1
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
SPACE ELECTRONICS INCORPORATED
(THE "COMPANY")
CERTAIN SHAREHOLDERS OF THE COMPANY,
MT ACQUISITION CORPORATION
AND
XXXXXXX TECHNOLOGIES, INC.
DATED AS OF
NOVEMBER 25, 1998
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TABLE OF CONTENTS
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ARTICLE 1 TERMS OF MERGER....................................................................2
1.1 The Merger.......................................................................2
1.2 Closing Date of the Merger.......................................................2
1.3 Certificate of Incorporation of the Surviving Corporation........................2
1.4 Bylaws of the Surviving Corporation..............................................2
1.5 Board of Directors and Officers of the Surviving Corporation.....................2
1.6 Consideration; Cancellation of Company Common Stock..............................2
1.7 Adjustments to Exchange Ratio....................................................4
1.8 Conversion of Newco Common Stock.................................................5
1.9 No Fractional Shares.............................................................5
1.10 Escrow...........................................................................5
1.11 Exchange of Shares; Stock Transfer Books.........................................6
1.12 Treasury and Other Stock.........................................................6
1.13 Dissenting Shares................................................................7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, SHAREHOLDERS AND PRINCIPAL SHAREHOLDERS.............................7
2.1 Organization and Good Standing...................................................7
2.2 Subsidiaries.....................................................................7
2.3 Capital Structure of the Company.................................................8
2.4 Authorization and Approvals......................................................8
2.5 No Violations....................................................................8
2.6 Taxes............................................................................9
2.7 Transactions with Affiliates....................................................10
2.8 Financial Statements............................................................11
2.9 Title to Properties.............................................................11
2.10 Real Property...................................................................11
2.11 Leases..........................................................................12
2.12 Fixed Assets....................................................................12
2.13 Intellectual Property...........................................................12
2.14 Accounts Receivable.............................................................14
2.15 Licenses and Permits............................................................15
2.16 Insurance.......................................................................15
2.17 Absence of Certain Changes......................................................15
2.18 Contracts.......................................................................17
2.19 Client and Supplier Relationships...............................................19
2.20 Compliance With Laws............................................................19
2.21 No Undisclosed Liabilities......................................................19
2.22 Employees.......................................................................19
2.23 Litigation......................................................................20
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TABLE OF CONTENTS (Continued)
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2.24 Environmental Matters...........................................................21
2.25 Employee Benefits...............................................................23
2.26 Bank Accounts...................................................................24
2.27 Corporate Records...............................................................25
2.28 Accounting Records..............................................................25
2.29 Omitted. .......................................................................25
2.30 Affiliates......................................................................25
2.31 Brokers and Finders.............................................................25
2.32 Inventory.......................................................................25
2.33 Year 2000 Compliance............................................................25
2.34 Government Contracts............................................................26
2.35 Product Liability and Warranties................................................26
2.36 Absence of Certain Payments.....................................................26
2.37 Application; Proxy Statement....................................................27
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH
PRINCIPAL SHAREHOLDER........................................................28
3.1 Title to Shares.................................................................28
3.2 Authorization and Approvals.....................................................28
3.3 No Violations...................................................................28
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF
XXXXXXX AND NEWCO...............................................................29
4.1 Organization and Power; Foreign Qualification...................................29
4.2 Capital Structure of Xxxxxxx and Newco..........................................29
4.3 Authorization and Enforceability of Agreements..................................29
4.4 No Conflicts....................................................................30
4.5 Financial Statements and Commission Reports.....................................30
4.6 Brokers and Finders.............................................................30
4.7 Exchange Shares.................................................................31
4.8 No Material Adverse Changes.....................................................31
4.9 Application; Proxy Statement....................................................31
4.10 Affiliates......................................................................31
4.11 Representations Required for Tax-Free Reorganization............................32
ARTICLE 5 COVENANTS OF THE COMPANY AND PRINCIPAL SHAREHOLDERS.............................32
5.1 Covenants Pending Closing.......................................................32
5.2 Consents and Approvals; Fulfillment of Conditions...............................34
5.3 Acquisition Proposals...........................................................34
5.4 Notice..........................................................................35
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TABLE OF CONTENTS (Continued)
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5.5 Access..........................................................................35
5.6 Affiliates; Accounting and Tax Treatment........................................36
5.7 Publicity.......................................................................36
5.8 Distribution of Proxy Statement; Shareholders' Approval.........................36
ARTICLE 6 COVENANTS OF XXXXXXX AND NEWCO..................................................36
6.1 Consents and Approvals; Fulfillment of Conditions...............................36
6.2 Notice..........................................................................37
6.3 Publicity.......................................................................37
ARTICLE 7 ADDITIONAL PRE-CLOSING COVENANTS OF THE PARTIES.................................37
7.1 Preparation of Application......................................................37
7.2 HSR Act.........................................................................37
7.3 Disclosure Schedules............................................................37
7.4 Pooling of Interests............................................................38
ARTICLE 8 CONDITIONS TO CLOSING BY XXXXXXX AND NEWCO......................................38
8.1 Accuracy of Representations and Warranties; Performance of Covenants............38
8.2 Consents........................................................................39
8.3 Shareholder Approval............................................................39
8.4 No Litigation...................................................................39
8.5 Corporate Resolutions...........................................................39
8.6 Adverse Changes.................................................................39
8.7 Opinion of Counsel..............................................................39
8.8 Legislation.....................................................................39
8.9 Employment and Noncompetition and Nondisclosure Agreements......................39
8.10 Investment Letter...............................................................40
8.11 Pooling Opinion.................................................................40
8.12 Escrow Agreement................................................................40
8.13 Dissenting Shares...............................................................40
8.14 California Securities Law.......................................................40
8.15 Nasdaq Listing..................................................................40
8.16 HSR Act.........................................................................40
8.17 Technology Transfer Agreement with Full Circle Research.........................40
8.18 Approval of Supplemental Disclosure Schedule....................................40
ARTICLE 9 CONDITIONS TO CLOSING BY THE COMPANY............................................41
9.1 Accuracy of Representations and Warranties; Performance of Covenants by
Xxxxxxx and Newco...............................................................41
9.2 Consents and Approvals..........................................................41
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TABLE OF CONTENTS (Continued)
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9.3 No Litigation...................................................................41
9.4 Corporate Resolutions...........................................................41
9.5 Adverse Changes.................................................................41
9.6 Legislation.....................................................................41
9.7 Opinion of Counsel..............................................................42
9.8 Employment, Noncompetition and Non-Solicitation Agreements......................42
9.9 Escrow Agreement................................................................42
9.10 California Securities Law.......................................................42
9.11 Nasdaq Listing..................................................................42
9.12 HSR Act.........................................................................42
9.13 Approval of Supplemental Disclosure Schedule....................................42
ARTICLE 10 TERMINATION OF AGREEMENT.....................................................43
10.1 Termination.....................................................................43
10.2 Effect of Termination...........................................................44
10.3 Costs and Expenses..............................................................44
ARTICLE 11 CLOSING......................................................................44
11.1 The Closing.....................................................................44
11.2 Further Acts....................................................................44
ARTICLE 12 SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND RELATED AGREEMENTS; INDEMNIFICATION............................45
12.1 General Liability Period........................................................45
12.2 Tax Liability Period............................................................45
12.3 Indemnity by the Shareholders...................................................45
12.4 Tax Indemnity...................................................................46
12.5 Indemnity by Xxxxxxx............................................................47
12.6 Limitations on Recoverable Losses...............................................48
12.7 Claims for Indemnification; Disputes............................................49
12.8 Indemnity as Exclusive Remedy...................................................50
ARTICLE 13 POST-CLOSING COVENANTS.......................................................51
13.1 Resale..........................................................................51
13.2 Surviving Corporation Option Plan...............................................51
13.3 Surviving Corporation Board of Advisors.........................................51
13.4 Organization....................................................................51
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TABLE OF CONTENTS (Continued)
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ARTICLE 14 SHAREHOLDER REPRESENTATIVES..................................................51
14.1 Appointment.....................................................................51
14.2 Appointment Irrevocable.........................................................52
14.3 Shareholder Representatives Held Harmless.......................................53
14.4 Duration; Succession............................................................53
ARTICLE 15 GENERAL PROVISIONS...........................................................53
15.1 Entire Agreement; Modifications; Waiver.........................................53
15.2 Severability....................................................................53
15.3 Successors and Assigns..........................................................53
15.4 Counterparts....................................................................54
15.5 Governing Law...................................................................54
15.6 Notices.........................................................................54
15.7 Expenses........................................................................55
15.8 Recovery of Litigation Costs....................................................55
15.9 Confidentiality.................................................................55
15.10 No Third Parties Benefitted.....................................................56
15.11 Recitals, Schedules and Exhibits................................................56
15.12 Section Headings................................................................56
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EXHIBIT INDEX
Exhibit A Escrow Agreement
Exhibit B Investment Letter
Exhibit C Form of Employment Agreement
Exhibit D Form of Noncompetition Agreements
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SCHEDULE INDEX
Schedule 2.1 Foreign Qualification
Schedule 2.2 Subsidiaries
Schedule 2.3 Shareholders
Schedule 2.4 Authorizations and Approvals
Schedule 2.5 Violations
Schedule 2.6 Tax Matters
Schedule 2.7 Affiliate Transactions
Schedule 2.8 Financial Statements
Schedule 2.9 Liens
Schedule 2.10 Real Property
Schedule 2.11 Leases
Schedule 2.12 Fixed Assets
Schedule 2.13(a) Trademarks
Schedule 2.13(b) Patents
Schedule 2.13(c) Copyrights
Schedule 2.13(d) Proprietary Rights Agreements
Schedule 2.13(g) Computer Software and Hardware
Schedule 2.14 Accounts Receivable
Schedule 2.15 Licenses and Permits
Schedule 2.16 Insurance
Schedule 2.17 Changes
Schedule 2.18(a) Contracts
Schedule 2.18(b) Fixed Price Client Contracts
Schedule 2.20 Compliance with Laws
Schedule 2.21 Liabilities
Schedule 2.22 Employees and Bonuses
Schedule 2.23 Litigation
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Schedule 2.24 Environmental Compliance
Schedule 2.25 Employee Benefits
Schedule 2.26 Bank Accounts
Schedule 2.30 Affiliates; Accounting and Tax Treatment
Schedule 2.31 Engagement Letter
Schedule 2.33 Year 2000 Compliance
Schedule 8.9 Employment Agreements
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AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is entered into as of November 25, 1998, by and among Space
Electronics Incorporated, a Delaware corporation (the "Company"), the
shareholders of the Company listed on the signature page hereto (the "Principal
Shareholders"), MT Acquisition Corporation, a Delaware corporation ("Newco"),
and Xxxxxxx Technologies, Inc., a Delaware corporation ("Xxxxxxx").
R E C I T A L S
WHEREAS, Xxxxxxx owns all of the issued and outstanding shares of the
common stock of Newco; and
WHEREAS, the parties intend that, subject to the terms and conditions
hereinafter set forth, Newco be merged with and into the Company pursuant to
this Agreement, with the Company as the surviving corporation; and
WHEREAS, upon the Merger, the shares outstanding of the Common Stock of
the Company, par value $0.001 per share ("Company Common Stock") will be
converted into the right to receive an aggregate of 893,617 shares of the Common
Stock of Xxxxxxx, par value $0.10 per share ("Xxxxxxx Common Stock"); and
WHEREAS, the parties hereto intend that this Agreement constitutes a
Plan of Reorganization and the Merger hereunder qualifies under Section
368(a)(1)(A) and Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, the respective Boards of Directors of the Company, Newco and
Xxxxxxx have approved the Merger pursuant to this Agreement and the Agreement of
Merger; and
WHEREAS, the Principal Shareholders have entered into Voting Agreements
with Xxxxxxx dated the date hereof, pursuant to which they have agreed to vote
their shares in favor of the Merger; and
NOW, THEREFORE, in order to consummate the Merger and in consideration
of the mutual representations, warranties and agreements contained herein, the
parties hereto agree as follows:
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ARTICLE 1
TERMS OF MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement
and the laws of the State of Delaware on the Closing Date (as defined in Section
11.1), Newco shall be merged with and into the Company. Following the Merger,
the separate corporate existence of Newco shall cease, and the Company, under
the name "Space Electronics Incorporated" shall continue as the surviving
corporation (the "Surviving Corporation") and shall be governed by the laws of
the State of Delaware. Newco and the Company are sometimes collectively referred
to as the "Constituent Corporations."
1.2 Closing Date of the Merger. The Merger shall become effective at the
close of business on the Closing Date, or at such other time on such date the
parties may agree, on which date a Certificate of Merger shall be duly executed,
acknowledged or verified and filed with the Delaware Secretary of State in
accordance with the Delaware General Corporation Law. The time the Merger
becomes effective in accordance with the Delaware General Corporation Law is the
"Effective Time."
1.3 Certificate of Incorporation of the Surviving Corporation. At the
Closing Date and without any further action on the part of the parties, the
Certificate of Incorporation of Newco shall be and remain the Certificate of
Incorporation of the Surviving Corporation. Such Certificate of Incorporation
may thereafter be altered, amended or repealed in accordance with the provisions
thereof or applicable law.
1.4 Bylaws of the Surviving Corporation. At the Closing Date and without
any further action on the part of the parties, the Bylaws of Newco shall be and
remain the Bylaws of the Surviving Corporation, until altered, repealed or
amended in accordance with the provisions thereof and applicable law.
1.5 Board of Directors and Officers of the Surviving Corporation. At the
Closing Date, the officers and directors of Newco as of such date shall be the
officers and directors of the Surviving Corporation, each of such persons to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and applicable law, until
a successor is duly elected or qualified.
1.6 Consideration; Cancellation of Company Common Stock.
(a) The aggregate consideration to be received by all of the
Company's holders of common stock and stock option holders ("Option Holders,"
and collectively with the holders of Company Common Stock, the "Shareholders")
in connection with the Merger shall be 893,617 shares of Xxxxxxx Common Stock,
unless adjusted as set forth in Section 1.7.
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(b) An aggregate of 89,362 shares of Xxxxxxx Common Stock shall
be deposited in escrow in accordance with Section 1.10 in order to satisfy
certain indemnity obligations of the Shareholders to Xxxxxxx, unless the number
is adjusted as set forth in Section 1.7.
(c) By virtue of the Merger and without any action on the part
of the holder thereof, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be canceled and all rights in
respect thereof shall cease to be outstanding, excepting the right to be
converted into 0.42258 shares of Xxxxxxx Common Stock ("Exchange Shares"),
unless adjusted pursuant to Section 1.7, upon surrender of certificates
representing such shares to the Surviving Corporation, less any Escrowed Shares,
or rights in respect of dissenting shares in accordance with Section 1.13.
(d) By virtue of the Merger and without any action on the part
of the holder thereof, each option to purchase a share of Company Common Stock
("Options") held immediately prior to the Effective Time shall (i) if unvested,
have vesting accelerated in accordance with the terms of stock option plans and
stock option agreements (collectively, "Option Agreements") between the Company
and persons holding Options, and (ii) be canceled and all rights thereof shall
cease to be existing, excepting the right to be converted into Exchange Shares
as follows:
OPTION EXERCISE PRICE NUMBER OF EXCHANGE
PER COMPANY COMMON SHARES ISSUED IN
SHARE MERGER PER OPTION
$0.51 0.40113
$1.41 0.36262
$3.62 0.26853
$5.55 0.18641
$6.37 0.15151
Any conversion shall be effective upon surrender for cancellation of an
Option Agreement, but 10% of the Exchange Shares otherwise issuable upon the
surrender shall be included in the total number of Escrowed Shares. The number
of Exchange Shares issuable may be adjusted as required by Section 1.7.
(e) The consideration shall be delivered to the Shareholders
promptly upon receipt by the Surviving Corporation of a certificate evidencing
ownership of Company Common Stock or an Option Agreement, accompanied by a
letter of transmittal in a form acceptable to Xxxxxxx and its transfer agent,
provided that the Exchange Shares issued upon surrender of the certificate or
agreement shall not include those shares subject to the Escrow. Xxxxxxx shall
use
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reasonable best efforts to cause all Exchange Shares (excluding Escrow Shares)
to be available for issuance immediately following the Effective Time.
1.7 Adjustments to Exchange Ratio.
(a) Definitions. For purposes of this Section 1.7:
"Designated Xxxxxxx Stock Price" shall mean the average of the closing
sale prices (last trade) of Xxxxxxx Common Stock on the Nasdaq National Market
on the twenty (20) trading days ending with the trading day immediately
preceding the Closing Date.
"Upper Value" means (i) if the Merger occurs on or prior to February 28,
1999, $29.00 per share or (ii) if the Merger occurs after February 28, 1999,
$35.00 per share.
"Lower Value" means (i) if the Merger occurs on or prior to February 28,
1999, $22.50 per share or (ii) if the Merger occurs after February 28, 1999,
$20.00 per share.
A "Class" of Company Options is that group of Options having the same
exercise price.
(b) Adjustments.
(i) No adjustment shall be made unless the Designated
Xxxxxxx Stock Price is either (x) greater than the Upper Value or (y) less than
the Lower Value.
(ii) An adjustment in the aggregate number of Exchange
Shares to be issued by Xxxxxxx in connection with the Merger pursuant to Section
1.6(a), and a corresponding adjustment to the number of Escrowed Shares under
Section 1.6(b), shall be made if the Designated Xxxxxxx Stock Price exceeds the
Upper Value or is less than the Lower Value.
