authority having
jurisdiction; or (iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
regulated by any governmental authority having jurisdiction. "Environmental
Requirement" shall mean all applicable statutes, laws, regulations, rules,
ordinances, codes, licenses, permits, orders, standards, guidelines, policies,
and similar items of any governmental authority having jurisdiction and all
applicable judicial, administrative, and regulatory decrees, judgments, and
orders and common law relating to the protection of human health or the
environment including, without limitation, all requirements pertaining to the
reporting, licensing, permitting, use, handling, generation, storage, treatment,
transportation, disposal, release, discharge, investigation, and remediation of
Hazardous Material.
5.24 FEES AND LIABILITIES TO CERTAIN CREDITORS. Except as set forth in
Schedule 5.24 of the Company Disclosure Schedule, there are no claims for legal,
accounting, financial advisory, or investment bankers' fees, brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company. As of the Effective Time, the
Company's aggregate liability to BSDI, Secure Computing and First Union (the
"Identified Creditors") does not exceed $155,000.
5.25 BOOKS AND RECORDS. Except as set forth in Schedule 5.25 of the
Company Disclosure Schedule, the financial books, records, and work papers of
the Company are complete and correct in all material respects, have been
maintained in accordance with good business practice and accurately reflect the
bases for the consolidated financial condition and results of operations of the
Company set forth in the financial statements referred to in Section 5.6 hereof.
5.26 ERISA. Neither the Company nor any trade or business (whether or
not incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code) (an "ERISA
Affiliate") of the Company maintains or contributes to or is obligated to
contribute to, and has ever maintained or contributed to or been obligated to
contribute to,
-18-
25
(i) any "multiemployer plan", within the meaning of Section 4001 (a)(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
promulgated and rulings issued thereunder ("ERISA"), to which any person or any
ERISA Affiliate of such person makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made, or been
obligated to make, contributions (a "Multiemployer Plan"), (ii) any single
employer plan, as defined in Section 4001 (a)(15) of ERISA, that (a) is
maintained for employees of a person or any ERISA Affiliate of such person and
at least one person other than such person and any ERISA Affiliate of such
person or (b) was so maintained and in respect of which such person or an ERISA
Affiliate of such person could have liability under Section 4064 of ERISA in the
event such plan has been or were to be terminated (a "Multiple Employer Plan")
or (iii) except as set forth in Schedule 5.26 of the Company Disclosure
Schedule, any employee benefit plan (as defined in Section 3(3) of ERISA)
sponsored or maintained by the Company or to which the Company makes, is making,
or is obligated to make contributions (a "Plan"), including but not limited to a
Pension Plan (as defined below). With respect to the Plan(s) disclosed in
Schedule 5.26 of the Company Disclosure Schedule:
(i) Each such Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and other
federal or state law. Except as set forth on Schedule 5.26 of the
Company Disclosure Schedule, any such Plan which is intended to qualify
under Section 401(a) of the Code has received a favorable determination
letter from the IRS and to the knowledge of the Company, nothing has
occurred that would cause the loss of such qualification. The Company
and each ERISA Affiliate of the Company has made all required
contributions to any such Plan subject to Section 412 of the Code, and
no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect
to any such Plan.
(ii) There are no pending claims (other than routine
claims for benefits) or, to the knowledge of the Company, threatened
claims, actions, or lawsuits, or action by any governmental authority,
with respect to any such Plan, and there has been no prohibited
transaction or violation of the fiduciary responsibility rules with
respect to any such Plan.
(iii) (1) the execution of, and the performance of
the transactions contemplated in, this Agreement will not constitute an
event under any Plan that will or is reasonably expected to result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee;
(2) no such Plan which constitutes a Pension Plan (as defined below)
has any Unfunded Pension Liability (as defined below); (3) neither the
Company nor any ERISA Affiliate of the Company has incurred, or
reasonably expects to incur, any material liability under Title IV of
ERISA with respect to any such Plan which constitutes a Pension Plan
(other than premiums due and not delinquent under Section 4007 of
ERISA); (4) neither the Company nor any ERISA Affiliate of the Company
has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of
ERISA with respect to a Multiemployer Plan; and (5) neither the Company
nor any ERISA Affiliate of the Company has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA. "Pension
Plan" shall mean a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA that a person sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in
the case of a Multiple Employer Plan has made contributions at any time
during the immediately preceding five (5) plan years. "Unfunded Pension
Liability" shall mean the excess of a Plan's benefit liabilities under
Section 4001(a)(16) of ERISA, over the current value of that Plan's
assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
5.27 POOLING OF INTERESTS TREATMENT. To the Company's knowledge,
neither the Company nor any of its affiliates has taken or agreed to take any
action or is aware of any condition other than as represented or specified in
the Company's representation letter to BDO Xxxxxxx LLP dated September 10, 1999
delivered in connection with BDO Xxxxxxx LLP's letter concerning the accounting
for the transactions provided for herein as a pooling-of-interests under APB
Opinion No. 16 (a "Pooling of Interests").
-19-
26
5.28 INSURANCE. The business, properties, and employees of the Company
are insured by the insurers or through the funds and with the types and amounts
of insurance (including, but not limited to, property, product liability,
automobile, workers compensation, business interruption, and excess indemnity
insurance) set forth in Schedule 5.28 of the Company Disclosure Schedule (the
"Company Insurance Coverage"). To the Company's knowledge, the Company Insurance
Coverage is in such amount and on such terms as to adequately cover the risks
attendant to the Company's business. Since January 1, 1997 the Company has not
been denied coverage by any insurance carrier or has failed or currently fails
to maintain any insurance coverage that may be required by the laws of the
states in which the Company sells or manufactures Products or provides services.
The premiums due on the Company Insurance Coverage that covers calendar year
1998 have been paid in full and the premiums due for the period from January 1,
1999 to the Effective Time, to the extent due and payable, have been timely paid
in full. All such insurance complies in all material respects with the terms of
each of its leases and each of the mortgages, deeds of trust, service agreements
with third parties and/or loan agreements to which the Company is a party.