The adjustment shall be computed as follows:
A. The total number of Exchange Shares ("Adjusted Exchange Shares")
issued in connection with the Merger shall be determined by multiplying 893,617
by the Upper Value (if the Designated Xxxxxxx Stock Price exceeds the Upper
Value), or by the Lower Value (if the Designated Xxxxxxx Stock Price is less
than the Lower Value) and dividing the product so obtained (the "Adjusted Total
Transaction Value") by the Designated Xxxxxxx Stock Price (rounded to the
nearest whole share).
B. The number of Adjusted Exchange Shares issuable to holders of Options
shall be computed as follows: $1,668,664 (representing the aggregate exercise
price of all Options) shall be added to the Adjusted Total Transaction Value and
the sum obtained shall then be divided by 2,282,740 (the total number of Company
Common Shares and Options). The quotient obtained ("Adjusted SEi Price Per
Share") shall be used to compute the "Adjusted Net Security Value" of each
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Class of SEi Options, which for each class, shall equal the Adjusted SEi Price
Per Share multiplied by the number of Options in that Class, subtracting from
the product obtained the aggregate exercise price of all Options in that Class.
The number of Adjusted Exchange Shares issued in respect of that Class of
Options shall be determined by taking the percentage obtained by dividing the
Adjusted Net Security Value for that Class into the Adjusted Total Transaction
Value, and multiplying the total number of Adjusted Exchange Shares by that
percentage. The exchange ratio for the Class shall be the quotient obtained by
dividing the number of Options in that Class into the number of Adjusted
Exchange Shares to be issued in respect of that Class.
C. The number of Adjusted Exchange Shares issuable to holders of Company
Common Stock shall be the total number of Adjusted Exchange Shares less the
Adjusted Exchange Shares issuable in respect of all five Classes of Options, and
the exchange ratio for holders of Company Common Stock would thereupon be equal
to the quotient obtained by dividing the number of Adjusted Exchange Shares
issuable to holders of Company Common Stock into 1,771,797.
D. The number of Escrowed Shares shall be 10% of the number of Adjusted
Exchange Shares (rounded to the nearest whole share).
E. Cash in lieu of fractional shares shall be paid based on the
Designated Xxxxxxx Stock Price.
1.8 Conversion of Newco Common Stock. The shares of common stock of
Newco, par value $0.01 per share ("Newco Common Stock"), outstanding immediately
prior to the Merger shall, by virtue of the Merger and without any further
action on the part of the holder thereof, automatically be converted into and
thereafter represent 5,000,000 validly issued, fully paid and non-assessable
shares of Surviving Corporation Common Stock.
1.9 No Fractional Shares. No fractional share of Xxxxxxx Common Stock
will be issued in the Merger, but, in lieu thereof, each holder of Company
Common Stock who would otherwise be entitled to a fraction of a share of Xxxxxxx
Common Stock (after aggregating all fractional shares of Xxxxxxx Common Stock to
be received by such holder) will be entitled to receive from Xxxxxxx an amount
of cash (rounded to the nearest whole cent) equal to the product of (a) the
fraction multiplied by (b) $23.50 (unless adjusted to be equal to the Designated
Xxxxxxx Stock Price pursuant to Section 1.7.)
1.10 Escrow.
(a) Prior to the Closing Date, Xxxxxxx, the Company, and the
Shareholder Representatives shall enter into an agreement with Zapp National
Bank, as escrow agent (the "Escrow Agent") substantially in the form of Exhibit
A hereto (the "Escrow Agreement"). At the Closing Date or as soon as practicable
thereafter, Xxxxxxx shall deposit in escrow an aggregate of 89,362 shares of
Xxxxxxx Common Stock (the "Escrow"), representing a portion of the Merger
consideration issuable to the Shareholders. In the event the Shareholders are
required to indemnify
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Xxxxxxx, Newco or their affiliates for breaches of representations, warranties
or covenants set forth in the definitive agreement, Xxxxxxx may claim the Escrow
from the Escrow Agent in accordance with the terms of the Escrow Agreement. The
Escrow shall be released 12 months after the Closing Date.
(b) Upon the approval by the Shareholders of the Company of the
Merger Agreement and the Merger, all Shareholders shall be deemed to have
irrevocably appointed each of Xxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxx (the
"Shareholder Representatives") to act as their attorney-in-fact on behalf of
such Shareholders to consent to, contest, settle, compromise or otherwise
dispose of any claim made by Xxxxxxx or any person affiliated with Xxxxxxx in
accordance with Section 1.10(a) and the Escrow Agreement. No further
documentation shall be required to evidence such appointment, and such power of
attorney shall be coupled with an interest, thereby confirming such appointment
as irrevocable. Each Shareholder Representative shall be empowered to act, with
or without the consent of the other, with respect to all matters arising under
Section 1.10(a) and the Escrow Agreement. If any Shareholder Representative
shall die, become disabled or otherwise be unable or unwilling to fulfill his
responsibilities hereunder, a replacement shall be selected as set forth in
Section 14.4.
1.11 Exchange of Shares; Stock Transfer Books. On the Closing Date of
the Merger, each holder of an outstanding certificate or certificates
theretofore representing shares of Company Common Stock (other than dissenting
shares, if any) shall be entitled, upon surrender of such certificate or
certificates to the Surviving Corporation, to receive as a distribution in
respect of each share represented by such certificate or certificates, Exchange
Shares and cash in lieu of fractional shares in accordance with Sections 1.6 and
1.9. The cash payment shall be made by corporate check of Xxxxxxx made payable
to the holder of record of Company Common Stock or the Option Holder. At the
Closing Date of the Merger there shall be no further registry of transfers on
the records in respect of Company Common Stock outstanding immediately prior to
the Closing Date of the Merger. If any payment of cash in lieu of fractional
shares is to be made in the form of a check payable to a name other than that in
which the certificate for Company Common Stock surrendered is registered, or if
Exchange Shares are to be issued in a name other than that in which the
certificate for Company Common Stock surrendered is registered, it shall be a
condition of such distribution that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such payment or Exchange Shares shall pay to the Surviving
Corporation any transfer or other taxes required, or shall establish to the
satisfaction of the Surviving Corporation that such taxes have been paid or are
not applicable. If, after the Closing Date of the Merger, certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
Exchange Shares or cash in lieu of fractional shares as provided herein.
1.12 Treasury and Other Stock. All shares of Company Common Stock which
are held by the Company as treasury shares (if any) shall cease to exist as of
the Closing Date, without any conversion thereof or exchange with respect
thereto.
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1.13 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, Shareholders who have properly exercised, perfected and not
subsequently withdrawn or lost their appraisal rights with respect thereto in
accordance with Section 262 of the Delaware General Corporation Law or, as the
case may be, Section 1300 et seq. of the California Corporations Code, (the
"Dissenting Shares") shall not have any of such shares converted into the right
to receive, or become exchangeable for, their applicable portion of the Xxxxxxx
Common Stock. The holders of such shares shall be entitled to receive payment of
the fair value or fair market value, as the case may be, of such shares in
accordance with the provisions of the applicable Section unless and until such
holders fail to perfect or shall have effectively withdrawn or lost their
dissenters' rights. If, after the Closing Date, any such holder fails to perfect
or shall have effectively withdrawn or lost such right, each of such
Shareholder's shares shall thereupon be treated as if it had been converted into
the right to receive, and become exchangeable for, at the Closing Date, the
applicable portion of the Xxxxxxx Common Stock, without interest thereon, as
provided in Section 1.6, plus cash in lieu of fractional shares, as provided in
Section 1.9.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, SHAREHOLDERS AND PRINCIPAL SHAREHOLDERS
The Company, the Shareholders (other than the Principal Shareholders),
severally (and not jointly and severally), and the Principal Shareholders,
jointly and severally, represent and warrant to Xxxxxxx and Newco as follows:
2.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Except as set forth on Schedule 2.1, the
Company is duly qualified to transact business and is in good standing in the
State of California and in every other jurisdiction in which the character of
its business makes such qualification necessary, except for where the failure to
be so qualified would not have a material adverse effect on the Company or its
business, assets, properties, prospects, financial condition or results of
operations (a "Material Adverse Effect"), all of which jurisdictions are listed
on Schedule 2.1 attached hereto. Except as set forth on Schedule 2.1, the
Company has all necessary corporate power and authority, including all necessary
licenses and permits, to carry on its business as it is now being conducted, and
to own or lease and operate its properties and assets. Complete, current and
correct copies of the charter and Bylaws of the Company, all as amended to date,
stock ledgers, minute books and all other organizational documents of the
Company have been made available to Xxxxxxx and, as updated, will be made
available to Xxxxxxx prior to the Closing Date. The Company is not in violation
of any provision of its charter or Bylaws.
2.2 Subsidiaries. Except as set forth on Schedule 2.2, The Company does
not, directly or indirectly, own or control any interest or investment (whether
equity or debt) in any corporation, partnership, limited liability company,
joint venture, business organization, trust or other entity.
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2.3 Capital Structure of the Company. The authorized capital stock of
the Company consists of 10,000,000 shares of common stock, $0.001 par value
("Company Common Stock"), of which 1,771,797 shares are issued and outstanding,
and all of such shares are owned of record and beneficially as set forth on
Schedule 2.3. There are 510, 943 outstanding options to purchase Company Common
Stock, held by the persons and in the amounts shown on Schedule 2.3. Except for
any of the transactions contemplated pursuant to this Agreement and as set forth
on Schedule 2.3, there are no warrants, convertible debt or securities, calls,
agreements, arrangements, commitments, understandings or other rights to
purchase any of the Company's capital stock or securities convertible into or
exchangeable for any such capital stock. All of such shares have been issued in
transactions exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and the Company has not violated the Securities
Act or any state securities or Blue Sky laws in connection with the issuance of
any such shares. All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued and are fully paid and nonassessable.
2.4 Authorization and Approvals. The Company has all requisite corporate
power and corporate authority to enter into this Agreement and to perform its
obligations hereunder. This Agreement has been, or will be prior to the Closing
Date, duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as may be limited by bankruptcy, reorganization, insolvency,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights and remedies generally; and except as enforcement may be limited by
general principles of equity. This Agreement has been duly and validly
authorized by and approved by all requisite corporate action on the part of the
Company's Board of Directors. Except as set forth in Schedule 2.4 hereto, no
further approvals or consents by, or filings with, any federal, state,
municipal, foreign or other court or governmental or administrative body, agency
or other third party is required in connection with the execution and delivery
by the Company of this Agreement, or the consummation by the Company of the
transactions contemplated hereby, except for filing the Certificate of Merger
with the Delaware Secretary of State and compliance with the Notification
provisions of the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements Act of 1976, as
amended ("HSR Act") and except for those which, if not obtained, would not have
a material adverse impact on the ability of the Company to perform its business
as currently conducted or the ability of the Company to execute and deliver this
Agreement or to consummate the transactions contemplated hereby.
2.5 No Violations. Except as set forth on Schedule 2.5 attached hereto,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) violate any provision of the
Certificate of Incorporation or the Bylaws of the Company, (b) violate, or be in
conflict with, or constitute a default (or other event which, with the giving of
notice or lapse of time or both, would constitute a default) under, or give rise
to any right of termination, cancellation or acceleration under any of the
terms, conditions or provisions of any material lease, license, promissory note,
contract, agreement, mortgage, deed of trust or other instrument or document to
which the Company is a party or by which the Company or any of its respective
properties or assets may be bound, (c) violate any order, writ, injunction,
decree, law, statute, rule or regulation of any court or governmental authority
applicable to the Company or any
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18
of its respective properties or assets or (d) give rise to a declaration or
imposition of any claim, lien, charge, security interest or encumbrance of any
nature whatsoever upon any of the assets of the Company.
2.6 Taxes.
(a) The Company has timely filed or been included in all Tax
Returns (as defined in Section 12.4) that are required to be filed by the
Company with respect to the activities of the Company, or in which the Company
is required to be included for any period ending on or before the Closing Date,
which Tax Returns are true, correct and complete in all material respects, and
the Company has paid all Taxes (as defined in Section 12.4) shown thereon to be
due.
(b) The Company has paid or caused to be paid within the time
and in the manner prescribed by law all Taxes payable or due from and owed by
the Company for all periods ending on or prior to the date hereof except for
taxes which are accrued but not yet due and payable. All Taxes attributable to
all taxable periods ending on or before the Closing Date, to the extent not
required to be previously paid, have been fully and adequately reserved for (as
taxes payable or as accrued taxes) on the Financial Statements (as defined
below) and the Company will not accrue a Tax liability from the date of the
Financial Statements up to and including the Closing Date other than a Tax
liability accrued in the ordinary course of business.
(c) The Company has not taken any action that would require an
adjustment pursuant to Section 481 of the Code, by reason of a change in
accounting method or otherwise. The Company has not filed a Consent under
Section 341(f)(1) of the Code or agreed to have the provisions of Section
341(f)(2) of the Code apply to any disposition of "subsection (f) assets" as
such term is defined in Section 341(f)(4) of the Code.
(d) No Tax assessment or deficiency which has not been paid or
for which an adequate reserve has not been set aside, has been made or proposed
against the Company, nor are any of the Tax Returns now being or, to the best
knowledge of the Company and the Principal Shareholders, threatened to be
examined or audited, and no consents waiving or extending any applicable
statutes of limitations for the Tax Returns, or any Taxes required to be paid
thereunder, have been filed. The Company shall promptly notify Xxxxxxx of any
notice of pending action or proceeding involving Taxes relating to the Company
between the date of this Agreement and the Closing Date. All Tax deficiencies
determined as a result of any past completed audit have been satisfied. The
Company has delivered to Xxxxxxx complete and correct copies of all audit
reports and statements of deficiencies with respect to any tax assessed against
or agreed to by the Company for the five most recent taxable periods for which
such audit reports and statements of deficiencies have been received by the
Company.
(e) Prior to the date hereof, the Company has made available to
Xxxxxxx complete, current and correct copies of the Tax Returns for the years
ended in 1994, 1995, 1996 and 1997. From March 2, 1992 to December 31, 1995, the
Company was duly qualified as an "S"
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19
corporation as defined in the Code and thereafter has been treated as a "C"
corporation under the Code. Effective March 2, 1992, the Company duly and timely
filed an election, executed by all persons whose signatures were required on
such election, to be treated as an "S" corporation on IRS Form 2553 in
accordance with the instructions on that form. Schedule 2.6 attached hereto
contains a true and complete list of those states in which the Company was an
"S" corporation for applicable state income tax purposes.
(f) The Company has collected all sales, use and value added
Taxes required to be collected, and has remitted, or will remit on a timely
basis, such amounts to the appropriate governmental authorities and has
furnished properly completed exemption certificates for all exempt transactions.
(g) The Company has properly withheld income and social security
or other similar Taxes and paid payroll Taxes with respect to all persons
properly characterized as employees for federal, state or local Tax purposes.
None of the assets of the Company are subject to any liens in respect of Taxes
(other than for current taxes not yet due and payable).
(h) The Company is not a party to or bound by any Tax sharing,
Tax indemnity or Tax allocation agreement or other similar arrangement.
(i) The Company has not made any payments, is not obligated to
make any payments and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code.
(j) The Company has delivered to Xxxxxxx complete and correct
copies of all state, local and foreign income or franchise Tax Returns filed by
the Company for the three most recent taxable years for which such Tax Returns
have been filed immediately preceding the date of this Agreement. Other than
with respect to taxes shown on Tax Returns described in this clause, the Company
is not subject to any tax imposed on net income in any jurisdiction or by any
taxing authority.
(k) The Company has not executed or entered into any closing
agreement pursuant to Section 7121 of the Code, or any predecessor provisions
thereof or any similar provision of state or other law.
2.7 Transactions with Affiliates. Except as set forth on Schedule 2.7
attached hereto, neither the Shareholders nor any of their Affiliates (as
defined in Section 2.30 below), has any interest, directly or indirectly, in any
lease, lien, contract, license, encumbrance, loan or other agreement to which
the Company is a party, any interest (other than as a shareholder) in any
properties or assets of the Company or any interest in any competitor, supplier
or customer of the Company. Each transaction set forth on Schedule 2.7 was on
terms comparable to those that would be obtained from a third party on an
arm's-length basis.
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2.8 Financial Statements.
(a) The Company has delivered to Xxxxxxx prior to the date
hereof, true and complete copies of (i) the unaudited balance sheet of the
Company as of September 30, 1998 (the "Company Balance Sheet"), and the related
consolidated statement of income, consolidated statement of shareholders' equity
and consolidated statement of cash flows for the three and nine months then
ended (collectively, the "Interim Financial Statements") and (ii) the audited
financial statements of the Company as of and for the fiscal years ended
December 31, 1995, 1996 and 1997 (including, without limitation, the related
consolidated balance sheets, consolidated statements of income, consolidated
statements of shareholders' equity, consolidated statements of cash flows and
all notes, schedules and exhibits thereto), accompanied by an opinion of Xxxxxx
Xxxxxxxx L.L.P. (collectively with the Interim Financial Statements, the
"Financial Statements"), and no changes have been made thereto since the date of
delivery. Except as expressly set forth or disclosed in the notes, exhibits or
schedules thereto or in Schedule 2.8 hereto, the Financial Statements (i)
present fairly in all material respects the financial position, results of
operations and cash flows of the Company as of and for the periods then ended,
(ii) were prepared in accordance with generally accepted accounting principles
("GAAP") (except, in the case of the Interim Financial Statements, for the lack
of footnote disclosure and normal year-end adjustments which, in the aggregate,
will not be material), (iii) disclose all liabilities, including contingent
and/or unmatured liabilities as of the dates thereof, which are required by GAAP
to be disclosed thereon.
(b) The Financial Statements reflect that the Company has set
aside adequate reserves (i) with respect to inventory, for all inventory
reasonably anticipated to be or become excess or obsolete, or have no value,
based on facts and circumstances existing as of the date hereof and as of the
Closing Date, as the case may be; and (ii) for all reasonably anticipated audit
adjustments as a result of the DCAA audit of the SDL Contract.
2.9 Title to Properties. The Company has good, valid and marketable
title to all of the material properties and assets which it purports to own
(personal and mixed, tangible and intangible), including, without limitation,
all the properties and assets listed on Schedules 2.12 and 2.13 attached hereto
which it purports to own. Except as set forth on Schedule 2.9, all such
properties and assets are free and clear of all title defects or objections,
liens, claims, charges, pledges, security interests, easements, title retention
agreements or other encumbrances of any kind or nature whatsoever.
2.10 Real Property. The Company does not own any real property, in whole
or in part, and does not have any contractual obligation to purchase or acquire
any interest in real property. Except as set forth on Schedule 2.10, (a) all of
the buildings, structures and appurtenances situated in whole or in part on any
of the Leased Property are in reasonable operating condition and in a state of
reasonable maintenance and repair in all material respects, are adequate and
suitable for the purposes for which they are presently being used and, with
respect to each, the Company has adequate rights of ingress and egress for
operation of the business in the ordinary course and consistent with past
practice; (b) to the knowledge of the Company and the Principal Shareholders,
none of such buildings, structures or appurtenances (or any equipment therein),
nor the operation or maintenance
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21
thereof, violates any restrictive covenant or any provision of any federal,
state or local law, ordinance, rule or regulation, or encroaches on any property
owned by others in any way except for such violations that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; (c) no condemnation proceeding or other
litigation is pending or, to the best knowledge of the Company on the Principal
Shareholders, threatened which would preclude or impair the use of any Leased
Property by the Company for the purposes for which it is currently used; and (d)
to the knowledge of the Company and the Principal Shareholders, the Company has
not violated or failed to hold any valid and effective certificates of
occupancy, or certificates relating to electrical work, zoning, other permits
and licenses (including building, housing, safety, fire, health and similar
permits and approvals) required by applicable law with respect to any Leased
Property or the business conducted thereat, except for certificates of occupancy
or other certificates that are not material to the business of the Company.
2.11 Leases. Schedule 2.11 attached hereto contains a complete, current
and correct list of all leases pursuant to which the Company leases real or
personal property, including all amendments thereto (collectively, the
"Leases"). Prior to the date hereof, the Company has delivered to Xxxxxxx
complete, current and correct copies of the Leases, and no changes have been
made thereto since the date of delivery. Each of the Leases is valid, binding
and enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, and except as may be
limited by bankruptcy, reorganization, insolvency, moratorium or other laws
relating to or affecting the enforcement of creditors' rights and remedies
generally. Except as set forth on Schedule 2.11, there are no existing defaults
by the Company under any of the Leases and no event has occurred which would
constitute a default (or any event which, with the giving of notice or lapse of
time or both, would constitute a default) thereunder by the Company, and except
for defaults (other than payment defaults) that could not reasonably be expected
to have a Material Adverse Effect on the Company.
2.12 Fixed Assets. Schedule 2.12 attached hereto contains a complete,
current and correct list, in all material respects, of all fixtures, furniture,
equipment and machinery owned, leased or used by the Company having or an
original cost of $10,000 or more. The material fixed assets of the Company
("Fixed Assets") are in good operating condition and repair, normal wear and
tear excepted, and are adequate for the uses to which they are being put. None
of the Fixed Assets are in need of maintenance or repairs, except for ordinary,
routine maintenance and repairs.
2.13 Intellectual Property.
(a) Schedule 2.13(a) hereto sets forth a complete list of all
registered (and material unregistered) trademarks, trade names, product
identifiers and/or trade dresses of any type whatsoever which is, has been or is
presently planned to be used in the business of the Company (the "Trademarks").
Except as set forth on Schedule 2.13(a), (i) each of the Trademarks is valid and
registered in the name of the Company on the Principal Register of the United
States Patent and Trademark Office and in the foreign countries indicated
thereon, (ii) the Company and the Principal Shareholders have no knowledge of
any infringement of the Trademarks by others, (iii) the
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22
continued use of the Trademarks in the business of the Company (as the business
has heretofore been conducted and as currently planned by the Company) will not
result in any infringement of the rights of others in the United States, and
neither the Company nor the Principal Shareholders have any knowledge of any
such claim as to any Trademarks registered in the foreign countries identified
on Schedule 2.13(a), (iv) the Company is the sole and legal owner of the
Trademarks in the countries indicated on Schedule 2.13(a) and in all other
jurisdictions in which the Company uses, has used or plans to use any Trademark
and, as of the date hereof, neither the Company nor the Principal Shareholders
has knowledge of any claim by any other person that such other person is the
legal owner of such Trademarks, (v) the Company has not granted any license or
right to use any Trademark to any other person, and (vi) each of the Trademarks
registered in the United States is and has been in use in interstate commerce
since the date of first use in the application or any non- use of such trademark
is excused under applicable law except, in the case of any of the foregoing, for
facts or circumstances which could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect on the Company.
(b) Schedule 2.13(b) hereto sets forth a complete list of all
patents, patent applications, inventions, invention disclosures of any type
whatsoever which is, has been or is presently planned to be used by the Company,
(the "Patents"). Except as set forth on Schedule 2.13(b), (i) each of the
Patents is valid and registered in the name of the Company in the United States
Patent and Trademark Office and in the foreign countries indicated thereon, (ii)
neither the Company nor the Principal Shareholders have knowledge of any
infringement of the Patents by others, (iii) the continued use of the Patents by
the Company (as the business of the Company has heretofore been conducted and as
currently planned by the Company) will not result in any infringement of the
rights of others in the United States, and the Company and the Principal
Shareholders have no knowledge of any such claim as to any Patents registered in
the foreign countries identified on Schedule 2.13(b), (iv) the Company is the
sole and legal owner of the Patents in the countries indicated on Schedule
2.13(b) and in all other jurisdictions in which the Company uses, has used or
plans to use any Patent and, as of the date hereof, neither the Company nor the
Principal Shareholders have knowledge of any claim by any other person or entity
that such other person or entity is the legal owner of such Patents, except, in
the case of any of (i)-(iv) above, for facts and circumstances which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company, and (v) the Company has not granted any license
or right to use any Patent to any other person.
(c) Schedule 2.13(c) hereto sets forth a complete list of all
registered (and material unregistered) copyrights of any type whatsoever which
is, has been or is presently planned to be used in the business of the Company
(the "Copyrights"). Except as set forth on Schedule 2.13(c), (i) each of the
Copyrights is valid and registered in the name of the Company in the United
States Copyright Office and in the foreign countries indicated thereon, (ii) as
of the date hereof, the Company has no knowledge of any infringement of the
Copyrights by others, (iii) the continued use of the Copyrights in the business
of the Company (as the business has heretofore been conducted and as currently
planned by the Company) will not result in any infringement of the rights of
others in the United States, and the Company has no knowledge of any such claim
as to any Copyrights
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23
registered in the foreign countries identified on Schedule 2.13(c), (iv) the
Company is the sole and legal owner of the Copyrights in the countries indicated
on Schedule 2.13(c) and in all other jurisdictions in which the Company uses,
has used or plans to use any Copyright and, as of the date hereof, has no
knowledge of any claim by any other person that such other person is the legal
owner of such Copyrights, and (v) the Company has not granted any license or
right to use any Copyright to any other person except, in the case of any of the
foregoing, for facts or circumstances which could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company.
(d) Except as set forth on Schedule 2.13(d) hereto, the Company
has valid and enforceable contracts with each and every employee, consultant
and/or contractor of the Company which vests with the Company all rights in any
invention, copyright and/or trade secret which relates to the business of the
Company to the fullest extent permitted by law and also protects the trade
secrets and/or proprietary information of the Company to the fullest extent
permitted by law.
(e) No infringement, illicit copying, misappropriation or
violation of any third party intellectual property rights has or would
reasonably be expected to occur with respect to the Company's use of the
intellectual property rights embodied in the intellectual property set forth on
Schedules 2.13(a), 2.13(b) and 2.13(c), as currently being used by the Company.
(f) Except for licenses to use software disclosed as Contracts
on Schedule 2.18(a), there are no other material agreements requiring the
Company to make payments or provide any consideration for, or restricting the
Company's right to use, any intellectual property rights of third parties.
(g) Except as set forth on Schedule 2.13(g), the software and
hardware products of the Company; (i) meet in all material respects all the
functional specifications for which they were designed or programmed; (ii) to
the best knowledge of the Company, are free from significant bugs, defects or
errors, viruses, worms, bombs, traps or other code designed to or having the
effect of interrupting normal processing, corrupt data or render the software or
hardware products unusable (collectively "Viruses"); and (iii) in the case of
software, have been maintained on media and hardware that are free from material
defects.
(h) The Company performs on a regular and professional basis
checks and procedures to determine the presence of Viruses in or on its software
or hardware.
2.14 Accounts Receivable. A complete, current and correct list of all
accounts receivable of the Company as of October 31, 1998 ("Accounts
Receivable") has been delivered to Xxxxxxx prior to the date hereof, and sets
forth the aging of such Accounts Receivable. The Accounts Receivable represent
bona fide sales actually made or services actually performed on or prior to such
date in the ordinary course of business of the Company and consistent with past
practices. Except as set forth on Schedule 2.14 attached hereto, to the best
knowledge of the Company and the Principal Shareholders, there is no contest,
claim or right of set-off contained in any oral or written
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24
agreement with any account debtor relating to the amount or validity of any
Account Receivable, or any other account receivable created after October 31,
1998. The Accounts Receivable (net of any reserves reflected in the Financial
Statements) are valid and collectible in the ordinary course of business of the
Company. The reserves for uncollectible accounts receivable reflected in the
Financial Statements have been established in the ordinary course of business,
in accordance with GAAP, and are consistent with past practices.
2.15 Licenses and Permits. Schedule 2.15 attached hereto contains a
complete, current and correct list of all governmental licenses, permits,
franchises, rights and privileges necessary for or material to the present
conduct of the Company's business (the "Licenses"). Except as set forth in
Schedule 2.15, the Company possesses all such Licenses. Each of the Licenses is
in full force and effect, and there are no pending or, to the best knowledge of
the Company and the Principal Shareholders, threatened claims or proceedings
challenging the validity of or seeking to revoke or discontinue, any of the
Licenses. Prior to the date hereof, the Company shall have delivered to Xxxxxxx
a complete, current and correct copy of each of the Licenses.
2.16 Insurance. Schedule 2.16 attached hereto contains a complete,
current and correct description of all existing policies of fire, liability,
workers' compensation and all other forms of insurance maintained by the
Company. Except as set forth on Schedule 2.16, all such policies are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the date hereof have been paid, and no notice of cancellation,
termination or denial of coverage has been received with respect to any such
policy. Such policies (a) are adequate for compliance with all agreements or
instruments to which the Company is a party, or pursuant to which any of its
businesses, properties or assets may be subject, (b) are valid, outstanding and
enforceable policies, (c) provide insurance coverage in the amounts indicated in
such policies for the Company's business, properties, assets and operations of
the Company as presently conducted and (d) will remain in full force and effect
through the respective dates set forth on Schedule 2.16, without the payment of
additional premiums. Schedule 2.16 also describes all claims of the Company
which are pending under such insurance policies or have been paid to the Company
since January 1, 1995. Since January 1, 1995, the Company has not been refused
coverage by any insurance carrier with respect to its properties, assets or
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance.
Prior to the date hereof, the Company has delivered to Xxxxxxx complete, current
and correct copies of all of the policies of insurance which are maintained by
the Company.
2.17 Absence of Certain Changes. Except as set forth in Schedule 2.17
attached hereto, and except for the transactions specifically contemplated under
this Agreement, since December 31, 1997 or other date as specified, the Company
has conducted its business in the ordinary course consistent with past practice,
and there has not been:
(a) Any declaration, setting aside or payment of any dividend or
other distribution or payment (whether in cash, stock or property) with respect
to the capital stock of the Company,
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25
or any redemption, purchase or other acquisition of any of the securities of the
Company, or any other payment to any stockholder of the Company in its capacity
as a stockholder;
(b) Any transaction involving the Company not in the ordinary
course of business, including any sale of material properties or assets (other
than inventory in the ordinary course);
(c) Any material adverse change in the prospects, results of the
operations, liabilities, financial condition or business of the Company;
(d) Any loan or advance by the Company to any person, except
normal travel advances or other reasonable expense advances to officers or
employees of the Company and normal trade terms extended to customers;
(e) Any indebtedness for borrowed money incurred by the Company
or any commitment to incur indebtedness for borrowed money entered into by the
Company, or any loans made or agreed to be made by the Company other than
pursuant to commitments or credit facilities existing on December 31, 1997 and
set forth on Schedule 2.17;
(f) Any capital expenditures or commitments to make capital
expenditures materially in excess of the amount budgeted for 1998, and a copy of
such budget has been made available to Xxxxxxx;
(g) Any material change in the Company's lines of business or
management practices and procedures;
(h) Any damage, destruction or loss, whether or not covered by
insurance, which has had or may have a Material Adverse Effect on the Company;
(i) Except in the ordinary course of business of the Company and
consistent with past practices, any payment, satisfaction, discharge or
cancellation of any debts or claims of the Company;
(j) Any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind on any of the Company's properties or assets, or any
assumption of, or taking any properties or assets subject to, any liability;
(k) Any cancellation of any indebtedness owed to the Company in
an aggregate amount greater than $2,500 or waiver of any rights of similar value
to the Company relating to any of its business activities or properties, other
than in the ordinary course of business;
(l) Any failure to repay any obligation of the Company;
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26
(m) Any amendment, modification or termination of any material
contract or agreement to which the Company is a party or pursuant to which its
properties or assets may be bound;
(n) Any sale or granting to any party or parties of any license,
franchise, option or other right of any nature whatsoever with respect to the
Company's business or termination of any such rights;
(o) Except as set forth on Schedule 2.17, since March 31, 1998,
any increase in, or commitment to increase, the direct or indirect compensation
payable or to become payable to any officer or director of the Company, its
employees, or to any of its Affiliates (as that term is defined in Section
2.30), or any commitment to make severance, bonus or special payments to any of
such parties, upon a change in ownership or management of the Company or upon
termination of such parties;
(p) Since October 31, 1996, any issuance by the Company of, or
commitment by it to issue, any capital stock or other equity securities or
obligations or any securities convertible into or exchangeable or exercisable
for capital stock or other equity interests;
(q) Any adoption by the Company of any new Benefit Plan (as that
term is defined in Section 2.25), or amendment to any Benefit Plan to provide
any new or additional plans, programs, contracts, benefits or arrangements
involving direct or indirect compensation to any officer, director, employee,
former employee, or their dependents or beneficiaries, of the Company;
(r) Any settlement of any material litigation or entry of any
judgment against the Company with a value of $50,000 or more (which judgment has
not been stayed or satisfied);
(s) Any alteration in the manner of keeping the books, accounts
or records of the Company or in the manner of preparing the Financial
Statements, or in the accounting practices of the Company, except as may be
required by any modification or change in GAAP;
(t) Any revaluation by the Company of any of its assets,
including without limitation, any write-offs, increases in any reserves except
in the ordinary course of business consistent with past practice or any write-up
or write-down of the value of inventory, property, plant, equipment or any other
asset;
(u) The occurrence of any other event or the development of any
other condition which has had or is reasonably likely to have a Material Adverse
Effect on the Company.
2.18 Contracts.
(a) Schedule 2.18(a) attached hereto contains a complete,
current and correct list of all contracts, commitments, obligations or
agreements of the Company, whether written or oral,
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formal or informal (the "Contracts"): (i) pursuant to which the Company will
make or receive payments in excess of $50,000 per annum; (ii) regarding
financing for the Company; (iii) with Affiliates; (iv) with employees,
consultants or independent contractors; (v) constituting Client Contracts (as
defined below); (vi) resulting in the creation of any lien or security interest
(including lease notifications); or (vii) otherwise material to the business of
the Company. Other than as set forth on Schedule 2.18(a), to the knowledge of
the Company and the Principal Shareholders, no event has occurred which would
constitute a default (or any event which, with the giving of notice or lapse of
time or both, would constitute a default) under any term or provision of any of
the Contracts and thereby allow a party thereto to terminate and/or claim
damages therefor. Each of the Contracts is in full force and effect and is the
legal, valid and binding obligation of the Company and, to the knowledge of the
Company and the Principal Shareholders, of the other parties thereto,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium or other laws relating to or
affecting the enforcement of creditors' rights and remedies generally and except
as enforcement may be limited by general principles of equity. The Company is
not a party to any Contract that restricts it from carrying on its business or
any part thereof, or from competing in any line of business with any person,
corporation or entity. Prior to the date hereof, the Company has made available
to Xxxxxxx a complete, current and correct copy of each of the written
Contracts, as well as a written summary of each of the oral Contracts, including
all amendments and modifications thereto.