5.29 DISCLOSURE. To the Company's knowledge, no representation or
warranty by the Company in this Agreement and no statement contained in any
document, certificate, or other writing prepared by the Company or its
representatives and furnished by the Company to Parent pursuant to the
provisions hereof, affirmatively misstates a material fact or omits a material
fact necessary to make the statements contained herein or therein not
misleading. No holder of the Company's equity securities will make any claim
against Parent, Merger Sub or the Company based upon the information concerning
the Exchange Ratio set forth in that certain Information Statement dated August
30, 1999 and delivered to the holders of the Company's equity securities in
connection with the Merger.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as of the
date of this Agreement as follows:
6.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE WITH LAW.
(a) Each of Parent and Merger Sub is a corporation duly
incorporated, validly existing, and in good standing (including tax good
standing) under the laws of Delaware and Georgia, respectively. Parent is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of the jurisdictions listed in Schedule 6.1 of the
disclosure letter delivered by Parent to the Company at or prior to the
execution hereof (the "Parent Disclosure Schedule"), which list contains all
jurisdictions in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary, in
each case except as would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect (as defined in Section 6.7 of
this Agreement).
(b) Parent and Merger Sub have all requisite corporate power
and authority to own, operate, and lease its properties and carry on its
business as presently conducted and as proposed to be conducted.
(c) Neither Parent nor Merger Sub is not in violation of any
law, ordinance, governmental rule or regulation to which it or any of its
properties or assets is subject, except as would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect, nor
is Parent or Merger Sub in violation of any order, judgment, or decree of any
court, governmental authority, or arbitration board or tribunal.
(d) The copies of Parent's and Merger Sub's respective
Articles of Incorporation and Bylaws, which have been delivered to the Company,
include any and all amendments made thereto at any time prior to the date of
this Agreement and are true, correct, and complete.
-20-
27
(e) Parent's and Merger Sub's respective corporate minute
books are accurate as to their content and include therein the Articles of
Incorporation and Bylaws of Parent with any amendments thereto. The meetings of
the directors or stockholders referred to in the corporate minute books were
duly called and held. The signatures appearing on all documents contained in the
corporate minute books are the true signatures of the persons purporting to have
executed the same and no minutes of meetings or written consents of the
directors or stockholders of Parent or Merger Sub, as applicable, are omitted
from such minute books that would contain any resolutions or other actions that
would be inconsistent with any of the representations and warranties contained
in Article VI hereof or prevent or limit any of the transactions contemplated by
this Agreement. Schedule 6.1 of the Parent Disclosure Schedule sets forth a true
and complete list of the names of all directors of Parent and the names and
offices held of all officers of the Parent as the date hereof.
6.2 AUTHORIZATION, VALIDITY, AND EFFECT OF AGREEMENTS. Each of Parent
and Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby and
thereby. The consummation by Parent and Merger Sub of the transactions
contemplated hereby has been duly authorized by all requisite corporate action
of Parent. This Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and delivery by the
Company, constitutes, and all agreements and documents contemplated hereby (when
executed and delivered pursuant hereto for value received) will constitute, the
valid and legally binding obligations of Parent and Merger Sub enforceable in
accordance with their respective terms, except to the extent that enforceability
may be limited by applicable bankruptcy, insolvency, moratorium, or other
similar laws relating to creditors' rights and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), including, without limitation, possible unavailability of
specific performance, other injunctive relief or other equitable remedies and an
implied covenant of good faith and fair dealing.
6.3 CAPITALIZATION. The authorized capital stock of Parent consists of
50,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred
stock, $.01 par value ("Parent Preferred Stock"). As of June 30, 1999, there
were (a) 9,348,794 shares of Parent Common Stock issued and outstanding, (b) no
shares of Parent Preferred Stock issued and outstanding, (c) 1,754,750 shares of
Parent Common Stock issuable upon exercise of outstanding options to purchase
Parent Common Stock, and (d) 1,435,268 shares of Parent Common Stock issuable
upon exercise of outstanding warrants, (e) 766,773 shares of Parent Common Stock
issuable upon converstion of outstanding convertible debt.
6.4 NO VIOLATION. Neither the execution and delivery by Parent and
Merger Sub of this Agreement and all agreements and documents contemplated
hereby, nor the consummation by Parent and Merger Sub of the transactions
contemplated hereby or thereby in accordance with the terms hereof or thereof,
will: (i) conflict with or result in a breach of any provisions of the
Certificate of Incorporation, as amended, or Bylaws of Parent or the Articles of
Incorporation or Bylaws of Merger Sub; (ii) violate any law, statute, rule,
regulation, judgment, or decree applicable to Parent (iii) except as set forth
in Schedule 6.4 of the Parent Disclosure Schedule, violate, conflict with,
result in a breach of any provision of, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, result
in the termination or in a right of termination or cancellation of, accelerate
the performance required by, result in the triggering of any payment or other
obligations pursuant to, result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties of Parent under, or result in
being declared void, voidable, or without further binding effect, any of the
terms, conditions, or provisions of any note, bond, mortgage, indenture, loan
agreement, deed of trust, or any license, franchise, permit, lease, contract,
agreement or other instrument, commitment, or obligation to which Parent is a
party, or by which Parent or any of its properties is bound or affected; (iii)
violate any law, statute, rule, regulation, judgment, or decree applicable to
Parent; or (iv) other than the Regulatory Filings, require any consent,
approval, or authorization of, or declaration, filing, or registration with, any
governmental or regulatory authority.
6.5 SEC DOCUMENTS. Since the date on which a registration statement
with respect to Parent Common Stock became effective with the Securities and
Exchange Commission (the "Commission") to the date hereof, Parent has filed all
forms, reports, and other documents (including all exhibits, schedules and
annexes thereto) required to be filed by Parent with the Commission
(collectively, the "Parent Reports"). Except to the extent that information
contained in any Parent Report has been revised or superseded by a later Parent
Report filed and publicly available prior to the date of this Agreement, as of
their respective dates, the Parent Reports (a) were (and any Parent Reports
filed after the date hereof will be) in all material respects in accordance with
the requirements of the Securities Act of 1933, as amended (the "Securities
-21-
28
Act") or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as the case may be, and the rules and regulations promulgated thereunder, and
(b) as of their respective filing dates did not (and any Parent Reports filed
after the date hereof will not) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. The financial statements of Parent included in
such reports (or incorporated therein by reference) were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto and subject to normal year-end
adjustments) and fairly present in all material respects the financial position
of Parent and its consolidated subsidiaries as of the dates thereof and the
periods then ended.