(b) Schedule 2.18(b) attached hereto identifies those Contracts
for work to be performed by the Company that are partially performed at the date
hereof (as updated to the Closing Date) or on which services have not commenced
on the date hereof (or as updated to the Closing Date) consisting of all Fixed
Price Contracts (as defined below) and those cost plus fixed fee Contracts with
a value of $50,000 or more (collectively "Client Contracts"). Schedule 2.18(b)
(i) identifies each Client Contract which is subject to a maximum cost, a fixed
fee or a lump sum ("Fixed Price Client Contracts") and (ii) states the estimated
percentage of completion for each Fixed Price Client Contract (other than a
purchase order) listed thereon and the estimated costs and expense required to
complete the Fixed Price Client Contract. With respect to the Fixed Price Client
Contracts, the Company will not incur any loss or diminution of profit thereon
except to the extent reserved on the Interim Financial Statements, or set forth
on Schedule 2.18(b). With respect to each other Client Contract, except as
described on Schedule 2.18(b) attached hereto and except to the extent caused
solely by occurrences or agreements subsequent to the Closing Date or by the
acts or omissions of Xxxxxxx, all services that are performed after the Closing
Date by the Surviving Corporation on Client Contracts will be fully billable by
the Surviving Corporation at no less than the rates that are shown on such
Client Contracts and neither Xxxxxxx nor the Surviving Corporation will be
required to provide any time reductions, unbilled services, discounted services
or other discounts on the Client Contracts unless Xxxxxxx voluntarily agrees to
such reductions, services or discounts. After the date hereof, the Company and
Xxxxxxx shall cooperate to secure any amendments to Contracts shown on Schedule
2.18(b) required to permit the Surviving Corporation to xxxx the other party to
each Contract shown on Schedule 2.18(b) for all services performed after the
Closing Date on each such Contract at the rates stated in each such Contract.
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2.19 Client and Supplier Relationships. The Company and the Principal
Shareholders have not received any notice and are not in possession of any
actual knowledge which might reasonably indicate that any of its current
clients, customers, subcontractors or suppliers intends to cease retaining,
purchasing from, selling to or dealing with the Company in the manner in which
such transactions have previously occurred, nor has the Company received any
notice or is in possession of any actual knowledge which might reasonably lead
it to believe that any current client, customer, subcontractor or supplier
intends to alter in any respect the amount of such retention, purchases or sales
or the extent of dealings with the Company or would alter in any respect any
such retention, purchases, sales or dealings in the event of the consummation of
the transactions contemplated hereby. The Company is current and in full
compliance with respect to all of its obligations to its suppliers and
subcontractors.
2.20 Compliance With Laws. Except as disclosed on Schedule 2.20, the
Company's business has been conducted in compliance with all, and is not in
violation of, applicable laws, statutes, ordinances, rules, regulations, orders
and other requirements of all national governmental authorities, and of all
territories, states, municipalities and other political subdivisions and
agencies thereof, having jurisdiction over the Company and its business,
including without limitation all such laws, regulations, ordinances and
requirements relating to insurance, environmental, antitrust, consumer
protection, labor and employment, zoning and land use, immigration, health,
occupational safety, pension and securities matters, except where the failure to
be in compliance would not have a Material Adverse Effect on the Company. The
Company has not received any written notification of any asserted present or
past failure by the Company to comply with such laws, statutes, ordinances,
rules, regulations, orders or other requirements.
2.21 No Undisclosed Liabilities. Except as disclosed in the Interim
Financial Statements or on Schedule 2.21 attached hereto, the Company has no
material liabilities, whether known or unknown, absolute, accrued, contingent or
otherwise, except liabilities incurred after September 30, 1998 in the ordinary
course of business consistent with past practice and not prohibited by this
Agreement. The Company has (x) with respect to contracts between the Company and
the U.S. Government, no liabilities of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, for defective pricing,
post-contract adjustment due to contract close-out, or mischarging, other than
liabilities stated or adequately reserved in the Interim Financial Statements,
or (y) with respect to all Client Contracts, no liabilities for loss contracts,
other than liabilities (i) stated or adequately reserved in the Interim
Financial Statements or reflected in the footnotes thereto, or (ii) reflected in
Schedule 2.21, which, in the case of (x) or (y), individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company.
2.22 Employees. Schedule 2.22 attached hereto contains a complete,
current and correct list of all of the Company's employees ("Employees"), which
includes the job position and compensation payable to each (excluding bonuses)
of the Employees. Except to the extent set forth in Schedule 2.22:
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(a) The Company is in compliance with all laws, statutes,
ordinances, rules, regulations, orders and other requirements relating to the
employment of labor, including without limitation Title VII of the federal Civil
Rights Act of 1964, the federal Age Discrimination in Employment Act of 1967,
the federal Americans with Disabilities Act, the federal Employee Retirement
Income Security Act of 1974 ("ERISA"), and any and all provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and similar Taxes, except where the failure to be in compliance would
not have a Material Adverse Effect;
(b) There is no pending or, to the best knowledge of the Company
and the Principal Shareholders, threatened charge, complaint, allegation,
application or other process or claim against the Company before any federal,
territorial, state or local or other governmental or administrative agency or
other entity relating to employment matters;
(c) No employees of the Company are covered by any collective
bargaining agreement, nor, to the best knowledge of the Company and the
Principal Shareholders, is there any effort being made by any union to organize
the Company's employees; and
(d) The Company has paid and performed in all material respects
all obligations when due with respect to its employees, consultants, independent
contractors, agents, officers and directors, including without limitation the
payment of any accrued and payable wages, severance pay, vacation pay, benefits
and commissions, except those obligations which are in good faith being
challenged by the Company as not valid obligations of the Company as more fully
described on Schedule 2.22.
2.23 Litigation. Except as set forth in Schedule 2.23 attached hereto:
(a) There is no pending or, to the best knowledge of the Company
and the Principal Shareholders, threatened action, suit, arbitration proceeding,
investigation or inquiry before any court or governmental or administrative body
or agency, or any private arbitration tribunal, against, relating to or
affecting the Company or any director, officer or employee of the Company in his
or her capacity as such, or the assets, properties or business of the Company,
or the transactions contemplated by this Agreement, nor to the best knowledge of
the Company and the Principal Shareholders, are there any facts or circumstances
which could reasonably lead to or provide the basis for any such threatened
action, suit, arbitration proceeding, investigation or inquiry.
(b) There is not in effect any order, judgment or decree of any
court or governmental or administrative body or agency enjoining, barring,
suspending, prohibiting or otherwise limiting the Company or any officer,
director or employee of the Company from conducting or engaging in any aspect of
the Company's business, or requiring the Company or any officer, director or
employee of the Company to take certain action with respect to any aspect of the
Company's business.
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(c) The Company is not in violation of or in default under any
order, judgment, writ, injunction or decree of any court or governmental or
administrative body or agency.
(d) The matters set forth on Schedule 2.23 could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
2.24 Environmental Matters.
(a) Definitions. The following terms, when used in this Section
2.24 shall have the following meanings:
(i) "Company" for purposes of this Section 2.24 includes
(A) all Affiliates of the Company (B) all partnerships, joint ventures and other
entities or organizations in which the Company was at anytime or is a partner,
joint venturer, member or participant, and (C) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Company or to which the Company has succeeded.
(ii) "Release" means any release, threatened release,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment or the workplace
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
(iii) "Hazardous Substance" means any pollutants,
contaminants, chemicals, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical compound or
hazardous substance, material or waste, whether solid, liquid or gas, including
any quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas, crude
oil or any fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives, radioactive substance, waste waters, sludges, slag
and any other substance, material or waste that is subject to regulation,
control or remediation under any Environmental Law.
(iv) "Environmental Laws" mean all laws which regulate
or relate to (A) the protection or clean-up of the environment, (B) the use,
treatment, storage, transportation, generation, manufacture, processing,
distribution, handling, or Release of Hazardous Substances, (C) the preservation
or protection of waterways, groundwater, drinking water, air, wildlife, plants
or other natural resources, or (D) the health and safety of persons or property,
including, without limitation, protection of the health and safety of employees.
Environmental Laws include, without limitation, the Federal Water Pollution
Control Act, Resource Conservation & Recovery Act, Clean Water Act, Safe
Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic
Substances Control Act, Clean Air Act, Comprehensive Environmental Response,
Compensation and Liability Act, Hazardous Materials Transportation Act and all
analogous or related foreign, federal, state or local law.
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(v) "Environmental Conditions" mean the Release of any
Hazardous Substance (whether or not such Release constituted at the time thereof
a violation of any Environmental Law) as a result of which the Company has or
may become liable to any person or entity or by reason of which the business of
the Company or any of its Assets may suffer or be subjected to any lien,
encumbrance or liability.
(vi) "Site" means any real property now or previously
owned or operated by the Company.
(b) Compliance and Liability. The Company and, to the knowledge
of the Company and the Principal Shareholders, each Site, is in compliance with
all, and the Company has no liability under any, Environmental Laws, except
where the failure to comply or liability would not reasonably be expected to
have a Material Adverse Effect on the Company;
(c) Releases and Environmental Conditions. The Company has not
made, caused or permitted any Release at any Site, and to the knowledge of the
Company and the Principal Shareholders, no Release has occurred at any Site and
there are no present or past Environmental Conditions in any way relating to the
Company or, to the knowledge of the Company and the Principal Shareholders, any
Site, except for any Release or Environmental Conditions which would not
reasonably be expected to have a Material Adverse Effect on the Company;
(d) Environmental Audits. The Company has delivered to Xxxxxxx
copies of all environmental audits or other studies or reports relating to any
Environmental Condition or relating to the Company or any Site;
(e) Potentially Responsible Party. The Company is not a
potentially responsible party with respect to any foreign, federal, state, or
local environmental clean-up site or with respect to investigations or
corrective actions under any Environmental Law;
(f) Notice of Violation. The Company has not received notice of
any alleged, actual or potential responsibility, inquiry, investigation or
administrative or judicial proceeding regarding (x) any Release by the Company
at any Site or other location, or (y) any violation of or non-compliance by the
Company with the conditions of any permit required under any Environmental Law
or the provisions of any Environmental Law. The Company has not received any
notice of any other claim, demand or action by any person or entity alleging any
actual or threatened injury or damage to any person, entity, property, natural
resource or the environment arising from or relating to any Release,
transportation or disposal of any Hazardous Substances.
(g) Notices, Warnings and Records. The Company has given all
notices and warnings, made all reports, and has kept and maintained all records
required by, and in compliance with, all Environmental Laws, including, without
limitation any notices and consents required under any Environmental Laws in
connection with the consummation of the transactions contemplated by
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this Agreement, except where the failure to do any of the foregoing would not
reasonably be expected to have a Material Adverse Effect.
2.25 Employee Benefits.
(a) Schedule 2.25 sets forth a true and complete list of (i) all
employee benefit plans, as defined in Section 3(3) of ERISA and (ii) all other
profit-sharing, deferred compensation, bonus, stock option, stock purchase,
stock bonus, vacation pay, holiday pay, severance, dependent care assistance,
excess benefit, incentive compensation, salary continuation, medical, life or
other insurance, supplemental unemployment and other compensation or employee
benefit plans, programs, agreements or arrangements, maintained or contributed
to by the Company for the benefit of its employees (or former employees) and/or
their beneficiaries. All of these types of plans shall be collectively referred
to as "Benefit Plans." An arrangement will not fail to be a Benefit Plan simply
because it only covers one individual, or because the Company's obligations
under the plan arise by reason of its being a "successor employer" under
applicable law. Except as set forth on Schedule 2.25, the Company does not have
any material unwritten compensation arrangements which, if put into writing,
would constitute a Benefit Plan.
(b) The Company has delivered or made available to Xxxxxxx a
true and complete copy of:
(i) Each Benefit Plan and any related funding agreements
(e.g., trust agreements or insurance contracts), including all amendments (and
Schedule 2.25 includes a description of any such amendment that is not in
writing);
(ii) The current draft of the Summary Plan Description
of each Benefit Plan (if applicable);
(iii) The most recent Internal Revenue Service
determination letter (if applicable) for each Benefit Plan, which determination
letter, except as set forth on Schedule 2.25, reflects all amendments that have
been made to the Benefit Plan.
(iv) The two most recent Form 5500s that were filed on
behalf of each Benefit Plan.
(c) All Benefit Plans maintained by the Company, or to which the
Company contributes or is required to contribute, to the extent required, comply
with the provisions of and have been administered and maintained in compliance
with the provisions of ERISA, the Code, and all other applicable laws in all
material respects. The Company does not currently maintain any, and in the past
has never maintained any, "Defined Benefit Plan" within the meaning of Section
414(j) of ERISA and the Company does not currently contribute to, and in the
past has never contributed to, any Defined Benefit Plan.
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(d) Except as set forth on Schedule 2.25, the Company does not
maintain any plan that provides (or will provide) medical or death benefits to
one or more former employees (including retirees) beyond their retirement or
other termination of service, other than benefits that are required to be
provided pursuant to Section 4980B of the Code or state law continuation
coverage or conversion rights.
(e) None of the persons performing services for the Company have
been improperly classified as independent contractors, leased employees (within
the meaning of Section 414(n) of the Code) or as being exempt from the payment
of wages for overtime.
(f) All costs of administering and contributions required to be
made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Code
or any other applicable law have been timely made, and are fully deductible in
the year for which they were paid. All unpaid liabilities of the Company with
respect to, and all unfunded benefits (whether vested or not) under, each
Benefit Plan have been calculated and are reflected in the Company's financial
statements in accordance with GAAP, and any such liabilities incurred after the
date of such financial statements will be incurred in the ordinary course of
business, determined in a manner substantially similar to that used in such
financial statements.
(g) There are no investigations, proceedings, or lawsuits,
either currently in progress or expected to be instituted in the future,
relating to any Benefit Plan, by any administrative agency, whether local,
state, or federal.
(h) There are no pending or, to the best knowledge of the
Company or the Principal Shareholders, threatened lawsuits or other claims
(other than routine claims for benefits under the plan and qualified domestic
relations orders) against or involving (i) any Benefit Plan, or (ii) any
Fiduciary of such plan (within the meaning of Section 3(21)(A) of ERISA) brought
on behalf of any participant, beneficiary, or Fiduciary thereunder, nor is there
any reasonable basis for any such claim.
(i) The Company has no intention or commitment, whether legally
binding or not, to create any additional Benefit Plan, or to modify or change
any existing Benefit Plan so as to materially increase benefits to participants
or the cost of maintaining the plan. The benefits under all Benefit Plans are as
represented, and have not been, and will not be materially increased subsequent
to the date documents are provided to Xxxxxxx.
(j) Except as provided in the Schedule 2.25, none of the Benefit
Plans or employment contracts with the Company provide any benefits that become
payable solely as a result of the consummation of this transaction.
2.26 Bank Accounts. Schedule 2.26 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the Company maintains safe deposit boxes or accounts of
any nature.
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2.27 Corporate Records. The minute books of the Company reflect material
actions taken to this date by the shareholders, board of directors and
committees of the board of directors of the Company, and contain true and
complete copies of their respective charters, Bylaws and all amendments thereto.
2.28 Accounting Records. The Company maintains accounting records which
fairly and validly reflect its transactions and maintains accounting controls
sufficient to provide reasonable assurances that such transactions are, in all
material respects, (i) executed in accordance with management's general or
specific authorization, and (ii) recorded as necessary to permit the preparation
of financial statements in conformity with GAAP.
2.29 Omitted.
2.30 Affiliates. Schedule 2.30 hereto sets forth all persons who, as of
the date of this Agreement, may be deemed to be affiliates of the Company under
Rule 145 of the Securities Act, or otherwise under applicable Securities and
Exchange Commission ("Commission") accounting releases with respect to
pooling-of-interests accounting treatment ("Affiliates").
2.31 Brokers and Finders. Except for Xxxxxx Xxxxxxxx L.L.P. who will
receive no more than $370,000 in total compensation, neither the Shareholders
nor the Company has engaged or authorized any broker, finder, investment banker
or other third party to act on behalf of the Shareholders or the Company,
directly or indirectly, as a broker, finder, investment banker or in any other
like capacity in connection with this Agreement or the transactions contemplated
hereby, or has consented to or acquiesced in anyone so acting, and neither the
Shareholders nor the Company knows of any claim for compensation from any such
broker, finder, investment banker or other third party for so acting on behalf
of the Company or the Shareholders or of any basis for such a claim. A copy of
the Xxxxxx Xxxxxxxx L.L.P. engagement letter is attached as Schedule 2.31.
2.32 Inventory. All inventories reflected in the Financial Statements
are stated at the lower of cost (first-in, first-out method) or market, and, as
so stated, are in good condition and are currently usable or salable in the
category in which they are inventoried, in the ordinary course of business of
the Company, without discounts other than normal trade discounts regularly
offered by the Company for prompt payment or quantity purchase, net of reserves
shown on the balance sheet of the Company.
2.33 Year 2000 Compliance. The Company does not sell, nor has it sold,
any application programs, databases, software or hardware (including distributed
systems and embedded chips), the performance of which will be adversely affected
by dates after the commencement of the year 2000 ("Year 2000 Matters") except to
the extent such adverse effects would not have a Material Adverse Effect on the
Company. To the knowledge of the Company and the Principal Shareholders, none of
the application programs, databases, software or hardware owned or licensed by
the Company or used in its business will be adversely affected in performance by
Year 2000 Matters. To the knowledge of the Company and the Principal
Shareholders, based solely on communications with
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customers and suppliers through the date of this Agreement or the Closing Date,
as the case may be, no customer or supplier of the Company will fail to complete
any material transaction with the Company, nor will the Company experience
material interruptions in supply or delays in sales, as a result of Year 2000
Matters. Set forth in Schedule 2.33 is a description of the Company's compliance
program with respect to Year 2000 Matters and a statement as to its progress in
meeting such program's compliance schedule and goals as of the date hereof.
2.34 Government Contracts. To the knowledge of the Company and the
Principal Shareholders, the Company has not been suspended or debarred from
bidding on contracts or subcontracts with any governmental entity and no such
suspension or debarment has been initiated or threatened. The consummation of
the transactions contemplated by this Agreement will not result in any such
suspension or debarment. The Company has not been audited or investigated and is
not now being audited or investigated by the U.S. Government Accounting Office,
the U.S. Department of Defense or any of its agencies, the Defense Contract
Audit Agency, the U.S. Department of Justice, the Inspector General of any U.S.
governmental entity, any similar agencies or instrumentalities of any foreign
governmental entity, or any prime contractor with a governmental entity nor, to
the Company's knowledge, has any such audit or investigation been threatened. To
the Company's or the Principal Shareholders' knowledge, there is no valid basis
for (a) the suspension or debarment of the Company from bidding on contracts or
subcontracts with any governmental entity or (b) any claim pursuant to an audit
or investigation by any of the entities named in the foregoing sentence. The
Company has no agreements, contracts or commitments which require it to obtain
or maintain a security clearance with any governmental entity.
2.35 Product Liability and Warranties. Each product designed,
manufactured, sold, leased, or delivered by the Company has been in conformity
in all material respects with all applicable contractual commitments and all
express and implied warranties, and the Company does not have any liability
(and, to the knowledge of the Company and the Principal Shareholders, there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any liability) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims in
the Interim Financial Statements as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company. No
product or service designed, manufactured, sold, leased, or delivered by the
Company is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Schedule 2.35
includes copies of the standard terms and conditions of sale or lease for the
Company (containing applicable guaranty, warranty, and indemnity provisions).
2.36 Absence of Certain Payments. The Company, nor any of its officers,
directors, employees or agents or other people acting on behalf of any of them
have (i) engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country which could result in a material liability to the
Company and, without limiting the generality of the preceding clause, (ii) used
any corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful
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expenditures relating to political activity to government officials or others
which could result in a material liability to the Company. None of the Company
or any of its directors, officers, employees or agents or other people acting on
their behalf has accepted or received any unlawful contributions, payments,
gifts or expenditures which could result in a material liability to the Company.
2.37 Application to Issue Xxxxxxx Securities; Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in (i) the
Application for Qualification of Securities under Section 25121 of the
California Corporate Securities Law of 1968, as amended (the "California
Securities Law") to be filed with the California Department of Corporations
(together with any amendments or supplements thereto, the "Application") by
Xxxxxxx which Application will be the subject of a fairness hearing to be held
pursuant to the provisions of Section 25142 of the California Securities Law
(the "Fairness Hearing") so that the issuance of the Exchange Shares will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to the exemption provided by Section
3(a)(10) of the Securities Act, or (ii) the proxy statement relating to the
meeting of the Shareholders (the "Shareholder Meeting") in connection with the
submission of this Agreement to the Shareholders and the issuance of Exchange
Shares in the Merger to be filed as an exhibit to the Application (the "Proxy
Statement") will, at the respective times filed with the California Department
of Corporations and, in addition in the case of the Proxy Statement, at the date
it or any amendments or supplements thereto are mailed to stockholders, and at
the time of the Shareholder Meeting and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Application and Proxy Statement will comply as to form in all material respects
with the applicable provisions of the California Securities Law and the rules
and regulations thereunder. If at any time prior to the Effective Time any event
relating to the Company or any of its respective Affiliates, officers or
directors should be discovered by the Company which should be set forth in an
amendment to the Application or a supplement to the Proxy Statement, the Company
shall promptly inform Xxxxxxx. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any information supplied by
Xxxxxxx or Newco which is contained in or incorporated by reference in any of
the foregoing documents.
(b) The Company has not taken any action that constitutes an
"offer", "offer to sell", "offer for sale" or "sale" of Xxxxxxx Common Stock
within the meaning of Rule 145 under the Securities Act.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH PRINCIPAL SHAREHOLDER
Each Principal Shareholder, severally and not jointly, represents and
warrants to Xxxxxxx and Newco as follows:
3.1 Title to Shares. The Principal Shareholder is the record and
beneficial owner of the shares of Company Common Stock set forth opposite such
Principal Shareholder's name on Schedule 2.3 hereto, free and clear of any
liens, encumbrances, security interests, restrictions or claims whatsoever, with
full power and authority to convey such shares in accordance with the terms of
this Agreement.
3.2 Authorization and Approvals. The Principal Shareholder has all
requisite legal power and authority to enter into this Agreement and to perform
his, her or its obligations hereunder and thereunder. This Agreement and the
Escrow Agreement have been, or will be prior to the Closing Date, duly executed
and delivered by the Principal Shareholder and constitute the legal, valid and
binding obligations of the Principal Shareholder, enforceable in accordance with
their terms, subject to judicial discretion regarding specific performance or
other equitable remedies, and except as may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws relating to or affecting
the enforcement of creditors' rights and remedies generally.
3.3 No Violations. Neither the execution and delivery of this Agreement
or the Escrow Agreement nor the consummation of the transactions contemplated
hereby and thereby will (a) violate, or be in conflict with, or constitute a
default (or other event which, with the giving of notice or lapse of time or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any lease, license, promissory note, contract, agreement,
mortgage, deed of trust or other instrument or document to which the Principal
Shareholder is a party or by which the Principal Shareholder or any of his
properties or assets may be bound, other than obligations to be discharged on or
immediately after Closing, (b) violate any order, writ, injunction, decree, law,
statute, rule or regulation of any court or governmental authority applicable to
the Principal Shareholder or any of his properties or assets or (c) give rise to
a declaration or imposition of any claim, lien, charge, security interest or
encumbrance of any nature whatsoever upon the shares of Company Common Stock
held by the Principal Shareholder or upon any of the assets of the Company.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
XXXXXXX AND NEWCO
Xxxxxxx and Newco, jointly and severally, represent and warrant to the
Company and the Shareholders as follows:
4.1 Organization and Power; Foreign Qualification. Xxxxxxx and Newco are
each corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware, and have all requisite corporate power and
authority to own, lease and operate their properties, and to carry on their
businesses, as such are now being conducted. Xxxxxxx and Newco are duly
qualified to transact business and are in good standing in every jurisdiction in
which the character of their business makes such qualification necessary, except
for such jurisdictions where the failure to so qualify would not have a material
adverse effect on the assets, properties, financial condition, results of
operation, prospects or business of either such corporation.
4.2 Capital Structure of Xxxxxxx and Newco.
(a) The authorized capital stock of Xxxxxxx consists of
40,000,000 shares of common stock, $.10 par value, of which 8,452,636 shares
were issued and outstanding as of November 6, 1998. Except for any of the
transactions contemplated pursuant to this Agreement, as set forth on Schedule
4.2, and for outstanding stock options granted to Xxxxxxx'x officers, directors,
employees and advisors, there are no outstanding options, warrants, convertible
debt or securities, calls, agreements, arrangements, commitments, understandings
or other rights to purchase any of Xxxxxxx'x capital stock, or securities
convertible into or exchangeable for any such capital stock. All of the
outstanding shares of capital stock of Xxxxxxx have been duly authorized,
validly issued and are fully paid and nonassessable.
(b) The authorized capital stock of Newco consists of 1,000
shares of Common Stock, $0.01 par value, of which 100 shares are issued and
outstanding, and all of the outstanding shares are owned by Xxxxxxx.
4.3 Authorization and Enforceability of Agreements. Each of Xxxxxxx and
Newco has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by each of Xxxxxxx and Newco and constitutes the legal,
valid and binding obligations of Xxxxxxx and Newco, enforceable in accordance
with its terms, except as may be limited by bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or affecting the enforcement of
creditors' rights and remedies generally and except as enforcement may be
limited by general principles of equity. This Agreement, and all ancillary
agreements hereto at the time they are entered into ("Ancillary Agreements"),
have been duly and validly authorized by and approved by all requisite corporate
action on the part of Xxxxxxx and Newco. No further approvals or consents by, or
filings with, any
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xxxxxxx, xxxxx, xxxxxxxxx, foreign or other court or governmental or
administrative body, agency or other third party is required in connection with
the execution and delivery by Xxxxxxx and Newco of this Agreement or the
consummation by Xxxxxxx and Newco of the transactions contemplated hereby,
except for (i) the issuance by the California Department of Corporations of a
Permit and Certificate of Issuance of Permit authorizing the issuance of the
Exchange Shares, and (ii) the expiration or termination of the waiting period
under the HSR Act and except for those which, if not obtained, would not have a
material adverse impact on the ability of Xxxxxxx and Newco to perform their
businesses as currently conducted or the ability of Xxxxxxx and Newco to execute
and deliver this Agreement, or to consummate the transactions contemplated
hereby.
4.4 No Conflicts. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby will (a) violate
any provisions of the respective charter or Bylaws of Xxxxxxx or Newco, (b)
violate, or be in conflict with, or constitute a default (or other event which,
with the giving of notice or lapse of time or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of any material lease, license,
promissory note, contract, agreement, mortgage, deed of trust or other
instrument or document to which Xxxxxxx or Newco is a party or by which Xxxxxxx
or Newco or any of their respective properties or assets may be bound, (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation of
any court or governmental authority applicable to Xxxxxxx or Newco or any of
their respective properties or assets or (d) give rise to a declaration or
imposition of any claim, lien, charge, security interest or encumbrance of any
nature whatsoever upon any of the assets of Xxxxxxx'x or Newco's respective
businesses.
4.5 Financial Statements and Commission Reports. Xxxxxxx has timely
filed all required forms, reports, statements and documents with the Commission
since January 1, 1996, all of which have complied in all material respects with
all applicable requirements of the Securities Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Xxxxxxx will deliver or make available
to the Company and the Shareholders true and complete copies of (i) its Annual
Report on Form 10-K for the fiscal year ended July 31, 1998, and (ii) all other
reports, statements and registration statements filed or required to be filed by
it with the Commission since July 31, 1998 (the documents referred to in clauses
(i) and (ii) being hereinafter referred to as the "Xxxxxxx SEC Reports"). As of
their respective dates, the Xxxxxxx Commission Reports did not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The financial statements (including
any related notes) of Xxxxxxx included in the Xxxxxxx SEC Reports were prepared
in conformity with GAAP applied on a consistent basis, and present fairly in all
material respects the consolidated financial position, results of operations and
cash flows of Xxxxxxx and its consolidated subsidiaries as of the date and for
the periods indicated, subject, in the case of unaudited interim consolidated
financial statements, to condensation, the absence of certain notes thereto and
normal year-end adjustments.
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4.6 Brokers and Finders. Neither Xxxxxxx nor Newco has engaged or
authorized any broker, finder, investment banker or other third party to act on
behalf of Xxxxxxx or Newco, directly or indirectly, as a broker, finder,
investment banker or in any other like capacity in connection with this
Agreement or the transactions contemplated hereby, or has consented to or
acquiesced in anyone so acting, and neither Xxxxxxx nor Newco knows of any claim
for compensation from any such broker, finder, investment banker or other third
party for so acting on behalf of Xxxxxxx or Newco or of any basis for such a
claim.
4.7 Exchange Shares. The Exchange Shares to be issued and delivered
pursuant to this Agreement and the Agreement of Merger will, on delivery of
certificates therefor in accordance with the terms hereof, be duly authorized,
fully paid and nonassessable shares, validly issued and outstanding. Xxxxxxx is
not aware of any facts or circumstances that would prevent it from satisfying
its obligation to file the Application and to have the Commissioner of the
California Department of Corporations approve of the exchange of securities and
issue a Permit and Certificate of Issuance of Permit for the issuance of the
Exchange Shares or from satisfying its obligation to cause the Exchange Shares
to be designated for listing on the Nasdaq National Market.
4.8 No Material Adverse Changes. Since July 31, 1998, there has not
occurred any event, nor has there been the development of any condition, which
has had or is reasonably likely to have a material adverse effect on the results
of operations, financial condition, prospects or business of Xxxxxxx and its
subsidiaries, taken as a whole.
4.9 Application; Proxy Statement. Subject to the accuracy of the
representations of the Company in Section 2.37(a), the Application shall not, at
the time it is filed with the California Department of Corporations and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements included therein, in light of the circumstances under which they
were made, not misleading. Subject to the accuracy of the representations of the
Company in Section 2.37(a), the Proxy Statement will not, at the date it or any
amendments or supplements thereto are mailed to shareholders, and at the time of
the Shareholder Meeting and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event relating to Xxxxxxx, Newco, or any of their
respective Affiliates, officers or directors should be discovered by Xxxxxxx
which should be set forth in an amendment to the Application or a supplement to
the Proxy Statement, Xxxxxxx will promptly inform the Company. Notwithstanding
the foregoing, Xxxxxxx makes no representation or warranty with respect to any
information supplied by or on behalf of the Company which is contained in, or
furnished in connection with the preparation of, the Application or the Proxy
Statement.
4.10 Affiliates. Based on information supplied to Xxxxxxx by the Company
and to Xxxxxxx'x knowledge, as of the date of this Agreement, none of the
Principal Shareholders would, after the Effective Time, be deemed to be
affiliates of Xxxxxxx under Rule 145 of the Securities Act,
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or otherwise under applicable Commission accounting releases with respect to
pooling-of-interests accounting treatment.
4.11 Representations Required for Tax-Free Reorganization. Prior to and
as of the Closing Date, Xxxxxxx shall be in control of Newco within the meaning
of Section 368(c)(1) of the Code. Xxxxxxx does not plan nor does it intend for
the Company to issue additional shares of the Company Common Stock that would
result in Xxxxxxx losing control of the Company within the meaning of Section
368(c)(1) of the Code. Xxxxxxx has no plan or intention to reacquire any of its
Common Stock issued in the Merger, other than purchases that may occur in the
ordinary course of Xxxxxxx'x stock buyback plan. Xxxxxxx has no plan or
intention to liquidate the Company, to merge the Company with or into another
corporation, to sell or other wise dispose of the Common Stock of the Company
except for transfers of stock to corporations controlled by Xxxxxxx, or to cause
the Company to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Newco, except for dispositions made in the ordinary course
of business or transfers of assets to a corporation controlled by the Company.
Newco will have no liabilities assumed by the Company, nor will it transfer to
the Company any assets subject to liabilities in the Merger. Following the
Merger, Xxxxxxx intends to continue the Company's historic business or use a
significant portion of the Company's historic business assets in a business.
Xxxxxxx does not own, nor has it owned during the past five years, any shares of
the Common Stock of the Company. Xxxxxxx is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
ARTICLE 5
COVENANTS OF THE COMPANY AND PRINCIPAL SHAREHOLDERS
5.1 Covenants Pending Closing. Each of the Company and the Principal
Shareholders jointly and severally agree that from the date hereof to the
Closing Date the Company will, except in the ordinary course of business or to
the extent that Xxxxxxx shall otherwise give its written consent, which shall
not be unreasonably withheld or delayed:
(a) Operate its business (including collection of the accounts
receivable and payment of accounts payable) substantially as now operated and
only in the ordinary course and, to the extent of and consistent with such
operation, use its best efforts to preserve intact its present business
organization and preserve its relationships with persons having business
dealings with it;
(b) Maintain all of the assets and properties related to its
business in customary repair, order and condition, reasonable wear and tear and
damage by unavoidable casualty excepted, and take all steps reasonably necessary
to maintain its intangible assets, including, without limitation, its patents,
trademarks, trade names and copyrights and any pending applications therefor;
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(c) Maintain its books, accounts and records, in the usual,
regular and ordinary manner and in accordance with generally accepted accounting
principles applied on a consistent basis and consistent with past practice;
(d) Except for Taxes contested in good faith, pay all Taxes upon
its properties, business and income as they become due;
(e) Refrain from disposing of or encumbering any of its
properties and assets;
(f) Maintain insurance upon its business and related assets and
properties in respect of the kinds of risks customarily insured against, in
accordance with its current practices;
(g) Not do any act which would cause a breach of or default
under any Client Contract or other material contract, commitment or obligation
of it;
(h) Not declare or pay any dividends on or declare or make any
other distribution, direct or indirect, on account of any shares of its capital
stock, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
any shares of the Company Common Stock;
(i) Not borrow any money, or incur, assume or guaranty or
otherwise become directly or indirectly responsible for the payment of any
indebtedness or obligation of any officer, director, employee or agent or of any
other person (other than the endorsement of negotiable instruments for deposit
or collection or any other transactions in the ordinary course of business and
consistent with past practice under credit facilities existing on the date
hereof);
(j) Not fail to repay any obligation of the Company;
(k) Not mortgage, pledge or subject to lien, charge or
encumbrance of any kind, any of the Company's properties or assets, or assume to
take any properties or assets subject to any liability;
(l) Not settle any material litigation or consent to the entry
of a judgment against the Company in the amount of $50,000 or more;
(m) Not amend the Company's charter or bylaws;
(n) Not amend or modify in a manner materially adverse to the
Company, or terminate, any Contract to which the Company is a party or pursuant
to which the Company's assets may be bound;
(o) Except as described on Schedule 2.17, not increase, or
commit to increase, the direct or indirect compensation payable or to become
payable to its officers or directors, or to
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any of its employees or Affiliates, or commit to make severance, bonus or
special payments to any of such parties, upon a change in ownership or
management or upon termination of such parties;
(p) Not commit to make capital expenditures materially in excess
of the Company's 1998 budget for capital expenditures, or make such
expenditures;
(q) Not amend, terminate or waive any material right with
respect to its business;
(r) Not adopt any new Benefit Plan or any amendment to any
Benefit Plan to provide any new or additional plan, programs, contracts or
arrangements involving direct or indirect compensation to any of its officers,
directors, employees, former employees, or any of their dependents or
beneficiaries;
(s) Not alter its operating policies and procedures;
(t) Promptly advise Xxxxxxx in writing of any material adverse
change in its condition (financial or otherwise), assets, liabilities, earnings,
business or prospects, and provide Xxxxxxx with all current financial data;
(u) Promptly advise Xxxxxxx in writing of the termination or
threatened termination of any key employee of the Company;
(v) Promptly advise Xxxxxxx of the commencement or threat of any
suit, claim, action or litigation, or any administrative, arbitration or other
proceedings or governmental investigations or inquiries;
(w) Duly comply with all laws applicable to it and to the
conduct of its business; and
(x) Not take, or commit to take, any action or fail to take or
commit to refrain from taking any action that would as of the date hereof be in
breach of, or cause a revision to the schedule provided for in Section 2.17
hereof.