6.6 NO CONSENT OR APPROVAL REQUIRED. Except for compliance with any
applicable Blue Sky Laws, federal securities regulations, and Nasdaq
requirements, no consent, approval, or authorization of, or declaration to or
filing with, any governmental or regulatory authority is required for the valid
execution and delivery by Parent of this Agreement or any other agreement or
instrument to be executed and delivered by Parent hereunder, the consummation of
the transactions provided for herein or therein or the issuance and delivery of
the Parent Common Stock.
6.7 ABSENCE OF CHANGE. Since June 30, 1999, no event or events have
occurred, which individually or in the aggregate have had a Parent Material
Adverse Effect, as hereafter defined, and there exists no condition or
contingency that could reasonably be expected to result in a Parent Material
Adverse Effect. A "Parent Material Adverse Effect" means a material adverse
change in the business, properties, financial condition, results of operations,
or prospects of the Parent, taken as a whole.
6.8 BROKERAGE. Except as set forth on Schedule 6.8 of the Parent
Disclosure Schedule, there are no claims for financial advisory or investment
bankers' fees, brokerage commissions, finders' fees, or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Parent.
6.9 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The accounts receivable
reflected on the balance sheet contained in the latest Parent Report filed with
the Commission immediately preceding the date hereof pursuant to the Exchange
Act and all accounts receivable of Parent that arose thereafter are valid and
arose out of bona fide transactions in the ordinary course of business. Schedule
6.9 of the Parent Disclosure Schedule sets forth a list of any such accounts
receivable that Parent considers to be doubtful accounts. To Parent's knowledge,
there are no scheduled returns from any of Parent's distributors, value-added
resellers or customers, except for such returns that could not reasonably be
expected to have a Parent Material Adverse Effect.
6.10 LITIGATION. Except as set forth in Schedule 6.10 of the Parent
Disclosure Schedule, there are no claims, actions, suits, investigations, or
proceedings (public or private) pending against or affecting Parent or any of
its properties or assets, at law or in equity, before or by any federal, state,
municipal, or other governmental or non-governmental department, commission,
board, bureau, agency, court, securities exchange or other instrumentality, or
arbitrator or by any private person or entity. Except as set forth in Schedule
6.10 of the Parent Disclosure Schedule, to the knowledge of Parent, there are no
claims, actions, suits, investigations, or proceedings (public or private)
threatened against or affecting Parent or any of its properties or assets, at
law or in equity, before or by any federal, state, municipal, or other
governmental or non-governmental department, commission, board, bureau, agency,
court, or other instrumentality, or arbitrator or by any private person or
entity, except for any of the foregoing which would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Except as set forth in Schedule 6.10 of the Parent Disclosure Schedule, there
are no existing orders, judgments, settlements, injunctions, or decrees of any
court or governmental agency that apply to Parent or any of its assets,
properties, business, or operations. Except as set forth in Schedule 6.10 of the
Parent Disclosure Schedule, since January 1, 1994, no product liability,
warranty, or similar claims have been made against Parent except routine claims
in the ordinary course of business (i.e., claims relating to defective products
that have been satisfied by Parent solely by replacement of products or
adjustment or refunding of purchase price or substantially equivalent credit on
future orders) that, in the aggregate, would not have a Parent Material Adverse
Effect. Except as set forth in Schedule 6.10 of the Parent Disclosure Schedule,
since January 1, 1994 Parent has not entered into any settlement agreements
relating to the compromise or dismissal of any litigation involving Parent or
any of its properties or assets. Nothing contained in any
-22-
29
settlement agreement to which Parent is a party prevents Parent in any way from
carrying out its business as now conducted or as presently contemplated to be
conducted, in any market, geographical area, or application, or interferes with
Parent's utilization of its Proprietary Rights.
6.11 PROPRIETARY RIGHTS. Except as set forth on Schedule 6.11 of the
Parent Disclosure Schedule: (i) to Parent's knowledge, Parent has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Proprietary Rights of third parties, (ii) Parent (and its employees with
responsibility for Proprietary Rights matters) has not received any written
charge, complaint, claims, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Parent
must license or refrain from using any Proprietary Rights of any third party),
(iii) to the knowledge of Parent (and employees with responsibility for
Proprietary Rights matters), there is no basis for any as-yet unasserted charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Parent
must license or refrain from using any Proprietary Rights of any third party),
or (iv) to the knowledge of Parent (and employees with responsibility for
Proprietary Rights matters), no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Rights of
Parent.
6.12 ROYALTIES. All royalties, license fees, and other fees relating to
Parent's use of Proprietary Rights have been or will be paid in full as and when
due. Except as set forth in Schedule 6.12 of the Parent Disclosure Schedule, to
Parent's knowledge, the method used by Parent to calculate all royalties,
license fees, and other fees relating to Parent's use of Proprietary Rights is
correct and accurate and in accordance with the terms of any agreements Parent
has with any third party relating to the use of such party's Proprietary Rights.
6.13 YEAR 2000 COMPLIANCE. The disclosure contained in the latest
Parent Report filed with the Commission immediately preceding the date hereof
pursuant to the Exchange Act concerning the Year 2000 Compliance of the Systems
and Products utilized and distributed by Parent is true and correct, except for
such misstatements or omissions that would not, individually or in the
aggregate, reasonably be likely to have a Parent Material Adverse Effect.