5.2 Consents and Approvals; Fulfillment of Conditions. The Company and
the Shareholders will use their reasonable best efforts to (i) obtain all
necessary consents and approvals of other persons and governmental and
regulatory authorities to the consummation of the transactions contemplated by
this Agreement, (ii) to obtain all governmental consents and novations necessary
in connection with the transactions contemplated by this Agreement with respect
to the Client Contracts, and (iii) perform, comply with and fulfill all
obligations, covenants and conditions required by this Agreement to be
performed, complied with and fulfilled by them prior to or at the Closing Date.
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5.3 Acquisition Proposals. Until the earlier of (i) January 31, 1999
(provided, however, that such date shall be extended to the later of (x) the
date that is 30 days after the Proxy Statement is mailed to the Shareholders, so
long as the Application was filed with the California Department of Corporations
by Xxxxxxx prior to December 31, 1998 or (y) five business days after the
waiting period under the HSR Act has expired or been terminated, or (ii) the
date Xxxxxxx has notified the Company that Xxxxxxx no longer intends to pursue
the Merger, neither the Company nor any Principal Shareholder or any of their
officers, directors, agents, representatives or affiliates will directly or
indirectly communicate, solicit, encourage or engage in any discussion or
negotiation with another person (including, without limitation, providing
information concerning the Company's business, properties, assets or financial
condition) with respect to the sale of the Company, sale of any capital stock of
the Company, or sale of any material portion of its assets or any merger or
other business combination involving the Company (an "Alternative Transaction").
If the Company or any Principal Shareholder or any of their officers, directors,
agents, representatives or affiliates or officers, directors, agents or
representatives of such affiliates receives any proposal for an Alternative
Transaction, the Company will promptly notify Xxxxxxx of the terms of such
proposal and the identity of the party making such proposal. In the event (i)
the Company or any Principal Shareholder or any of their officers, directors,
agents, representatives or affiliates do not comply with the agreement in this
paragraph, (ii) the transaction contemplated hereby is not consummated, and
(iii) the Company or its shareholders enter into or agree to enter into an
Alternative Transaction prior to October 31, 1999, then Xxxxxxx may pursue all
available remedies at law or in equity, and in the event the Merger contemplated
hereby is not consummated, the Company shall pay Xxxxxxx $500,000 in view of
Xxxxxxx'x substantial efforts and expense in conducting its due diligence review
and its efforts and expense in negotiating and attempting to consummate the
Merger.
5.4 Notice. The Company and the Principal Shareholders will give prompt
notice to Xxxxxxx of the occurrence, or failure to occur, of any event of which
they have knowledge and which they determine would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any respect
at any time from the date hereof to and including the Closing Date.
5.5 Access. Xxxxxxx may, prior to the Closing Date, through its
employees, agents and representatives (including accountants and attorneys),
make or cause to be made such reasonable investigation as it deems necessary or
advisable of the assets, properties and business of the Company, but such
investigation shall not affect the representations and warranties of the Company
and the Principal Shareholders hereunder or the right of Xxxxxxx to terminate
this Agreement as provided in Article 10 hereof. The Company and the Principal
Shareholders agree to permit Xxxxxxx and its employees, agents and
representatives to have complete access to the properties, books and records,
contracts and other documents of the Company, during regular business hours and
at such other times agreeable to the Company and to Xxxxxxx. The Company and the
Principal Shareholders shall furnish to Xxxxxxx such financial and operating
data and other information with respect to the Company's business as Xxxxxxx
shall from time to time reasonably request (including without limitation true
and correct copies of all financial statements and tax returns of the Company
for all periods within the last five years, and copies of all documents and
correspondence relating
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to any audit or investigation of the Company by the Internal Revenue Service or
any other taxing authority presently being conducted or at any time conducted
during the last five years) and to authorize the key employees and expressly
authorized representatives of the Company to discuss the affairs of the Company
with the employees, agents and representatives of Xxxxxxx. Xxxxxxx'x
representatives shall also be permitted to contact the customers and clients of
the Company to discuss their respective businesses, after the customer has been
contacted by the responsible employee of the Company. The Company and the
Principal Shareholders will fully cooperate with Xxxxxxx and its counsel in
connection with any steps reasonably required to be taken as part of its
obligations under this Agreement.
5.6 Affiliates; Accounting and Tax Treatment. Prior to the Closing Date,
the Company shall obtain from each Principal Shareholder and each other person
listed in Schedule 2.30 and any person who may be deemed to have become an
affiliate of the Company (under Rule 145 of the Securities Act or otherwise
under applicable Commission accounting releases with respect to
pooling-of-interests accounting treatment) after the date of this Agreement and
on or prior to the Closing Date an Investment Letter substantially in the form
of Exhibit B hereto (the "Investment Letter"); provided, however, that the
Company shall use its best efforts to obtain such a written agreement from each
such person as soon as practicable after the date of this Agreement or the date
on which such person attains such status, as the case may be. Each Principal
Shareholder voting in favor of the Merger has delivered, or agrees to deliver to
Xxxxxxx at or prior to the Closing Date, an Investment Letter. Each party hereto
shall use its best efforts to cause the Merger to qualify, and shall not take
any actions which could prevent the Merger from qualifying for
pooling-of-interests accounting treatment and as a reorganization qualifying
under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
5.7 Publicity. Neither the Company nor the Shareholders, nor any of
their agents or affiliates, shall either directly or indirectly make any press
release or other public communication with respect to the transaction
contemplated hereby without the prior written consent of Xxxxxxx, unless
required by applicable law or the regulations of any securities exchange to make
such a communication.
5.8 Distribution of Proxy Statement; Shareholders' Approval. The Company
shall take all action necessary in accordance with applicable law to convene the
Shareholder Meeting at the earliest possible time after the Fairness Hearing and
the issuance of a Permit and Certificate of Issuance of Permit for the issuance
of the Exchange Shares (and no later than 15 business days thereafter or the
next business day following) for the purpose of approving the Merger. The
Company shall submit the Proxy Statement to its shareholders, and its Board of
Directors shall recommend to the shareholders, and continue to recommend until
the completion of the Shareholder Meeting, the adoption of this Agreement and
the approval of the Merger. The Company shall use all reasonable efforts to
solicit proxies from its shareholders and otherwise to obtain all votes and
approvals of the shareholders necessary for the approval and adoption of the
Merger under the Delaware General Corporation Law and its Certificate of
Incorporation and Bylaws.
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ARTICLE 6
COVENANTS OF XXXXXXX AND NEWCO
6.1 Consents and Approvals; Fulfillment of Conditions. Xxxxxxx and Newco
will use their reasonable best efforts to (i) obtain all necessary consents and
approvals of other persons and governmental and regulatory authorities to the
consummation of the transactions contemplated by this Agreement and (ii)
perform, comply with and fulfill all obligations, covenants and conditions
required by this Agreement to be performed, complied with and fulfilled by them
prior to or at the Closing Date.
6.2 Notice. Xxxxxxx and Newco shall give prompt notice to the Company
and the Shareholders of the occurrence, or failure to occur, of any event of
which they have knowledge and which they determine would cause any
representation or warranty of Xxxxxxx and Newco contained in this Agreement to
be untrue or inaccurate in any respect at any time from the date hereof up to
the Closing Date.
6.3 Publicity. Neither Xxxxxxx nor Newco, nor any of their agents or
affiliates, shall either directly or indirectly make any press release or other
public communication with respect to the transaction contemplated hereby without
the consent of the Company or the Shareholder Representatives, unless required
by applicable law or Nasdaq National Market regulation to make such a
communication.
ARTICLE 7
ADDITIONAL PRE-CLOSING COVENANTS OF THE PARTIES
7.1 Preparation of Application. The Company and Xxxxxxx shall cooperate
to prepare and file the Application as soon as practicable after the execution
hereof. The Company and Xxxxxxx shall use their respective reasonable best
efforts to respond promptly to any comments of the California Department of
Corporations with respect to the Application and to cause the Fairness Hearing
to be held and the California Department of Corporations to issue a Permit and
Certificate of Issuance of Permit for the issuance of the Exchange Shares as
promptly as practicable.
7.2 HSR Act. Each of the Company and Xxxxxxx has filed the Notification
and Report Forms and related material required to be filed with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the HSR Act, and each shall use its reasonable best efforts to
obtain an early termination of the applicable waiting period, and shall make any
further filings or information submissions pursuant thereto that may be
necessary, proper or advisable; provided, however, that Xxxxxxx shall not be
obligated to respond to formal requests for additional information or
documentary material pursuant to 16 C.F.R. 803.20 under the HSR Act except to
the extent it elects to do so in its sole discretion.
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7.3 Disclosure Schedules.
(a) The Disclosure Schedule. Concurrently with the execution of
this Agreement, each party has delivered to the other its Disclosure Schedules.
The Disclosure Schedules shall: (i) contain accurate, true, correct and complete
information and data; (ii) be delivered by the parties and dated the date of
this Agreement; (iii) be deemed to provide exceptions or qualifications to the
representations, warranties and obligations of the parties made pursuant to
Articles 2, 3 and 4 of this Agreement, and as expressly contemplated herein and
therein; and (iv) be updated, amended and supplemented, as appropriate through
Supplemental Disclosure Schedules. Terms used and defined in this Agreement
shall have the same definition when used in the Disclosure Schedules.
(b) The Supplemental Disclosure Schedules. The parties shall
update their Disclosure Schedules to include all information relevant to the
disclosures therein which relates to events which have occurred after the date
hereof and until the date five (5) business days prior to the Closing Date and
to amend, modify or correct the disclosures made therein. Each party shall
deliver a draft of such updated information to the others ten (10) days prior to
the Closing Date, and shall deliver the final updated information (the
"Supplemental Disclosure Schedule") to Xxxxxxx on the date four (4) business
days prior to the Closing Date. The Supplemental Disclosure Schedule shall
contain accurate, true, correct and complete information and data. The Company's
Supplemental Disclosure Schedule shall identify each exception or qualification
on the Schedule that, if Xxxxxxx were not to accept the exception or
qualification as provided in Section 8.18 of this Agreement, would cause a
representation or warranty of the Company and the Principal Shareholders to not
be true and correct in any material respects at and as of the Closing Date.
7.4 Pooling of Interests. Neither the Company nor Xxxxxxx, nor any
person who may be deemed to be an affiliate of the Company or Xxxxxxx under Rule
145 of the Securities Act, or otherwise under applicable Commission releases
with respect to pooling-of-interests accounting treatment, shall or shall agree
to, take any action that individually or in conjunction with any actions taken
by others, would prevent the Merger from being accounted for as a
pooling-of-interests, including the failure to satisfy any of the conditions set
forth in Paragraph 45 et seq. of APB Opinion No. 16 "Business Combinations."
ARTICLE 8
CONDITIONS TO CLOSING BY XXXXXXX AND NEWCO
The obligations of Xxxxxxx and Newco to consummate and effect the Merger
and transactions contemplated by this Agreement on the Closing Date are subject
to the satisfaction in all material respects, on or before the Closing Date, of
the following conditions (unless waived in writing by Xxxxxxx and Newco):
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8.1 Accuracy of Representations and Warranties; Performance of
Covenants. The representations and warranties of the Company and the Principal
Shareholders set forth herein shall be true and accurate in all material
respects on and as of the date hereof and on and as of the Closing Date (as
though made on and as of the Closing Date) and the Company and the Principal
Shareholders shall have each, in all material respects, performed all
obligations and complied with all covenants required to be performed or to be
complied with by them under this Agreement prior to the Closing Date, and
Xxxxxxx and Newco shall have received a certificate, dated the Closing Date,
signed on behalf of the Company by a duly authorized officer to all such
effects, and signed by the Shareholder Representatives to all such effects.
8.2 Consents. The Company shall have obtained all consents or approvals
of any governmental authority or of any person in any contractual relationship
with the Company necessary for the consummation of the transactions contemplated
hereby.
8.3 Shareholder Approval. At the Special Meeting, ninety percent (90%)
of the shares of the Company's common stock voting, in person or by proxy, shall
have been voted in favor of this Agreement.
8.4 No Litigation. No legal action or other proceedings brought by third
parties to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or to obtain other relief in connection with
this Agreement or the transactions contemplated hereby or thereby, or that, if
determined adversely, would have a Material Adverse Effect on the Company, shall
be pending or threatened.
8.5 Corporate Resolutions. The Company shall have delivered to Xxxxxxx a
certified copy of the resolutions adopted by the Company's Board of Directors
authorizing and approving this Agreement and the transactions contemplated
herein and therein.
8.6 Adverse Changes. There shall not have occurred any loss or
destruction of any material part of the assets of the Company, or any material
adverse change in the assets, properties, financial condition, business,
prospects or results of operations of the Company.
8.7 Opinion of Counsel. On the Closing Date, Xxxxxxx shall have been
furnished with an opinion of Xxxx, Forward, Xxxxxxxx and Scripps LLP, counsel
for the Company and the Principal Shareholders, dated the Closing Date and
addressed to Xxxxxxx, in a form acceptable to Xxxxxxx.
8.8 Legislation. No statute, rule, regulation or order shall have been
enacted, entered into or deemed applicable by any domestic or foreign
government, governmental or administrative agency or court which would make the
transactions contemplated by this Agreement illegal or otherwise prevent the
consummation thereof or that upon implementation would have a Material Adverse
Effect on the Company.
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8.9 Employment and Noncompetition and Nondisclosure Agreements. On the
Closing Date, Xxxxxxx shall have received from each of the employees of the
Company listed on Schedule 8.9 an executed Employment Agreement in the form
attached as Exhibit C, from each person listed on Schedule 8.9 an executed
Noncompetition Agreement in the form attached as Exhibit D-1, and from each
Principal Shareholder who is not listed on Schedule 8.9 an executed
Noncompetition Agreement in the form of Exhibit D-2 (each a "Noncompetition
Agreement"). For each such person, the appropriate agreement shall contain a
general release of the Surviving Corporation for any liabilities it may have
(other than ordinary payroll liabilities) to such Principal Shareholder or
employee as of the Closing Date.
8.10 Investment Letter. Xxxxxxx shall have received from each Principal
Shareholder and any other person who may be deemed to have become a shareholder
or an affiliate of the Company (under Rule 145 of the Securities Act or
otherwise under applicable Commission accounting releases with respect to
pooling-of-interests accounting treatment) after the date of this Agreement and
on or prior to the Closing Date a signed Investment Letter.
8.11 Pooling Opinion. Xxxxxxx shall have received the opinion of Ernst &
Young LLP or other advice satisfactory to it, to the effect that the Merger
qualifies for pooling-of-interests accounting treatment if consummated in
accordance with this Agreement. Xxxxxx Xxxxxxxx L.L.P. shall have delivered an
opinion to Ernst & Young that the Company qualifies for a pooling-of-interests
business combination, at no additional cost to the Company.
8.12 Escrow Agreement. The Shareholder Representatives shall have
executed and delivered the Escrow Agreement.
8.13 Dissenting Shares. The holders of not more than 5% of the issued
and outstanding shares of the Company Common Stock shall have informed the
Company that they intend to exercise their appraisal rights.
8.14 California Securities Law. The Fairness Hearing shall have been
held and the California Department of Corporations shall have issued a Permit
and Certificate of Issuance of Permit for the issuance of the Exchange Shares
and no order suspending the effectiveness of the Permit or the Certificate of
Issuance of Permit shall have been issued and no proceedings for that purpose
shall have been instituted or threatened by the California Department of
Corporations or the Commission.
8.15 Nasdaq Listing. The Exchange Shares shall have been authorized for
listing on the Nasdaq National Market.
8.16 HSR Act. The waiting period under the HSR Act shall have expired or
been terminated.
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8.17 Technology Transfer Agreement with Full Circle Research. The
technology transfer agreement with Full Circle Research shall have been
terminated or renegotiated, and such termination or new terms would not
reasonably be expected to have a Material Adverse Effect on the Company.
8.18 Approval of Supplemental Disclosure Schedule. Xxxxxxx, in its sole
discretion, shall have approved and accepted each exception and qualification
set forth in the Company's Supplemental Disclosure Schedule as to which the
Company has informed Xxxxxxx that, if Xxxxxxx refuses to accept such exception
or qualification, a representation or warranty of the Company and the Principal
Shareholders would not be true and correct in all material respects as of the
Closing Date.
ARTICLE 9
CONDITIONS TO CLOSING BY THE COMPANY
The obligations of the Company to consummate and effect the Merger and
transactions contemplated by this Agreement on the Closing Date are subject to
the satisfaction in all material respects, on or before the Closing Date, of the
following conditions (unless waived in writing by the Company):
9.1 Accuracy of Representations and Warranties; Performance of Covenants
by Xxxxxxx and Newco. The representations and warranties of Xxxxxxx and Newco
set forth herein shall be accurate in all material respects on and as of the
date hereof and the Closing Date (as though made on and as of the Closing Date)
and Xxxxxxx and Newco shall have, in all material respects, performed all
obligations and complied with all covenants required to be performed or to be
complied with by them under this Agreement prior to the Closing Date, and the
Company and the Shareholders shall have received a certificate from each of
Xxxxxxx and Newco, dated the Closing Date, signed on behalf of Xxxxxxx and Newco
by a duly authorized officer to all such effects.
9.2 Consents and Approvals. Xxxxxxx and Newco shall have obtained all
consents or approvals of any governmental authority or third party necessary for
the consummation of the transactions contemplated hereby.
9.3 No Litigation. No legal action or other proceedings brought by third
parties to restrain or prohibit the consummation of the transactions
contemplated by this Agreement shall be pending or threatened.
9.4 Corporate Resolutions. Xxxxxxx and Newco shall have delivered to the
Company a certified copy of the resolutions adopted by the Board of Directors of
Xxxxxxx and the Board of Directors and sole common shareholder of Newco
authorizing and approving this Agreement and the transactions contemplated
herein.
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9.5 Adverse Changes. There shall not have occurred any loss or
destruction of any material part of the assets of Xxxxxxx'x and its
subsidiaries' business taken as a whole, or any material adverse change in the
financial condition, business, prospects or operations of Xxxxxxx and its
subsidiaries, taken as a whole.
9.6 Legislation. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign government or
governmental or administrative agency or court which would make the transaction
contemplated by this Agreement illegal or otherwise prevent the consummation
thereof. In addition, no statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign government or
governmental or administrative agency or court which would prevent the issuance
of the Exchange Shares from qualifying for the exemption from registration under
the Securities Act pursuant to Section 3(a)(10) of the Securities Act.
9.7 Opinion of Counsel. On the Closing Date, the Company shall have been
furnished with an opinions of Xxxxxxx & XxXxxxxx, counsel for Xxxxxxx, and
Xxxxxx X. Xxxxxxx, General Counsel for Xxxxxxx and Newco, dated the Closing Date
and addressed to the Company, in forms acceptable to the Company.
9.8 Employment, Noncompetition and Non-Solicitation Agreements. Xxxxxxx
or the Surviving Corporation shall have entered into the Employment and
Noncompetition Agreements.
9.9 Escrow Agreement. Xxxxxxx shall have duly executed and delivered the
Escrow Agreement.
9.10 California Securities Law. The Fairness Hearing shall have been
held and the California Department of Corporations shall have issued a Permit
and Certificate of Issuance of Permit for the issuance of the Exchange Shares
and no order suspending the effectiveness of the Permit or the Certificate of
Issuance of Permit shall have been issued and no proceedings for that purpose
shall have been instituted or threatened by the California Department of
Corporations or the Commission.
9.11 Nasdaq Listing. The Exchange Shares shall have been authorized for
listing on the Nasdaq National Market.
9.12 HSR Act. The waiting period under the HSR Act shall have expired or
been terminated.
9.13 Approval of Supplemental Disclosure Schedule. The Company and the
Principal Shareholders, in their sole discretion, shall have approved and
accepted each exception and qualification set forth in Xxxxxxx'x Supplemental
Disclosure Schedule as to which Xxxxxxx has informed the Company and the
Principal Shareholders that, if the Company and the Principal
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Shareholders refuses to accept such exception or qualification, a representation
or warranty of Xxxxxxx and Newco would not be true and correct in all material
respects as of the Closing Date.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, as follows, and in no other
manner:
(a) By agreement of Xxxxxxx and Newco on the one hand, and the
Company and the Principal Shareholders, on the other hand, approved by the
respective Boards of Directors of Xxxxxxx and the Company;
(b) By Xxxxxxx in writing, if (i) at any time Xxxxxxx has
reasonable grounds to believe, and does believe, that there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of the
Company and the Principal Shareholders in any of the representations, warranties
or covenants under this Agreement which breach is not curable, or, if curable,
is not cured within ten days after written notice of such breach is given to the
Shareholder Representatives and the Company; or (ii) any of the conditions set
forth in Article 8 hereof shall not have been met in all material respects prior
to the later of (x) January 31, 1999, (y) 30 days after the date the Proxy
Statement has been mailed to the Shareholders (but only if the Application has
been filed with the California Department of Corporations prior to December 31,
1998) or (z) five business days after the termination or expiration of the
waiting period under the HSR Act;
(c) By the Company and the Principal Shareholders, in writing,
if (i) at any time the Company and the Principal Shareholders have reasonable
grounds to believe, and do believe, that there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of
Xxxxxxx and Newco in any of the representations, warranties or covenants under
this Agreement which breach is not curable, or if curable, is not cured within
ten days after written notice of such breach is given to Xxxxxxx and Newco, or
(ii) any of the conditions set forth in Article 9 hereof shall not have been met
in all material respects prior to the later of (x) January 31, 1999, (y) 30 days
after the date the Proxy Statement has been mailed to the Shareholders (but only
if the Application has been filed with the California Department of Corporations
prior to December 31, 1998) or (z) five business days after the termination or
expiration of the waiting period under the HSR Act; or
(d) By Xxxxxxx or the Company, in writing, on or before December
4, 1998, if it is not satisfied in its sole discretion with the results of its
due diligence investigation of the Company or Xxxxxxx, as the case may be, and
such period shall end prior to December 4, 1998, if necessary to mail the Proxy
Statement in a timely manner to hold the Shareholder meeting on or before
December 31, 1998.
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10.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 10.1, all further obligations of the parties
hereto under this Agreement shall terminate without further liability or
obligation of either party; provided, however, that Section 5.3 and Section 15.9
shall survive the termination of this Agreement and no party shall be relieved
of its liability for damages caused to another party for breach of this
Agreement.
10.3 Costs and Expenses. Upon termination of this Agreement, all
expenses incurred in connection with the transactions contemplated herein,
including but not limited to legal and accounting expenses, shall be borne by
the respective party incurring such expenses, except as provided in Section 5.3,
and except that if Xxxxxxx fails to consummate the Merger (other than under the
circumstances contemplated by Sections 10.1(a) or (b), due to any material fact
discovered in Xxxxxxx'x due diligence of the Company, due to a material adverse
change in the Company's business, assets, properties or results of operations,
or due to the failure by the Company and the Principal Shareholders to satisfy
all of the conditions to Closing by Xxxxxxx set forth in Article 8 before the
later of 30 business days after the holding of a Fairness Hearing or January 31,
1999), then Xxxxxxx shall reimburse the Company for its reasonable,
out-of-pocket expenses incurred in connection with the Company's attempts to
consummate the Merger.
ARTICLE 11
CLOSING
11.1 The Closing. The parties hereto shall use their best efforts to
cause the Closing of the Merger to occur on or before January 31, 1999 (the
"Closing Date") or as soon after the holding of a Fairness Hearing as reasonably
practicable. The Closing shall occur at the offices of Xxxx, Forward, Xxxxxxxx &
Scripps LLP, 000 Xxxx Xxxxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000, or at
such other place mutually agreed to by the parties hereto. At the Closing, each
of the parties shall take all such action and deliver all such documents,
instruments, certificates and other items as may be required, under this
Agreement or otherwise, in order to perform or fulfill all covenants, conditions
and agreements on its part to be performed or fulfilled at or prior to the
Effective Time and to cause all conditions precedent to the other parties'
obligations under this Agreement to be satisfied in full.
11.2 Further Acts. If, at any time after the Closing, any further action
by any of the parties to this Agreement is necessary or desirable to carry out
the purposes of this Agreement and/or to vest in the Surviving Corporation's
full title to all properties, assets and rights of the Company, such parties
shall take all such necessary or desirable action or use such parties'
reasonable best efforts to cause such action to be taken.
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ARTICLE 12
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND RELATED AGREEMENTS; INDEMNIFICATION
12.1 General Liability Period. Except as set forth in Section 12.4, the
covenants, warranties, representations and agreements made by the Company, the
Shareholders and the Principal Shareholders on the one hand, or by Xxxxxxx and
Newco, on the other hand, in this Agreement, or in any document, certificate,
schedule or instrument delivered in connection herewith, shall survive the
Closing and shall continue in effect, notwithstanding any investigation by or on
behalf of Xxxxxxx or the Principal Shareholders, for 18 months following the
Closing Date, except that representations and warranties set forth in Sections
2.1-2.4, 2.9, 4.1, 4.2 and 4.3 and Article 3 shall survive the Closing
indefinitely, that the representations and warranties set forth in Sections 2.24
(Environmental Matters) and 2.25 (Benefits) shall survive the Closing until
expiration of the applicable statute of limitations (or any extension thereof)
and that the representation and warranty set forth in Section 2.8(b)(ii) shall
survive the Closing until the date that is four (4) years after the Closing Date
(the "General Liability Period").
12.2 Tax Liability Period. The Tax Liability Period shall be as
described in Section 12.4(c) hereof.
12.3 Indemnity by the Shareholders.
(a) The Shareholders, jointly and severally, shall indemnify and
hold harmless Xxxxxxx and the Surviving Corporation and the officers, directors,
employees, agents, affiliates and representatives of Xxxxxxx and the Surviving
Corporation or any of them (the "Xxxxxxx Indemnitees") from and against, and
shall reimburse the Xxxxxxx Indemnitees on demand for any loss, liability,
damage or expense that the Xxxxxxx Indemnitees shall incur or suffer, but
subject at all times to Section 12.6 hereof (collectively, "Xxxxxxx Recoverable
Losses"), arising out of or resulting from any misrepresentation by the Company
or the Principal Shareholders or breach by the Company or the Shareholders or
the Principal Shareholders of any (i) representation or warranty contained in
Article 2 hereof; (ii) agreement or covenant under or pursuant to this
Agreement; or (iii) document, certificate, schedule or instrument delivered by
or on behalf of the Company or the Principal Shareholders pursuant hereto.
(b) Each Principal Shareholder, severally, and not jointly and
severally, agrees to indemnify and hold harmless the Xxxxxxx Indemnitees from
and against Xxxxxxx Recoverable Losses arising out of or resulting from a breach
by such Principal Shareholder of the representations and warranties set forth in
Article 3.
(c) Nothing in this Section 12.3 shall be interpreted as giving
the Xxxxxxx Indemnitees the right to recover an amount in excess of their
Xxxxxxx Recoverable Losses, notwithstanding their right to elect remedies under
this Section 12.3.
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12.4 Tax Indemnity.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" means any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, personal property, or windfall profit tax,
custom duty or other tax, governmental fee or other like assessment or charge of
any kind whatsoever, addition to tax or additional amount imposed by any
governmental (whether federal, state, local or foreign) authority (a "Taxing
Authority") responsible for the imposition of any such tax (domestic or
foreign), but only if and to the extent attributable to periods (or partial
periods) prior to and including the Closing Date, together with any interest and
any penalty thereon.
(ii) "Tax Return" means any return, report, information
return, registration form or other document (including any related or supporting
information) filed or required to be filed with any Taxing Authority in
connection with the determination of any Tax or the administration of any laws,
regulations or administrative requirements relating to any Tax.
(b) Subject to Sections 12.6 and 12.7, the Shareholders shall,
jointly and severally, indemnify and hold harmless Xxxxxxx and the Company for
all Taxes and expenses (including reasonable accounting and legal fees and the
costs and expenses of enforcing such indemnification against the Shareholders)
in connection with any tax audit or proceeding, with respect to the operations
of the Company for all periods (or partial periods) prior to and including the
Closing Date, but not including those in connection with the transactions
contemplated by this Agreement.
(c) The covenants and agreements contained in this Section 12.4
and all of the terms, covenants, warranties, representations and agreements
hereunder of the Company and the Shareholders related to federal and state taxes
shall survive the Closing until the expiration of the applicable statutory
period of limitation for the payment of such taxes, giving effect to any waiver,
mitigation or extension thereof (the "Tax Liability Period").
(d) Xxxxxxx agrees that in the event it receives notice, whether
orally or in writing, of any federal, state or local examination, claim,
proposed adjustment or related matter with respect to any Tax Return for Taxes
covered by the Shareholders' indemnity in Section 12.4(b) (the "Tax
Controversies"), Xxxxxxx shall timely notify the Shareholder Representatives.
Failure of Xxxxxxx to timely notify the Shareholder Representatives of any Tax
Controversies shall not constitute a waiver of any rights of Xxxxxxx with
respect to the indemnification thereof by the Shareholders, but shall relieve
the Shareholders of their indemnity obligation to the extent that such
obligation is increased as the result of Xxxxxxx'x failure to give timely
notice. Any claim under this Section 12.4 shall be treated similarly to a Third
Party Claim under Section 12.7 hereof.
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(e) After the Closing Date, each of the Principal Shareholders
shall:
(i) assist the Surviving Corporation in preparing any
Tax Returns for the Company for periods prior to the Closing Date;
(ii) cooperate fully in preparing for any audits of, or
disputes, contests or proceedings with, taxing authorities regarding any Tax
Returns which relate to the Company for periods prior to the Closing Date;
(iii) make available to the Surviving Corporation and to
any taxing authority as reasonably requested all information, records and
documents relating to tax liabilities which are attributable to the Company's
business or the Company relating to periods beginning prior to the Closing Date.
(iv) convey to Xxxxxxx all relevant information, records
and documents;
(v) make him or herself available, without charge, to
the Surviving Corporation, as reasonably requested, in connection with tax
disputes related to periods prior to the Closing Date; and
(vi) keep confidential any Tax information except as may
otherwise be necessary in connection with the filing of returns or claims for
refund or in conducting any audit or other Tax proceeding.
(f) The Company shall be liable for and shall pay all excise,
sales, use, transfer (including real property transfer or gains), stamp,
documentary, filing, recordation and other similar taxes which may be imposed in
connection with the transactions contemplated by this Agreement, together with
any interest, additions or penalties with respect thereto ("Transfer Taxes"). No
Shareholder shall have any indemnity or other payment obligation with respect to
the Transfer Taxes. Each party hereto hereby agrees to file all necessary
documentation in connection with the payment and reporting of Transfer Taxes.
12.5 Indemnity by Xxxxxxx. Xxxxxxx shall indemnify and hold harmless the
Company's Shareholders from and against, and shall reimburse the Shareholders
for any loss, liability, damage or expense, including reasonable attorneys' fees
and cost of investigation incurred as a result thereof, that the Shareholders
shall incur or suffer (collectively, the "Shareholders Recoverable Losses")
resulting from any misrepresentation by Xxxxxxx or Newco or breach by Xxxxxxx or
Newco of any (i) representation or warranty contained in Article 4 hereof, (ii)
agreement or covenant under or pursuant to this Agreement or (iii) document,
certificate, schedule or instrument delivered by or on behalf of Xxxxxxx or
Newco in connection herewith. Notwithstanding the foregoing, it is specifically
agreed that Xxxxxxx shall not be responsible for any Shareholder Recoverable
Losses attributable to the failure of the Merger to qualify as a tax-free
reorganization under Section 368(a) of the Code, if such failure, directly or
indirectly, arises out of, relates to, or is caused by, any act or
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omission of the Company (prior to the Effective Date) or any act or omission of
any of the Shareholders.
12.6 Limitations on Recoverable Losses. Notwithstanding anything to the
contrary, express or implied, set forth herein, claims for payment of Xxxxxxx
Recoverable Losses under Section 12.3 may be made only with respect to claims
arising during the General Liability Period or the Tax Liability Period, as
applicable; (b) must be made, if at all, by giving the written Claim Notice (as
defined in Section 12.7(a) hereof) to the Shareholders during the General
Liability Period or the Tax Liability Period, as applicable, with respect to
such claim; (c) except for losses covered by Section 12.4, or for breaches by
the Principal Shareholders of the representations and warranties set forth in
Article 3, a breach by the Company, the Shareholders or the Principal
Shareholders of the representation and warranty set forth in Section 2.3, or a
breach by the Company or the Principal Shareholders of the covenants set forth
in Article 5 and Article 7, may be made only to the extent that the aggregate
amount of Xxxxxxx Recoverable Losses exceeds $100,000, in which case all Xxxxxxx
Recoverable Losses in excess of $100,000 shall be paid by the Shareholders or
the Principal Shareholders; and (d) except for fraud, shall not exceed in the
aggregate the value of the Exchange Shares received by the Shareholders (deemed
by the parties to be $21,000,000). Notwithstanding anything to the contrary,
express or implied, set forth herein, claims for payment of the Shareholders
Recoverable Losses under Section 12.5 (a) may be made only with respect to
claims arising during the General Liability Period; (b) must be made, if at all,
by giving a written Claim Notice to Xxxxxxx during the General Liability Period
with respect to such claim; (c) except for breaches of the covenants set forth
in Article 6, Article 7 or Article 13, may be made only to the extent that the
aggregate amount of Shareholders Recoverable Losses exceed $100,000, in which
case all Shareholders Recoverable Losses in excess of $100,000 shall be paid by
Xxxxxxx; and (d) except fraud, shall not exceed $21,000,000. Any indemnification
payment hereunder shall be net of any tax benefit or insurance proceeds actually
realized by the Indemnitee. The liability under this Section 12 of any
Shareholder, other than a Principal Shareholder, shall be limited to his or her
proportionate share of the Xxxxxxx Recoverable Losses. In no event shall the
liabilities under this Section 12 of any Shareholder, other than a Principal
Shareholder, exceed the amount attributable to such Shareholder's deposit into
the Escrow. Notwithstanding anything in this Section 12 to the contrary, any
Xxxxxxx Recoverable Losses payable under this Section 12 shall be paid first
from the Escrowed Shares (and any proceeds from the sale of such Escrowed
Shares) until such Escrowed Shares (and any proceeds) have been exhausted or the
Escrow has been terminated. Once such Escrowed Shares (and any proceeds) have
been exhausted, or the Escrow has been terminated, then and only then, the
Principal Shareholders who are obligated to pay any unpaid Xxxxxxx Recoverable
Losses pursuant to the terms of this Section 12 shall pay such amounts from
sources outside of Escrow. Nothing in this Section 12 shall prevent any or all
of the Principal Shareholder from seeking contribution from the other
Shareholders for joint and several obligations of such Shareholders under
Sections 12.3 and 12.4 (as further limited by Section 12.6) for claims made
after the Escrow Agreement has been terminated. Any claim for indemnification
under this Section 12 shall be made prior to the expiration of the General
Liability Period or the Tax Liability Period, as appropriate.