6.14 LABOR RELATIONS. Except as set forth in Schedule 6.14 of the
Parent Disclosure Schedule, there are no material controversies pending or, to
the knowledge of Parent, threatened, between Parent and any of its respective
employees, former employees, or applicants for employment. Parent has complied
in all respects with all laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, equal employment opportunity,
collective bargaining, federal immigration law, and the payment of social
security and similar taxes, except as would not be reasonably expected to have a
Parent Material Adverse Effect. Parent is not liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing. None of
the employees of Parent are covered by any collective bargaining agreement and,
to the knowledge of Parent, there are no organizational efforts currently being
made or threatened involving any employees of Parent. All employee severance or
change of control policies covering any employee of Parent or Merger Sub are
described in or filed as exhibits to the Parent Reports and no such employee is
entitled to any severance or change of control benefits not described therein.
6.15 CERTAIN EMPLOYEE MATTERS. Except as set forth on Schedule 6.15 of
the Parent Disclosure Schedule, all current and former members of management,
key (including sales and recruiting) personnel and consultants (whether
employees or independent contractors) of Parent have executed and delivered to
Parent a confidential information agreement restricting such person's right to
disclose confidential information of Parent. Except as set forth on Schedule
6.15 of the Parent Disclosure Schedule, all such members of management, key
personnel and consultants of Parent have been party to a "work-for-hire"
arrangement or proprietary rights agreement with Parent pursuant to which either
(i) in accordance with applicable federal and state law, Parent has been
accorded full, effective, exclusive and original ownership of all tangible and
intangible property thereby arising or (ii) there has been conveyed to Parent by
appropriately executed instruments of assignment full, effective and exclusive
ownership of all tangible and intangible property thereby arising. No employee,
agent, consultant or contractor of Parent who has contributed to or participated
in the conception and development of proprietary rights of Parent has asserted
in writing or, to Parent's knowledge, threatened any claim against Parent in
connection with such person's involvement in the conception and development of
the proprietary rights of Parent and, to the knowledge of Parent, no such person
has a reasonable basis for any such claim.
-23-
30
6.16 ENVIRONMENTAL MATTERS. There has been no "release or threatened
release of a hazardous substance" (as defined in CERCLA) or any other activities
of Hazardous Material on, under, about, or from any real property owned or
leased by Parent (collectively, the "Parent Real Property") other than those
activities that have not resulted and could not reasonably be expected to result
in any material liability on the part of Parent. To the knowledge of Parent, all
hazardous waste generated at Parent's properties have been disposed of at sites
that maintain valid permits under RCRA and any other applicable Environmental
Requirement. To the knowledge of Parent and except as set forth in Section 6.16
of the Parent Disclosure Schedule, there are no underground tanks, PCBs, or
asbestos containing materials on the Parent Real Property. Except as set forth
in Schedule 6.16 of the Parent Disclosure Schedule, Parent does not have any
written notice of any pending formal or informal assertion by any governmental
agency or other person that Parent or any predecessor business or owner or
operator of Parent Real Property may be a responsible or potentially responsible
party in connection with any violation or obligation arising under any
Environmental Requirement at any site or facility (including the Parent Real
Property itself).
6.17 ERISA. Neither Parent nor any ERISA Affiliate of Parent maintains
or contributes to or is obligated to contribute to, and has ever maintained or
contributed to or been obligated to contribute to, (i) any Multiemployer Plan,
(ii) any a Multiple Employer Plan or (iii) except as set forth in Schedule 6.17
of the Parent Disclosure Schedule, any Plan, including but not limited to a
Pension Plan. With respect to the Plan(s) disclosed in Schedule 6.17 of the
Parent Disclosure Schedule:
(i) Each such Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and other
federal or state law. Any such Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination
letter from the IRS and to the knowledge of Parent, nothing has
occurred that would cause the loss of such qualification. Parent and
each ERISA Affiliate of Parent has made all required contributions to
any such Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any
such Plan.
(ii) There are no pending claims (other than routine
claims for benefits) or, to the knowledge of Parent, threatened claims,
actions, or lawsuits, or action by any governmental authority, with
respect to any such Plan, and there has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any
such Plan.
(iii) (1) the execution of, and the performance of
the transactions contemplated in, this Agreement will not (either alone
or upon the occurrence of any additional or subsequent events)
constitute an event under any Plan that will or is reasonably expected
to result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee; (2) no such Plan which constitutes a Pension Plan (as defined
below) has any Unfunded Pension Liability; (3) neither Parent nor any
ERISA Affiliate of Parent has incurred, or reasonably expects to incur,
any material liability under Title IV of ERISA with respect to any such
Plan which constitutes a Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); (4) neither Parent nor any
ERISA Affiliate of Parent has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (5) neither Parent nor any ERISA Affiliate of Parent has
engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
6.18 POOLING OF INTERESTS TREATMENT. To Parent's knowledge, neither
Parent nor any of its affiliates has taken or agreed to take any action or is
aware of any condition which would prevent Parent from accounting for the
transactions provided for herein as a Pooling-of-Interests.
-24-
31
ARTICLE VII
COVENANTS
7.1 WRITTEN CONSENT OF STOCKHOLDERS. The Company will take all action
necessary in accordance with applicable law and its charter documents to obtain
written consent of its stockholders to approve this Agreement and to consummate
the transactions contemplated hereby. The Board of Directors of the Company
shall recommend such approval and the Company shall take all lawful action to
solicit such approval.
7.2 NOTIFICATION TO STOCKHOLDERS. Within ten (10) days after the
Effective Date, Parent shall prepare and deliver to each of the Company's
stockholders who did not execute a written consent as contemplated in Section
7.1 hereof a notification of such consent in accordance with Sections
14-2-704(f) and (g) of the GBCC.
7.3 BLUE SKY. Parent shall use all reasonable efforts to obtain, prior
to the Effective Date, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement, and Parent will pay all expenses incident thereto. Parent will advise
the Company, promptly after it receives notice, of the issuance of any stop
order, the suspension of the qualification of the Parent Common Stock issuable
in connection with the Merger for offering or sale in any jurisdiction, or
requests by any state securities regulatory authority for additional
information.
7.4 BOARD NOMINATION. The Board of Directors of Parent shall appoint
Xxxxx X. Xxxxx to serve as a Class II director of Parent upon the consummation
of the Merger.
7.5 NOTICES TO HOLDERS OF COMPANY OPTIONS. The Company will take all
actions necessary in accordance with applicable law and the terms of the Company
Option Plans to provide all required notice of the Merger to the holders of
Company Options.
7.6 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Company and Parent shall and shall cause any appropriate other
party to: (a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits, or authorizations are required to
be obtained prior to the Effective Time from governmental or regulatory
authorities of the United States, the several states and foreign jurisdictions
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits, or
authorizations, (b) to timely file with the Commission all reports and documents
and take such other actions required to enable the Stockholders (as defined in
the Stockholders Agreement) to sell under Rule 144 of the Securities Act, all
Parent Common Stock held by them, and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper, or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
7.7 RESERVED.
7.8 PUBLICITY. Each of Parent and the Company shall, subject to
Parent's legal obligations (including requirements of stock exchanges and other
similar regulatory bodies), consult with each other before issuing any press
release or otherwise making public statements with respect to the transactions
contemplated hereby.
7.9 LISTING APPLICATION. Parent shall promptly prepare and submit to
the Nasdaq a listing application covering the shares of Parent Common Stock
issuable in the Merger, and shall use its best efforts to obtain, prior to the
Effective Time, approval for the listing of such Parent Common Stock, subject to
official notice of issuance.
7.10 FURTHER ACTION. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions set forth
herein or the waiver thereof, directly or by or through its officers or
directors, perform such further
-25-
32
acts and execute such documents whether before or after the Effective Time as
may be reasonably required to effect the Merger. In addition, subject to the
limitations set forth in this Agreement, and unless specifically prohibited by
applicable law, each party will use its best efforts to cause all of the
conditions to Closing set forth in this Agreement that are within its control to
be satisfied prior to the Closing Date and will not take any action inconsistent
with its obligations under this Agreement or which could hinder or delay the
consummation of the transactions contemplated by this Agreement or that would
cause any representation, warranty, or covenant made by it in this Agreement or
in any certificate, list, exhibit, or other instrument furnished or to be
furnished pursuant hereto, or in connection with the transaction contemplated
hereby, to be untrue in any material respect as of the Effective Time.
7.11 RELEASE OF CERTAIN GUARANTIES. Within a reasonable time after the
Closing. Parent shall cause Xxxxx Xxxxx, Xxxxx Xxxxx and Xxxx Xxxxx to be
released from any and all obligations and/or liabilities under any and all
agreements whereby they personally guaranty the Company obligation's to the
Identified Creditors.
7.12 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, however, that prior to the Effective Time, the stockholders of the
Company shall take such action to pay, from funds other than those of the
Company, all liabilities to any person who provided legal services to the
Company (the "Professional Creditors") such that, at the Effective Time, the
Company's aggregate liability to the Professional Creditors does not exceed
$75,000; provided, however, that Parent shall pay to Xxxxx, Xxxxxxxx & Xxxxxxx,
LLP at the Closing $37,500 of liability by wire transfer of immediately
available funds, and shall pay any remaining liability to the Professional
Creditors (subject to the $75,000 cap referred to above) within 30 days
following the Closing.
7.13 FEES TO BROKERS. At the Effective Time, Parent shall pay to the
investment bankers identified in Schedule 5.25 of the Company Disclosure
Schedule (the "Brokers"), in satisfaction of the fees owed to the Brokers by the
Company, 75,000 shares of Parent Common Stock pursuant to a Subscription
Agreement satisfactory to Parent.
7.14 POOLING. From and after the date hereof and until the expiration
of the Restricted Period (as defined below), neither Parent nor the Company
shall or shall permit any of its subsidiaries or controlled affiliates to take,
and Parent and the Company shall use their respective best efforts to cause
their other affiliates not to take, any action, or fail to take any action, that
would jeopardize the treatment of the Merger as a Pooling of Interests. For
purposes hereof, the Restricted Period shall mean the period commencing on the
date hereof and terminating on the date on which thirty days of combined
operations are publicly announced by Parent in accordance with the provisions of
Section 7.15 hereof. The Company agrees to cause its officers to execute such
representations and covenants necessary to cause BDO Xxxxxxx LLP to issue a
pooling letter prior to the Closing.
7.15 PUBLICATION OF FINANCIALS. As promptly as reasonably practicable
after the first complete fiscal quarter after the Effective Time that includes
at least 30 days of combined operations of the Company and Parent, Parent will
cause to be publicly reported in a Quarterly Report on Form 10-QSB financial
statements of Parent that include such combined operations.
7.16 TAX MATTERS. Parent and Merger Sub covenant and agree that: (i)
they will treat and cause the Surviving Corporation to treat the Merger as a
reorganization qualifying under Section 368(a)(2)(E) of the Code and will file
and cause the Surviving Corporation to file all returns and reports (including
without limitation those required under Treasury Regulation Section 1.368-3) as
required and in a manner consistent with such treatment and (ii) they will take
no action that will prevent or be inconsistent with treating the Merger as a
reorganization qualifying under Section 368(a)(2)(E) of the Code. After the
Closing, Parent shall afford the Representative (as defined in the Stockholders
Agreement contemplated by Section 9.4 hereof) and his agents reasonable access
to the books and records of the Company for the purposes of preparing any
short-period tax returns required to be filed by the Company.
7.17 EMPLOYMENT AGREEMENTS. Concurrently with the execution of this
Agreement, each of Xxxxx X. Xxxxx and Xxxxx Xxxxx shall enter into the
employment agreements set forth as Exhibit A-1 and A-2, respectively, to become
effective after the Effective Time.
-26-
33
7.18 BANKING MATTERS. The Company shall take all such action to remove
the current authorized signatories from the Company's bank accounts and credit
lines and to substitute Xxxxxxx Xxxx and Xxx Xxxx Xxxxxxx as such authorized
signatories as of the Effective Time.
7.19 TERMINATION OF 401(K) PLAN. Parent agrees that any surrender
charges or other fees incurred as a result of its termination of either of the
Company's 401(k) plans will not be paid out of any such plan's proceeds.
ARTICLE VIII
CONDITIONS
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby
shall have been approved in the manner required by applicable law by the holders
of the issued and outstanding shares of capital stock of Company and of Parent
and Merger Sub.
(b) None of the parties hereto shall be subject to any order
or injunction of a court of competent jurisdiction that prohibits the
consummation of the transactions contemplated by this Agreement. In the event
any such order or injunction shall have been issued, each party agrees to use
its reasonable efforts to have any such injunction lifted or order reversed.
(c) No action, suit, proceeding, or investigation to suspend
the offering of Parent Common Stock in connection with the Merger shall have
been initiated and be continuing, and all necessary approvals under state
securities laws relating to the issuance or trading of the Parent Common Stock
to be issued to the Company stockholders in connection with the Merger shall
have been received.
(d) All consents, authorizations, orders, and approvals of (or
filings or registrations with) any governmental commission, board, or other
regulatory body required in connection with the execution, delivery, and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time.
(e) The Parent Common Stock to be issued to the Company
stockholders in connection with the Merger shall have been approved for listing
on the Nasdaq, subject only to official notice of issuance.
(f) No action, suit, or proceeding shall be pending or
threatened by or before any court or governmental body in which an unfavorable
judgment, order, or decree would prevent any of the transactions contemplated
hereby or cause any such transaction to be declared unlawful or rescinded or
that could reasonably be expected to cause a Company Material Adverse Effect or
a Parent Material Adverse Effect.
(g) Parent, Merger Sub, the Company, and the Escrow Agent
shall have entered into the escrow agreement set forth as Exhibit B hereto (the
"Escrow Agreement").
(h) Xxxxx, Xxxxxx & Xxxxxx LLP shall have rendered an opinion,
in form and substance reasonably satisfactory to Parent and the Company, that
the Merger qualifies as a tax-free reorganization under Section 368(a) of the
Code (which shall be supported in part by customary certificates of officers of
Parent and the Company).
-27-
34
(i) All documents and instruments to be delivered by the
parties in connection with the transactions contemplated hereby shall be in form
and substance reasonably satisfactory to the parties and their respective
counsel, and the parties shall have received such other documents and
instruments as they may reasonably request in connection therewith.
8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. In
addition to the conditions set forth in Section 8,1 above, the obligation of the
Company to effect the Merger shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions:
(a) Parent shall have performed in all respects its agreements
contained in this Agreement required to be performed on or prior to the Closing
Date, the representations and warranties of Parent and Merger Sub contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct as of the Closing Date, and Company shall have received a
certificate of the President or a Vice President of Parent, dated the Closing
Date, certifying to such effect; provided, however, that notwithstanding
anything herein to the contrary, this Section 8.2(a) shall be deemed to have
been satisfied even if such performance has not occurred or such representations
or warranties are not true and correct, unless the failure to perform or the
failure of any of the representations or warranties to be so true and correct
would have or would be reasonably likely to have a Parent Material Adverse
Effect.
(b) There shall have been delivered to the Company
certificates, dated within five days of the Closing Date, of the Secretary of
State of the State of Delaware and the State of Georgia, with respect to the
incorporation, subsistence, and good legal standing of Parent and Merger Sub,
respectively.
(c) All consents and approvals of any third parties required
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been obtained
and delivered to the Company.
(d) There shall have been delivered to the Company
certificates, dated the Closing Date, of the President or Vice President and
Secretary, respectively, of Parent and Merger Sub (i) to the effect that the
Certificate of Incorporation of Parent and Articles of Incorporation of Merger
Sub have not been amended since the date of the Certificates referred to in
Section 8.2(b) above, (ii) attaching a true and complete copy of the Bylaws of
Parent and Merger Sub as in effect on the Closing Date, and (iii) attaching a
true and complete copy of the resolutions of the Board of Directors of Parent
and Merger Sub approving the execution and delivery of this Agreement and
authorizing the consummation of the transactions contemplated hereby.
(e) There shall have been delivered to the Company
certificates, dated the Closing Date, with respect to the incumbency and
signatures of all officers of Parent and Merger Sub signing this Agreement and
any other certificate, agreement, or instrument delivered on behalf of Parent in
connection with this Agreement.
(f) Parent shall have executed and delivered to the Company
the Stockholders Agreement (as defined in Section 9.4).
(g) Parent shall have delivered to the Company an opinion of
its counsel in the form attached hereto as Exhibit C.
(h) Parent shall have executed and delivered to each of Xxxxx
X. Xxxxx and Xxxxx Xxxxx the employment agreements set forth as Exhibit A-1 and
A-2, respectively.
8.3 CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB TO EFFECT THE
MERGER. In addition to the conditions set forth in Section 8.1 above, the
obligations of Parent and Merger Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) The Company shall have performed in all respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date, the representations and warranties of the Company contained in
-28-
35
this Agreement and in any document delivered in connection herewith shall be
true and correct as of the Closing Date as if made on the Closing Date, and
Parent shall have received a certificate of the President or a Vice President of
the Company, dated the Closing Date, certifying to such effect; provided,
however, that notwithstanding anything herein to the contrary, this Section
8.3(a) shall be deemed to have been satisfied even if such performance has not
occurred or such representations or warranties are not true and correct, unless
the failure to perform or the failure of any of the representations or
warranties to be so true and correct would have or would be reasonably likely to
have a Company Material Adverse Effect.
(b) The status of any litigation of the Company as described
in Schedule 5.14 of the Company Disclosure Schedule and/or the terms of any
agreements relating to the compromise or dismissal of any action, suit or
proceeding described in Schedule 5.14 of the Company Disclosure Schedule
(subject to any restrictions on the disclosure of such terms) shall be
satisfactory to Parent.
(c) Other than with respect to a default identified in the
Company Disclosure Schedule as of the date of this Agreement, the Company shall
not be in default of any obligation, where said default cannot be cured by the
Closing Date, under any of the Material Contracts, unless any such defaults,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect, and Parent shall have received a certificate of
the President or a Vice President of the Company, dated the Closing Date,
certifying to such effect.
(d) All consents and approvals of any third parties required
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been obtained
and delivered to Parent unless otherwise waived by Parent.
(e) The number of Dissenting Shares shall not consist of more
than five percent (5%) of the issued and outstanding Company Common Stock.
(f) The holders of Company Options shall have executed and
delivered the Optionholders Agreement set forth as Exhibit F hereto.
(g) Each of Xxxxx X. Xxxxx and Xxxxx Xxxxx shall have executed
and delivered to the Company the employment agreements set forth as Exhibit A-1
and A-2, respectively.
(h) The holders of at least ninety-five percent (95%) of the
issued and outstanding Company Common Stock shall have executed and delivered to
the Company the written consent contemplated by Section 7.1 of this Agreement
and executed and delivered to Parent the Stockholders Agreement.
(i) There shall have been delivered to Parent a certificate,
dated within fifteen days of the Closing Date, of the Secretary of State of the
State of Georgia, listing all charter documents of the Company on file in the
office of said Secretary of State and copies of the Articles of Incorporation of
the Company and all amendments thereto, certified as true and correct by said
Secretary of State within fifteen days of the Closing Date.
(j) There shall have been delivered to Parent a certificate,
dated within fifteen days of the Closing Date, of the Secretary of State of the
State of Georgia, with respect to the incorporation, subsistence, and good legal
standing of the Company.
(k) There shall have been delivered to Parent a certificate,
dated the Closing Date, of the Secretary of the Company (i) to the effect that
the Company's Articles of Incorporation have not been amended since the date of
the Certificate referred to in Section 8.3(i) above, (ii) attaching a true and
complete copy of the Company's Bylaws as in effect on the Closing Date, and
(iii) attaching a true and complete copy of the resolutions of the Company's
Board of Directors approving the execution and delivery of this Agreement and
authorizing the consummation of the transactions contemplated hereby.
-29-
36
(l) There shall have been delivered to Parent a certificate,
dated the Closing Date, with respect to the incumbency and signatures of all
officers of the Company signing this Agreement and any other certificate,
agreement or instrument delivered on behalf of the Company in connection with
this Agreement.
(m) There shall have been no change in the financial condition
or results of operations of the Company from that reflected in the Company
Balance Sheet so as to result in a Company Material Adverse Effect.
(n) The Company shall have delivered to Parent an opinion of
its counsel in the form attached hereto as Exhibit D.
(o) Representatives of the Company shall have performed a
successful live build demonstration of the Software. Immediately following the
build demonstration of the Software, the Company shall deliver to the Company's
counsel a source code version of each of the Software deliverables hereunder..
(p) Parent shall have received a subscription agreement, in
form and substance satisfactory to Parent, from each of the Brokers, in which
the Brokers shall agree to accept the delivery of 75,000 shares of Parent Common
Stock as payment in full of any fees owed to them by the Company.
ARTICLE IX
ESCROW; LIMITS ON LIABILITY
9.1 DELIVERY OF PARENT COMMON STOCK TO THE ESCROW AGENT. As of the
Effective Time, Parent shall deposit, or shall cause to be deposited, with the
Escrow Agent, for the benefit of the holders of shares of the Company Common
Stock (other than Dissenting Shares), for distribution in accordance with this
Article IX, the Deferred Merger Consideration (the "Deferred Merger
Consideration Fund"). For tax purposes, the Parent Common Stock held by the
Escrow Agent shall be treated as owned by the beneficial holders of the Parent
Common Stock (rather than by the Parent or any affiliate of the Parent). The
beneficial holders of the Parent Common Stock shall be entitled to direct the
manner in which the Escrow Agent shall vote the shares of Parent Company Common
Stock held in the Deferred Merger Consideration Fund.
9.2 DIVIDENDS DECLARED AFTER THE EFFECTIVE TIME. Any dividends or other
distributions with respect to the Parent Common Stock comprising the Deferred
Merger Consideration that are declared after the Effective Time but prior to the
date any Deferred Merger Consideration is paid by the Escrow Agent to the
Company's stockholders shall be paid to the Escrow Agent, deposited by the
Escrow Agent into the Deferred Merger Consideration Fund, and distributed by the
Escrow Agent in accordance with this Article IX.
9.3 SURVIVAL OF REPRESENTATIONS. Notwithstanding any examination made
by or on behalf of Parent or Merger Sub, the knowledge of Parent or Merger Sub
or any of the respective officers, directors, stockholders, employees, or agents
of Parent or Merger Sub, or the acceptance by any party of any certificate or
opinion, the representations, warranties, covenants, and agreements of the
Company set forth in this Agreement, or in any writing delivered by the Company
in connection with this Agreement, shall survive the consummation of the
transactions contemplated hereby and shall expire on the date that is the
earlier of twelve months after the Effective Date or the date on which Parent
publishes audited financial statements for the fiscal year ended December 31,
1999. Notwithstanding any examination made by or on behalf of the Company, the
knowledge of the Company or any of its officers, directors, stockholders,
employees, or agents of the Company, or the acceptance by any party of any
certificate or opinion, the representations, warranties, covenants, and
agreements of Parent or Merger Sub set forth in this Agreement, or in any
writing delivered by Parent or Merger Sub in connection with this Agreement,
shall survive the consummation of the transactions contemplated hereby and shall
expire on the date that is twelve months after the Effective Date.
-30-
37
9.4 INDEMNITY. On or prior to the Closing Date, the holders of at least
ninety-five percent (95%) of the issued and outstanding Company Common Stock
shall have executed and delivered to the Company an agreement with respect to
the indemnification of Parent and Merger Sub with respect to breaches of the
terms and conditions of this Agreement (the "Stockholders Agreement"), which
Stockholders Agreement shall be substantially in the form of Exhibit E attached
hereto. Except for the rights granted to Parent pursuant to Section 9.5 hereof,
the Escrow Agreement and the Stockholders Agreement shall govern Parent's rights
in the event of a breach of any representation, warranty, covenant, or agreement
contained in this Agreement or any document contemplated hereby. Subject to
Sections 9.3 and 9.8 of this Agreement, the Stockholders Agreement shall govern
the rights of each stockholder who executes such agreement in the event of (i)
any breach of any covenant or agreement of Parent or Merger Sub contained in
this Agreement or (ii) any inaccuracy in any representation or warranty of
Parent or Merger Sub contained in this Agreement, the Parent Disclosure
Schedule, or any other agreement or instrument executed by Parent pursuant to
this Agreement.
9.5 APPLICATION BY PARENT TO ESCROW AGENT FOR PAYMENT OF CLAIMS. On or
prior to the Closing Date, the Company, Parent, Merger Sub, and a designated
representative of the holders of the Company Common Stock shall execute and
deliver the Escrow Agreement, which Escrow Agreement shall provide for Parent's
right to seek payment for a breach of any representation, warranty, covenant, or
agreement contained in this Agreement or any document contemplated hereby from
the Deferred Merger Consideration Fund. Parent's right to seek payment of any
such claim from the Deferred Merger Consideration Fund shall be governed by the
Escrow Agreement and the Stockholders Agreement.
9.6 DISTRIBUTION OF DEFERRED MERGER CONSIDERATION TO THE COMPANY'S
STOCKHOLDERS. The Escrow Agent shall, in accordance with and the times provided
in the Escrow Agreement, deliver to the Company's stockholders (other than
holders of Dissenting Shares) each stockholder's pro rata share of any cash and
securities constituting Deferred Merger Consideration remaining after the
payment of any claims by Parent for breaches of any representation, warranty,
covenant, or agreement of the Company contained in this Agreement or any
document contemplated hereby.
9.7 UNCLAIMED FUNDS. Any portion of the Deferred Merger Consideration
Fund (including the proceeds of any investments thereof and any shares of Parent
Common Stock) that remains unclaimed by the former stockholders of the Company
two years after the Effective Time shall be delivered to the Surviving
Corporation. Any former stockholders of the Company who have not theretofore
complied with this Article IX and the Escrow Agreement shall thereafter look
only to the Surviving Corporation for payment of their shares of Parent Common
Stock, and any unpaid dividends and distributions on the Parent Common Stock
deliverable in respect of each share of the Company Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
9.8 LIMITS ON LIABILITY. The limitations on the liability of the former
stockholders of the Company shall be set forth in the Stockholders' Agreement.
Notwithstanding anything to the contrary in this Agreement or any agreement or
document contemplated hereby, Parent's aggregate liability for breaches of the
representations, warranties or covenants made in this Agreement, or in any
agreement or document contemplated hereby, shall not exceed $600,000; provided,
however, that such $600,000 limitation shall not apply to Parent's violation or
non-compliance with any applicable state or federal securities laws or rules and
regulations of any national securities exchange on which the Parent Common Stock
is traded, and any Stockholder shall be entitled to pursue a claim against
Parent for any such violation and/or non-compliance to the full extent permitted
by applicable law.
ARTICLE X
GENERAL PROVISIONS
10.1 CONFIDENTIALITY. The Company agrees that it shall, and it shall
direct and use its best efforts to cause its officers, directors, stockholders,
employees, agents, and representatives to, keep the existence of this Agreement
and the terms of the transactions contemplated hereby strictly confidential and
to not disclose such matters to any third party without Parent's prior written
consent. The Company acknowledges that Parent has certain reporting obligations
as a public company, and agrees that Parent may make public disclosure of the
existence of this Agreement and the terms of the
-31-
38
transactions contemplated hereby at such time as it believes it to be prudent to
do so, based upon the advice of counsel and with notice to and consultation with
the Company.
10.2 NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by same day or
overnight courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
If to Parent or Merger Sub: If to the Company:
eSoft, Inc. Technologic, Inc.
Xxxxx 000 Xxxxx 000
000 Xxxxxxxxxxx Xxxxxxxxx 0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000 Xxxxxxxx, Xxxxxxx 00000
Attn: President Attn: Xxxxx X. Xxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
With copies to: With copies to:
Xxxxx, Xxxxxx & Xxxxxx LLP Xxxxx, Gambrell& Xxxxxxx, LLP
000 00xx Xxxxxx, Xxxxx 0000 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq. Attn: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered, or delivered by courier or on the third
day after the mailing thereof.
10.3 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto and certain stockholders of the Company (as to Article IX of this
Agreement) and other named beneficiaries of covenants or agreements in this
Agreement, or their respective heirs, successors, executors, administrators, and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement.
10.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the Company
Disclosure Schedule, the Parent Disclosure Schedule, the confidentiality
agreements between the parties hereto and any schedules or agreements delivered
or to be delivered in connection with this Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No information previously provided, or any addition to or modification
of any provision of this Agreement shall be binding upon any party hereto unless
made in writing and signed by all parties hereto.
10.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company, Parent and Merger Sub, but after any such
stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
-32-
39
10.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
10.7 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
Executed counterparts transmitted by fax shall be effective as originals.
10.8 HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
10.9 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11 INCORPORATION OF EXHIBITS. The Company Disclosure Schedule, the
Parent Disclosure Schedule and all Exhibits and schedules attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
10.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction unless the same is
material to the terms of this Agreement, in the judgment of either party to this
Agreement, in which case the parties shall negotiate in good faith to revise the
same so as to be valid or enforceable. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
10.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
10.14 SUBSIDIARIES. As used in this Agreement, the word "Subsidiary"
when used with respect to any Party means any corporation, partnership, or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such party
is a general partner; provided, however, that in the case of Parent, a
Subsidiary shall not include any corporation to be acquired by it concurrently
with or subsequent to the acquisition of the Company.
-33-
40
10.15 CONSENT. Whenever the consent or approval of a party is required
by the terms of this Agreement, unless otherwise provided, the same shall not be
unreasonably withheld or delayed.
SIGNATURE PAGE FOLLOWS
-34-
41
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
"PARENT"
eSOFT, INC.
By: /s/ Xxxxxxx Xxxx
--------------------------
Name: Xxxxxxx Xxxx
Title: President
"MERGER SUB"
eSOFT ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxx
--------------------------
Name: Xxxxxxx Xxxx
Title: President
"THE COMPANY"
TECHNOLOGIC, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------
Name: Xxxxx X. Xxxxx
Title: President
-35-