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12.7 Claims for Indemnification; Disputes.
(a) Claims for Indemnification. Any party hereto (individually
or with others, collectively, the "Indemnitee") shall give the Shareholder
Representatives or Xxxxxxx, as the case may be (the "Indemnitor"), written
notice (the "Claim Notice") of any claim (including the receipt of any demand)
or the commencement of any action with respect to which indemnity may be sought
by the Indemnitee (individually, a "Claim" and collectively, the "Claims");
provided, however, that the failure to give a Claim Notice shall not constitute
a waiver of any rights of the Indemnitee with respect to indemnification by the
Indemnitor, but shall relieve the Indemnitor of its indemnity obligation to the
extent that such obligation is increased as a result of the Indemnitee's failure
to give timely notice; provided, further, however, that if the Indemnitee fails
to give such Claim Notice prior to the expiration of the General Liability
Period or the Tax Liability Period, as applicable, all rights of the Indemnitee
to assert any such Claims shall terminate and be forever waived. The Claim
Notice shall state (i) the aggregate amount of the Xxxxxxx Recoverable Losses or
the Shareholders Recoverable Losses (in either case, "Recoverable Losses") as to
which indemnification is being sought (which amount may be estimated and updated
from time to time); (ii) the components of the amount of Recoverable Losses for
which indemnification is being sought (which components may be estimated and
updated from time to time); and (iii) the specific grounds upon which the Claim
for indemnification is being made. The right of the Indemnitee to
indemnification for a Claim shall be deemed to be accepted by the Indemnitor
unless, within 30 days after the Indemnitor's receipt of the Claim Notice, the
Indemnitor shall notify the Indemnitee in writing that it objects to the right
of the Indemnitee to indemnification with respect to the Claim.
(b) Control of Litigation; Mutual Cooperation. If a Claim is
based upon a claim asserted by a third party against the Indemnitee (a "Third
Party Claim") and the Indemnitor denies liability for the Claim hereunder, the
Indemnitee shall be entitled to control the defense of the Third Party Claim,
including, without limitation, the employment of counsel and the right to settle
the Third Party Claim without any participation by or consent from the
Indemnitor. All fees and expenses of counsel retained by the Indemnitee to
defend such Third Party Claim, expert witness fees and other costs incurred in
such action, shall be payable by the Indemnitee defending such Third Party
Claim; provided, however, that if such Third Party Claim results in a
Recoverable Loss for which the Indemnitor, notwithstanding any denial of
liability, is found to be liable hereunder, such reasonable fees and expenses of
counsel, expert witness fees and other reasonable costs incurred in such action
shall be deemed to be included in such Recoverable Loss and payable by the
Indemnitor to the extent and under the limitations provided in this Article 12.
If the Indemnitor does not deny liability for the Claim hereunder, the
Indemnitor shall be entitled, in his or its discretion, to assume the defense of
the Third Party Claim, including, without limitation, the employment of counsel
reasonably satisfactory to the Indemnitee; provided, however, that until the
amount of Xxxxxxx Recoverable Losses exceeds $100,000, the Indemnitee, if
Xxxxxxx or a Xxxxxxx Indemnitee, shall be entitled to assume the defense of the
Third Party Claim, including, without limitation, employment of counsel
reasonably satisfactory to the Shareholders. If the Indemnitor does not deny
liability for the Claim hereunder, but does not elect to assume the defense of
the Third Party Claim, the Indemnitee shall be entitled to assume the defense of
the Third Party Claim. Regardless of which
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party is controlling the defense of the Third Party Claim for which the
Indemnitor admits liability hereunder, (i) the Indemnitor and the Indemnitee
shall act in good faith; (ii) no settlement of the Third Party Claim may be
agreed to without the written consents of the Indemnitor and the Indemnitee,
which consents shall not be unreasonably withheld; (iii) the reasonable fees and
expenses of counsel retained to defend the Third Party Claim, expert witness
fees and other costs incurred in such action shall be deemed to be included in
such Recoverable Losses and shall be payable by the Indemnitor to the extent and
under the limitations provided in this Article 12; and (iv) the party
controlling the defense of the Third Party Claim shall deliver, or cause to be
delivered, to the other party copies of all correspondence, pleading, motions,
briefs, appeals or other written statements relating to or submitted in
connection with the defense of the Third Party Claim, and timely notices of, and
the right to participate in (as an observer), any hearing or other court
proceeding relating to the Third Party Claim.
(c) Resolution of Disputes. The Indemnitor and the Indemnitee
shall undertake in good faith to or to have their representatives promptly meet
and attempt to resolve all disputes regarding indemnification. If the Indemnitor
and the Indemnitee are unable to resolve such disputes within 20 days, the
resolution of the disputes shall be referred to and settled by arbitration to be
held in San Diego, California and conducted in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association. In any
such action initiated by a Xxxxxxx Indemnified Party, or in any cross-complaint
by a Xxxxxxx Indemnified Party (i) such Xxxxxxx Indemnified Party shall use
reasonable best efforts to make each Principal Shareholder a party to such
Arbitration and (ii) in any action to collect a judgment related to Xxxxxxx
Recoverable Losses, such Xxxxxxx Indemnified Party shall use reasonable best
efforts to collect such losses from each Principal Shareholder, such that no
Principal Shareholder would, absent a default by one of them, pay more than his
or her pro rata share of the Xxxxxxx Recoverable Losses, which pro rata share
shall be set forth in a contribution or cross-indemnity agreement among the
Principal Shareholders, (a copy of which will be provided to Xxxxxxx). The
foregoing shall not limit the authority of a Shareholder Representative to act
on behalf of the Principal Shareholders with respect to any claim by a Xxxxxxx
Indemnified Party. Judgment upon the award may be entered in any court of
competent jurisdiction or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be. The
successful or prevailing party or parties shall be entitled to recover all
attorneys' fees, expert witness fees and other costs incurred in such action, in
addition to any other relief to which it or they may be entitled. Such
attorneys' fees, expert witness fees and other costs shall be payable in cash.
12.8 Indemnity as Exclusive Remedy. Each party hereto acknowledges and
agrees that, from and after the Closing Date, its sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this Agreement,
shall be pursuant to the indemnification provisions set forth in this Article
12, except that nothing in this Agreement shall be deemed to constitute a waiver
of any tort claims of, or causes of action arising from, fraudulent
misrepresentation or deceit, or a waiver of any equitable remedies that a court
or arbitrator may determine that a party may obtain.
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ARTICLE 13
POST-CLOSING COVENANTS
13.1 Resale. In order to preserve the pooling-of-interests treatment of
the combination, each Affiliate hereby agrees not to sell, transfer or convey
Xxxxxxx Common Stock issued in connection with the Merger until the date on
which Xxxxxxx has filed with the Commission consolidated financial statements of
Xxxxxxx including combined results of operations of at least 30 days after the
Merger, in accordance with Regulation S-X under the Exchange Act, as amended
(such date being the "Eligible Resale Date").
13.2 Surviving Corporation Option Plan. As promptly as possible
following the Effective Time (and in any event in no more than 45 days), Xxxxxxx
shall cause the Surviving Corporation to adopt a stock option plan similar to
that in place at Xxxxxxx Technologies Systems Division, Inc. ("Systems"). The
number of shares in the plan pool would equal 15% of the outstanding shares of
the Surviving Corporation, and of the total of 15% in the option pool, 8% would
be utilized initially for options granted to key employees of the Surviving
Corporation and 2% would be utilized initially for certain Xxxxxxx officers,
consistent with current practice. The balance would be reserved for key
employees hired by the Company in the future. In addition, Xxxxxxx plans to
offer certain employees of the Surviving Corporation its standard Xxxxxxx Option
Program.
13.3 Surviving Corporation Board of Advisors. Immediately after the
Effective Time Xxxxxxx will cause the Surviving Corporation to establish a Board
of Advisors that would include the current independent directors of the Company.
The Board of Advisors will hold regular meetings for at least one year following
the Effective Time.
13.4 Organization. So long as feasible in light of Xxxxxxx'x overall
goals for financial performance and increasing shareholder value, the Surviving
Corporation shall be part of the Systems organization and the President of the
Surviving Corporation will report to the President of Systems. Effective as of
the first day of the month following the Effective Time, Systems and the
Surviving Corporation shall enter into an asset transfer agreement whereby
Systems' Radiation Source Business would be placed in the Surviving Corporation.
The Surviving Corporation's executive officers would manage the day-to-day
operations of the Surviving Corporation and the Radiation Source Business,
subject to oversight by Xxxxxxx and consistent with other Xxxxxxx subsidiaries.
ARTICLE 14
SHAREHOLDER REPRESENTATIVES
14.1 Appointment. Each Principal Shareholder by executing this Agreement
appoints each of the Shareholder Representatives as his, her or its agent and
attorney-in-fact for the purposes set
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forth herein. Each Shareholder Representative, acting alone or together with the
other Shareholder Representatives, shall have the full and exclusive power and
authority to act in each Principal Shareholder's name, place and stead with
respect to all matters relating to this Agreement and the transactions
contemplated hereby, including, without limitation:
(i) To modify, waive and amend, and execute and
acknowledge and deliver to Xxxxxxx such modifications, waivers and amendments,
to any provision of the Agreement as such Shareholder Representative shall
approve, the approval of such amendments, waivers and modifications by such
Shareholder Representative and all of the terms and conditions thereof to be
conclusively evidenced by the execution and delivery of such amendments, waivers
and modifications by such Shareholder Representative.
(ii) To complete, modify, amend, execute, acknowledge
and deliver all instruments, documents, certificates and instructions as such
Shareholder Representative deems necessary in order to effect the transactions
contemplated by this Agreement.
(iii) To retain legal counsel in connection with all
matters and things set forth or necessary with respect to this Agreement and the
Escrow Agreement.
(iv) To ask, demand, xxx for, levy, recover and receive
all sums of money, debts, dues and other demands whatsoever which may be due,
owing and payable to such Shareholder under the terms of this Agreement.
(v) To negotiate, defend and settle all claims asserted
by, and to resolve all disputes with, the Xxxxxxx Indemnified Parties with
respect to this Agreement and the transactions contemplated hereby, including,
without limitation, those arising in connection with any claim for
indemnification, and to pay such persons any amounts due with respect to such
claims, and to settle any dispute or pay any judgment in favor of such Xxxxxxx
Indemnified Parties by releasing Exchange Shares held in Escrow to Xxxxxxx.
(vi) To receive all notices under this Agreement and the
Escrow Agreement.
(vii) To make any other decision or election or take any
other action on behalf of such Shareholder relating to the subject matter of
this Agreement and the Escrow Agreement and the transactions contemplated hereby
and thereby.
14.2 Appointment Irrevocable. This appointment is coupled with an
interest and is irrevocable until such time as all claims asserted by, and
disputes with, the Xxxxxxx Indemnified Parties have been finally satisfied,
waived or otherwise resolved, except that a successor or successors may be
appointed pursuant to Section 14.4 hereof. Subject to the terms and conditions
hereof, any and all action taken by either Shareholder Representative with
respect to this Agreement shall be binding on each Shareholder.
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14.3 Shareholder Representatives Held Harmless. Each Principal
Shareholder agrees to hold each Shareholder Representative free and harmless
from any and all loss, cost, claim, expense, damage or liability which he may
incur or sustain as a result of any action taken by him in good faith pursuant
to his appointment as agent and attorney-in-fact under this Agreement.
14.4 Duration; Succession. The appointment of a Shareholder
Representative hereunder shall be effective until the last date upon which all
claims for indemnification under Article 12 hereof have been resolved or the
time for bringing any such claims has expired; and all disputes involving
Xxxxxxx or any of the Shareholders regarding any of the matters subject to
indemnity have been resolved; provided, however, that in the event of the death
or incapacity of a Shareholder Representative, Xxxx Xxxxxxx, followed by Xxxxx
Xxxxxxxxxx, shall succeed to the duties of the deceased or incapacitated
Shareholder Representative hereunder, and shall act as attorney-in-fact and
representative for the Shareholders as if he were appointed attorney-in-fact and
representative hereunder on the date of such death or incapacity. In the event
no named person shall be available to serve as Shareholder Representative, the
estate of Xxxxxx Xxxxxxxxxx shall select such a person.
ARTICLE 15
GENERAL PROVISIONS
15.1 Entire Agreement; Modifications; Waiver. This Agreement and the
agreements ancillary hereto, supersede any and all agreements heretofore made,
written or oral, relating to the subject matter hereof including without
limitation the Letter of Intent dated November 4, 1998 and constitute the entire
agreement of the parties relating to the subject matter hereof. This Agreement
may be amended only by an instrument in writing signed by Xxxxxxx on the one
hand and the Company and a Shareholder Representative on the other hand.
Inspection of documents or the receipt of information pursuant to this Agreement
shall not constitute a waiver of any representation, warranty, covenant or
condition hereunder. No waiver shall be binding unless executed in writing by
the party making such waiver.
15.2 Severability. If any clause or provision of this Agreement shall be
held invalid or unenforceable by the final determination of a court of competent
jurisdiction, and all appeals therefrom shall have failed or the time for such
appeals shall have expired, such clause or provision shall be deemed eliminated
from this Agreement but the remaining provisions shall nevertheless be given
full force and effect.
15.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto, and their respective
successors and assigns.
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15.4 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
15.5 Governing Law. This Agreement shall be construed and interpreted in
accordance with the internal substantive laws of the State of California.
15.6 Notices. All notices required or desired to be given hereunder
shall be given in writing and signed by the party so giving notice, and shall be
effective when personally delivered, one business day after transmission if sent
by facsimile and appropriate confirmation is received, or five (5) days after
being deposited in the United States mail, as certified or registered mail,
return receipt requested, first class postage and fees prepaid, addressed as set
forth below. Any party from time to time may change such party's address for
giving notice by giving notice thereof in the manner outlined above:
If to the Company:
Space Electronics Inc.
0000 Xxxxxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
If to Xxxxxxx or Newco:
Xxxxxxx Technologies, Inc.
0000 Xxx Xxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx & XxXxxxxx
000 X. Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
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If to the Shareholder Representatives:
Space Electronics Inc.
0000 Xxxxxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxx, Forward, Xxxxxxxx & Scripps LLP
000 X. Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
15.7 Expenses. None of the Company, the Shareholders, or Xxxxxxx is or
shall be obligated to any person for any finder's fee in connection with this
Merger, other than the Company's liability to Xxxxxx Xxxxxxxx L.L.P. and,
whether or not the acquisition is consummated, each of the Company and Xxxxxxx
shall pay their own expenses (including outside legal and accounting fees)
incident to the negotiation, preparation of the definitive written agreement,
filings and preparation of documents in connection with the issuance of shares,
and any other documents prepared in connection therewith and consummation of the
acquisition.
15.8 Recovery of Litigation Costs. If any legal action or arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of the Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
15.9 Confidentiality. From and after the date hereof, Xxxxxxx, the
Company and their affiliates, agents or representatives shall not disclose or
communicate to any person, firm or corporation in any manner whatsoever any
Confidential Information (as defined below) of the other, which Xxxxxxx or the
Company learns, discovers or otherwise acquires pursuant to this Agreement and
the transactions contemplated hereunder; provided, however, that Xxxxxxx and the
Company shall be permitted to make such disclosures or communications to their
financial advisors, consultants, attorneys, accountants and lenders provided
that such Confidential Information shall be accompanied by directions that such
information is to remain confidential in accordance with the provisions
contained herein. The term "Confidential Information," as used herein, means all
information of a business or technical nature relative to Xxxxxxx'x and the
Company's businesses currently being conducted by Xxxxxxx and the Company.
Xxxxxxx'x and the Company's obligations
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with respect to such Confidential Information shall be of no effect to the
extent, and only to the extent (a) such Confidential Information is required to
be disclosed by any law, rule or regulation or by any applicable judgment, order
or decree of any court or governmental body having jurisdiction, (b) such
information is now or hereafter becomes part of the public domain, to the extent
it is not public as a result of breach of this Agreement, (c) such information
is already in the possession of Xxxxxxx or the Company at the time disclosure to
Xxxxxxx or the Company occurs under this Agreement, so long as such prior
possession was not knowingly acquired by Xxxxxxx or the Company by
misappropriation or other improper means or under a prior agreement of
confidentiality, or (d) such information has come into the possession of Xxxxxxx
or the Company from a third party without breach of this Agreement, or without
any breach by the third party of a confidentiality obligation to Xxxxxxx or the
Company, known to the other, or without misappropriation or other improper means
on the part of the third party and made known to Xxxxxxx or the Company.
Previously entered confidentiality agreements between the parties will continue
in full force and effect. In the event of termination of this Agreement pursuant
to Article 10, Xxxxxxx and the Company will not use any such Confidential
Information of another party and will promptly return to the other parties all
documents, records and materials, including all copies thereof, that contain
Confidential Information of that party.
15.10 No Third Parties Benefitted. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto, their successors
and assigns, and no other person or persons shall have any right or action under
this Agreement.
15.11 Recitals, Schedules and Exhibits. The recitals, schedules and
exhibits to this Agreement are incorporated herein and, by this reference, made
a part hereof as if fully set forth at length herein.
15.12 Section Headings. The section headings used herein are inserted
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SPACE ELECTRONICS INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer
PRINCIPAL SHAREHOLDERS:
*
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
*
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
*
-----------------------------------------
Name: Xxxx X. Xxxxxxx
*
-----------------------------------------
Name: W. Xxx Xxxxxx, Ph.D.
*
-----------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
*
-----------------------------------------
Name: Xxxxx Xxxxxx
*
-----------------------------------------
Name: Xxxx Xxxxxx
*By /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Attorney-in-Fact
67
XXXXXXX TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer
MT ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer
