AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SS&C TECHNOLOGIES, INC.,
SECURITIES SOFTWARE ACQUISITION CORP.,
XXXXXX XXXXX SYSTEMS, INC.,
XXXXXX X. XXXXXX,
XXXXX X. XXXXXX,
XXXXXXX X. XXXXX,
XXXX X. XXXXXX
AND
XXXXX X. XXXXXXX
December 31, 1997
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 1
1.1 The Merger 1
1.2 The Closing 1
1.3 Actions at the Closing 2
1.4 Additional Action 2
1.5 Conversion of Shares 2
1.6 Exchange of Shares 3
1.7 Dividends. 4
1.8 Fractional Shares 4
1.9 Escrow. 5
1.10 Articles of Incorporation 5
1.11 By-laws 5
1.12 Directors and Officers 5
1.13 No Further Rights 5
1.14 Closing of Transfer Books 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PRINCIPAL STOCKHOLDERS 6
2.1 Organization, Qualification and Corporate Power 6
2.2 Capitalization 6
2.3 Authorization of Transaction 7
2.4 Noncontravention 7
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2.5 Subsidiaries 7
2.6 Financial Statements 8
2.7 Absence of Certain Changes 8
2.8 Undisclosed Liabilities 8
2.9 Tax Matters 8
2.10 Assets 10
2.11 Real Property 10
2.12 Intellectual Property 10
2.13 Inventory 13
2.14 Real Property Leases. 13
2.15 Contracts 13
2.16 Accounts Receivable 15
2.17 Insurance 15
2.18 Litigation 15
2.19 Product Warranty 15
2.20 Employees 16
2.21 Employee Benefit Plans 16
2.22 Environmental Matters 17
2.23 Legal Compliance 17
2.24 Permits 17
2.25 Certain Business Relationships With Affiliates 18
2.26 Brokers' Fees 18
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2.27 Books and Records 18
2.28 Customers and Suppliers 18
2.29 Pooling 18
2.30 Disclosure 18
2.31 Additional Representations and Warranties of the Stockholders. 19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY 20
3.1 Organization 20
3.2 Capitalization 20
3.3 Authorization of Transaction 21
3.4 Noncontravention 21
3.5 Reports and Financial Statements 21
3.6 Absence of Material Adverse Changes 22
3.7 Brokers' Fees 22
3.8 Legal Compliance. 22
3.9 Disclosure 22
3.10 Negotiations 23
ARTICLE IV COVENANTS 23
4.1 Best Efforts. 23
4.2 Notices and Consents 23
4.3 Operation of Business 23
4.4 Full Access 25
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4.5 Notice of Breaches 25
4.6 Agreements from Certain Affiliates of the Company. 25
4.7 Listing of Merger Shares 26
4.8 Bonus Pool. 26
4.9 Option Pool 26
4.10 Repayment of Loans; Deferred Compensation. 26
4.11 Tax-Free Reorganization 26
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER 28
5.1 Conditions to Each Party's Obligations 28
5.2 Conditions to Obligations of the Buyer and
the Transitory Subsidiary 29
5.3 Conditions to Obligations of the Company 30
ARTICLE VI INDEMNIFICATION 32
6.1 Indemnification 32
6.2 Method of Asserting Claims 33
6.3 Survival. 34
6.4 Limitations 34
ARTICLE VII TERMINATION 35
7.1 Termination of Agreement 35
7.2 Effect of Termination 36
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ARTICLE VIII REGISTRATION RIGHTS 36
8.1 Registration of Shares 36
8.2 Limitations on Registration Rights 37
8.3 Registration Procedures 37
8.4 Requirements of Principal Stockholders 38
8.5 Indemnification 39
8.6 Assignment of Rights 39
ARTICLE IX DEFINITIONS 39
ARTICLE X MISCELLANEOUS 41
10.1 Press Releases and Announcements 41
10.2 No Third-Party Beneficiaries 41
10.3 Entire Agreement 41
10.4 Succession and Assignment 42
10.5 Counterparts 42
10.6 Headings 42
10.7 Notices 42
10.8 Governing Law 43
10.9 Amendments and Waivers 43
10.10 Severability 43
10.11 Expenses 44
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10.12 Specific Performance 44
10.13 Construction 44
10.14 Incorporation of Exhibits and Schedules 44
Exhibits
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Affiliate Agreement
Exhibit C - Form of Opinion of Xxxxx, Xxxxx & Xxxxx
Exhibit D - Form of Xxxxxx X. Xxxxxx Employment Agreement
Exhibit E - Form of Xxxxx X. Xxxxxx Employment Agreement
Exhibit F - Form of Opinion of Xxxx and Xxxx LLP
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered
into as of December 31, 1997 by and among SS&C Technologies, Inc., a
Delaware corporation (the "Buyer"), Securities Software Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of the Buyer (the
"Transitory Subsidiary"), Xxxxxx Xxxxx Systems, Inc., an Illinois
corporation (the "Company"), and Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxxxxx
X. Xxxxx, Xxxx X. Xxxxxx and Xxxxx X. Xxxxxxx (individually, a
"Stockholder" and collectively, the "Stockholders"). The Buyer, the
Transitory Subsidiary, the Company and the Stockholders are referred to
collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary
into the Company in a transaction that will qualify as a reorganization
under Section 368 of the Code (as defined below) and which will be
accounted for as a "pooling of interests" for financial accounting
purposes. In such merger, the Stockholders will receive capital stock of
the Buyer in exchange for their capital stock of the Company.
Now, therefore, in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1. The Merger. Upon and subject to the terms and conditions
of this Agreement, the Transitory Subsidiary shall merge with and into the
Company (with such merger referred to herein as the "Merger") at the
Effective Time (as defined below). From and after the Effective Time, the
separate corporate existence of the Transitory Subsidiary shall cease and
the Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time at which
the Company and the Transitory Subsidiary file the Certificate of Merger
prepared and executed in accordance with the relevant provisions of the
Delaware General Corporation Law (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, and file the Articles of
Merger prepared and executed in accordance with the relevant provisions of
The Business Corporation Act of the State of Illinois (the "Articles of
Merger") with the Secretary of State of the State of Illinois (the
Certificate of Merger and Articles of Merger are collectively referred to
herein as the "Merger Documents"). The Merger shall have the effects set
forth in Section 259 of the Delaware General Corporation Law and Section
11.50 of The Business Corporation Act of the State of Illinois.
2. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Xxxx
and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 commencing at
10:00 a.m., local time, on the date hereof (the "Closing Date").
3. Actions at the Closing. At the Closing, (a) the Company
shall deliver to the Buyer and the Transitory Subsidiary the various
certificates, instruments and documents referred to in Section 5.2, (b) the
Buyer and the Transitory Subsidiary shall deliver to the Company the
various certificates, instruments and documents referred to in Section 5.3,
(c) the Company and the Transitory Subsidiary shall file the appropriate
Merger Documents with the Secretaries of State of the States of Delaware and
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Illinois, (d) the Buyer shall deliver certificates for the Initial Shares
(as defined below) to the Stockholders in accordance with Section 1.6 and
(e) the Buyer, the Indemnification Representatives (as defined therein) and
the Escrow Agent (as defined therein) shall execute and deliver the Escrow
Agreement attached hereto as Exhibit A (the "Escrow Agreement") and the
Buyer shall deliver to the Escrow Agent a certificate for the Escrow Shares
(as defined below) being placed in escrow on the Closing Date pursuant to
Section 1.9.
4. Additional Action. The Surviving Corporation may, at any
time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or
the Transitory Subsidiary, in order to consummate the transactions
contemplated by this Agreement.
5. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of any Party or the holder of
any of the following securities:
a. Each share of common stock, no par value per share,
of the Company (the "Company Shares") issued and outstanding immediately
prior to the Effective Time (other than Company Shares owned beneficially
by the Buyer or the Transitory Subsidiary and Company Shares held in the
Company's treasury) shall be converted into and represent the right to
receive (subject to the provisions of Section 1.9) such number of shares of
common stock, $.01 par value per share, of the Buyer (the "Buyer Common
Stock") as is equal to the Conversion Ratio. The "Conversion Ratio" shall
be equal to a fraction, (x) the numerator of which shall be 1,000,000 and
(y) the denominator of which shall be the number of Company Shares issued
and outstanding immediately prior to the Effective Time (other than Company
Shares held in the Company's treasury). The Conversion Ratio shall be
subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or similar event affecting the Buyer Common
Stock between the date of this Agreement and the Effective Time. The
Stockholders, who represent all of the stockholders of record of the
Company, shall be entitled to receive immediately 90% of the shares of
Buyer Common Stock into which their Company Shares were converted pursuant
to this Section 1.5(a) (the "Initial Shares"); the remaining 10% of the
shares of Buyer Common Stock into which Company Shares were converted
pursuant to this Section 1.5(a) (the "Escrow Shares") shall be deposited in
escrow pursuant to Section 1.9 and shall be held and disposed of in
accordance with the terms of the Escrow Agreement. The Initial Shares and
the Escrow Shares shall together be referred to herein as the "Merger
Shares."
b. Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled
and retired without payment of any consideration therefor.
c. Each share of common stock, $.01 par value per
share, of the Transitory Subsidiary issued and outstanding immediately
prior to the Effective Time shall be converted into and thereafter evidence
one share of common stock, no par value per share, of the Surviving
Corporation.
6. Exchange of Shares; Restrictions on Transfer
a. From and after the Effective Time, each holder of
an outstanding certificate or certificates which represented, immediately
prior to the Effective Time, Company Shares converted into
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Merger Shares pursuant to Section 1.5 ("Certificates") shall have the right
to surrender each Certificate to the Buyer, and receive in exchange
therefor a certificate representing the whole number of Initial Shares
issuable pursuant to Section 1.5(a). Until surrendered, each outstanding
Certificate which prior to the Effective Time represented Company Shares
shall be deemed for all purposes to evidence the right to receive the whole
number of Initial Shares into which the Company Shares have been converted.
From and after the Effective Time, the holders of Company Shares shall
cease to have any rights in respect of such Company Shares and their rights
shall be solely in respect of the Buyer Common Stock into which such
Company Shares have been converted. From and after the Effective Time,
there shall be no further registration of transfers on the records of the
Company of Company Shares outstanding immediately prior to the Effective
Time.
b. Unless otherwise agreed to in writing, Initial
Shares will not be issued in the name of a person other than the person in
whose name the Certificate(s) surrendered in exchange therefor is
registered.
c. In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed, the Buyer
shall issue in exchange for such lost, stolen or destroyed Certificate the
Initial Shares issuable in exchange therefor pursuant to Section 1.5(a).
The Board of Directors of the Buyer may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to submit to the Buyer an affidavit
and to give to the Buyer an indemnity against any claim that may be made
against the Buyer with respect to the Certificate alleged to have been
lost, stolen or destroyed.
d. The Stockholders acknowledge that the Merger
Shares will not have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or applicable state securities laws as of
the Closing Date, and that any resale inconsistent with the Securities Act
may create liability on their part and/or the part of the Buyer, and agree
not to assign, sell, pledge, transfer or otherwise dispose of or transfer
any Merger Shares unless registered under the Securities Act and applicable
state securities laws, or an opinion is given by counsel satisfactory to
the Buyer that such registration is not required.
e. The Stockholders acknowledge that certificates
representing the Merger Shareswill bear the following legend:
"The shares represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, and may not be sold, transferred or otherwise
disposed of in the absence of an effective registration
statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such
registration is not required."
7. Dividends. No dividends or other distributions that are
payable to the holders of record of Buyer Common Stock as of a date on or
after the Closing Date shall be paid to former Stockholders entitled by
reason of the Merger to receive Initial Shares until such holders surrender
their Certificates in accordance with Section 1.6. Upon such surrender, the
Buyer shall pay or deliver to the persons in whose
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name the certificates representing such Initial Shares are issued any
dividends or other distributions that are payable to the holders of record
of Buyer Common Stock as of a date on or after the Closing Date and which
were paid or delivered between the Effective Time and the time of such
surrender; provided that no such person shall be entitled to receive any
interest on such dividends or other distributions.
8. Fractional Shares. No certificates or scrip representing
fractional Initial Shares shall be issued to former Stockholders upon the
surrender for exchange of Certificates, and such former Stockholders shall
not be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with respect to
any fractional Initial Shares that would otherwise be issued to such former
Stockholders. In lieu of any fractional Initial Shares that would otherwise
be issued, each former Stockholder that would have been entitled to receive
a fractional Initial Share shall, upon proper surrender of such person's
Certificates, receive a cash payment equal to the closing price per share
of the Buyer Common Stock on the Nasdaq National Market, as reported by the
Nasdaq Stock Market on the business day immediately preceding the Closing
Date, multiplied by the fraction of a share that such Stockholder would
otherwise be entitled to receive.
9. Escrow.
a. On the Closing Date, the Buyer shall deliver to
the Escrow Agent a certificate (issued in the name of the Escrow Agent or
its nominee) representing the Escrow Shares, as described in Section
1.5(a), for the purpose of securing the indemnification obligations of the
Stockholders set forth in this Agreement. The Escrow Shares shall be held
by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrow Shares shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any party, and shall be held and disbursed
solely for the purposes and in accordance with the terms of the Escrow
Agreement.
b. The execution of this Agreement by the Stockholders
and the approval of the Merger by the Stockholders shall constitute
approval of the Escrow Agreement and of the arrangements relating thereto,
including without limitation the placement of the Escrow Shares in escrow
and the appointment of the Indemnification Representatives.
10. Articles of Incorporation. The Articles of Incorporation
of the Surviving Corporation shall be the same as the Articles of
Incorporation of the Company immediately prior to the Effective Time.
11. By-laws. The By-laws of the Surviving Corporation shall
be the same as the By-laws of the Company immediately prior to the Effective
Time.
12. Directors and Officers. The directors of the Transitory
Subsidiary shall become the directors of the Surviving Corporation as of
the Effective Time. The officers of the Company shall remain as officers of
the Surviving Corporation after the Effective Time, retaining their
respective positions, except as specified by the Buyer pursuant to Section
5.2(g). The directors and officers shall each hold office in accordance
with the Articles of Incorporation and By-laws of the Surviving
Corporation.
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13. No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of
Certificates shall cease to have any rights with respect thereto, except as
provided herein or by law.
14. Closing of Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of
Company Shares shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for Initial Shares in accordance with Section
1.5(a), subject to Section 1.9.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS
Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx (individually, a "Principal
Stockholder" and collectively, the "Principal Stockholders") and, prior to
the Effective Time, the Company, jointly and severally, represent and
warrant to the Buyer and, following the Effective Time, the Surviving
Corporation that the statements contained in this Article II are true and
correct, except as set forth in the disclosure schedule attached hereto
(the "Disclosure Schedule"). The Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained
in this Article II, and the disclosures in any paragraph of the Disclosure
Schedule shall qualify other paragraphs in the Disclosure Schedule to the
extent relevant.
1. Organization, Qualification and Corporate Power. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois. The Company is duly
qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its business or
the ownership or leasing of its properties requires such qualification,
except where the failure to so qualify would not have a material adverse
effect on the business of the Company. The Company has all requisite
corporate power and authority to carry on the business in which it is
engaged and to own and use the properties owned and used by it. The Company
has furnished to the Buyer true and complete copies of its Article of
Incorporation and By-laws, each as amended and as in effect on the date
hereof. The Company is not in default under, or in violation of any
provision of, its Articles of Incorporation or By-laws.
2. Capitalization. The authorized capital stock of the
Company consists of 100,000 Company Shares, of which 10,400 shares are
issued and outstanding and no shares are held in the treasury of the
Company. Section 2.2 of the Disclosure Schedule sets forth a complete and
accurate list of all stockholders of the Company, indicating the number of
Company Shares held by each stockholder. All of the issued and outstanding
Company Shares are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. There are no outstanding
or authorized options, warrants, rights, agreements or commitments to which
the Company is a party or which are binding upon the Company providing for
the issuance, disposition or acquisition of any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company. There are no agreements, voting
trusts, proxies or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares. All of the
issued and outstanding Company Shares were issued in compliance with
applicable federal and state securities laws.
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3. Authorization of Transaction. The Company has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement and the performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the
part of the Company. All of the Stockholders have voted to approve this
Agreement in accordance with The Business Corporation Act of the State of
Illinois, and no Stockholder may assert dissenters' rights in accordance
with Section 11.70 of such Business Corporation Act. This Agreement has
been duly and validly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
4. Noncontravention. Except for the filing of the
Certificate of Merger as required by the Delaware General Corporation Law
and the filing of the Articles of Merger as required by The Business
Corporation Act of the State of Illinois, neither the execution and
delivery of this Agreement by the Company, nor the consummation by the
Company of the transactions contemplated hereby, will (a) conflict with or
violate any provision of the Articles of Incorporation or By-laws of the
Company; (b) require on the part of the Company any filing with, or any
permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"); (c) conflict
with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel,
or require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest
(as defined below) or other arrangement to which the Company is a party or
by which the Company is bound or to which any of its assets is subject; (d)
result in the imposition of any Security Interest upon any assets of the
Company or (e) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or any of its properties or assets.
For purposes of this Agreement, "Security Interest" means any mortgage,
pledge, security interest, encumbrance, charge, or other lien (whether
arising by contract or by operation of law), other than (i) mechanic's,
materialmen's and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement and
similar legislation and (iii) liens on goods in transit incurred pursuant
to documentary letters of credit, in each case arising in the ordinary
course of business consistent with past custom and practice (including with
respect to frequency and amount) ("Ordinary Course of Business") of the
Company and not material to the Company.
5. Subsidiaries. The Company does not own or control,
directly or indirectly, any shares of capital stock of any corporation or
have any equity interest in any partnership, joint venture, trust,
association or other non-corporate business enterprise.
6. Financial Statements. The Company has provided the Buyer
with the Company's unaudited balance sheets and unaudited statements of
income and cash flows for and as of each of the fiscal years ended December
31, 1995 and 1996 and for and as of the eleven months ended November 30,
1997 (the "Most Recent Period End"). Such financial statements
(collectively, the "Financial Statements") have been prepared in accordance
with good business practice applied on a consistent basis throughout the
periods covered thereby (with recording of work in progress, assets and
revenues as described in Section 2.6 of the Disclosure Schedule), fairly
present the financial condition, results of operations and cash flows of
the Company as of the respective dates thereof and for the periods referred
to
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therein and are consistent with the books and records of the Company. The
Financial Statements have not been prepared in accordance with United
States generally accepted accounting principles ("GAAP").
7. Absence of Certain Changes. Since the Most Recent Period
End, (a) there has not been any material adverse change in the business,
properties, operations, financial condition, assets or liabilities of the
Company, nor has there occurred any event or development which could
reasonably be foreseen to result in such a material adverse change in the
future, and (b) the Company has not taken any of the actions set forth in
paragraphs (a) through (o) of Section 4.3.
8. Undisclosed Liabilities. The Company has no liability
(whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for
(a) liabilities shown on the Company's balance sheet as of November 30,
1997 (the "Most Recent Balance Sheet"), (b) liabilities which have arisen
since the Most Recent Period End in the Ordinary Course of Business and
which are similar in nature and amount to the liabilities which arose
during the comparable period of time in the immediately preceding fiscal
period and (c) contractual liabilities incurred in the Ordinary Course of
Business which are not required by good business practice (not necessarily
GAAP) to be reflected on a balance sheet.
9. Tax Matters.
a. For all periods since its election under Subchapter
S of the Internal Revenue Code of 1986, as amended (the "Code"), effective
on January 1, 1995, the Company has been qualified as an S Corporation
pursuant to an election validly made under Subchapter S of the Code (which
election has not been revoked or terminated for any such period), and the
Company has not been subject to federal corporate income taxes for such
periods.
b. The Company has filed all Tax Returns (as defined
below) required to be filed by it and all such Tax Returns were correct and
complete in all material respects. The Company has paid all Taxes (as
defined below) imposed on it, or for which it is liable, whether to
Governmental Entities (as, for example, under law) or to other persons or
entities (as, for example, under a tax allocation agreement), due on or
before the date hereof except for such Taxes that the Company is contesting
in good faith or which would not have a material adverse effect on the
Company. The unpaid Taxes of the Company for tax periods through the date
of the Most Recent Balance Sheet do not exceed the accruals and reserves
for Taxes set forth on the Most Recent Balance Sheet. The Company has no
actual or potential liability for any Tax obligation of any taxpayer
(including without limitation any affiliated group of corporations or other
entities that included the Company during a prior period) other than the
Company. All Taxes that the Company is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity, except as would
not have a material adverse effect on the Company. For purposes of this
Agreement, "Taxes" means all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, severance, stamp,
occupation, windfall profits, customs, duties, real property, personal
property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, payroll and franchise taxes imposed by the United States of
America or any state, local or foreign government, or any agency thereof,
or other political subdivision of the United States or any such government,
and any interest, fines,
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penalties, assessments or additions to tax resulting from, attributable to
or incurred in connection with any tax or any contest or dispute thereof.
For purposes of this Agreement, "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
c. The Company has delivered to the Buyer correct
and complete copies of all federal income Tax Returns, examination reports
and statements of deficiencies assessed against or agreed to by the Company
since January 1, 1995. No examination or audit of any Tax Returns of the
Company by any Governmental Entity is currently in progress or, to the
knowledge of the Company and the Principal Stockholders, threatened or
contemplated. Except as set forth in Section 2.9(c) of the Disclosure
Schedule, the Company has not waived any statute of limitations with
respect to taxes or agreed to an extension of time with respect to a tax
assessment or deficiency.
d. The Company is not a "consenting corporation"
within the meaning of Section 341(f) of the Code, and none of the assets of
the Company is subject to an election under Section 341(f) of the Code. The
Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(l)(A)(ii) of the Code. The Company is
not a party to any Tax allocation or sharing agreement.
e. The Company is not and has never been a member of
an "affiliated group" of corporations (within the meaning of Section 1504
of the Code). The Company has not made an election under Treasury Reg.
Section 1.1502-20(g). The Company is not, nor has it ever been, required to
make a basis reduction pursuant to Treasury Reg. Section 1.1502-20(b) or
Treasury Reg. Section 1.337(d)-2(b).
f. None of the assets of the Company is "tax exempt
use property" within the meaning of Section 168(h) of the Code. The Company
has not agreed to make, nor is required to make, any adjustments under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
10. Assets. The Company owns or leases all tangible assets
necessary for the conduct of its business as presently conducted. Each such
tangible asset is free from material defects, has been maintained in
accordance with normal industry practice, is in good operating condition
and repair (subject to normal wear and tear) and is suitable for the
purposes for which it presently is used. No asset of the Company (tangible
or intangible) is subject to any Security Interest. The assets set forth on
Section 2.10 of the Disclosure Schedule, which assets have an aggregate
value of less than $50,000, are leased from a general partnership of which
Xxxxxx X. Xxxxxx and Xxxxxx Xxxxx are the sole general partners.
11. Real Property. The Company does not own any real property.
12. Intellectual Property.
a. The Company owns or has the right to use all
Intellectual Property (as defined below) used in the operation of its
business or necessary for the operation of its business as presently
proposed to be conducted. Each item of Intellectual Property owned by, or
used in the operation of, the
8
business of the Company at any time during the period covered by the
Financial Statements will be owned or available for use by the Surviving
Corporation on identical terms and conditions immediately following the
Closing. The Company has taken all reasonable measures to protect the
proprietary nature of each item of Intellectual Property, and to maintain
in confidence all trade secrets and confidential information that it owns
or uses, except to the extent that it has elected to disclose Confidential
Business Information (as defined below) pursuant to the agreements
disclosed pursuant to Section 2.15(e) below. No other person or entity has
any rights to any of the Intellectual Property owned or used by the Company
(except pursuant to agreements or licenses specified in Sections 2.12(c) or
2.12(d) of the Disclosure Schedule), and, except as disclosed in Section
2.12(b) of the Disclosure Schedule, to the knowledge of the Company and the
Principal Stockholders, no other person or entity is infringing, violating
or misappropriating any of the Intellectual Property that the Company owns
or uses. For purposes of this Agreement, "Intellectual Property" means all
(i) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination,
utility, model, certificate of invention and design patents, patent
applications, registrations and applications for registrations; (ii)
trademarks, service marks, trade dress, logos, trade names and corporate
names and registrations and applications for registration thereof; (iii)
copyrights and registrations and applications for registration thereof;
(iv) computer software, data and documentation; (v) trade secrets, whether
patentable or unpatentable and whether or not reduced to practice,
know-how, research and development information and copyrightable works;
(vi) financial, marketing and business data and information, pricing and
cost information, business and marketing plans and customer and supplier
lists and information (collectively, "Confidential Business Information");
(vii) other proprietary rights relating to any of the foregoing and (viii)
copies and tangible embodiments thereof.
b. To the knowledge of the Company and the Principal
Stockholders, except as set forth in Section 2.12(b) of the Disclosure
Schedule, none of the activities or business presently conducted by the
Company, or conducted by the Company at any time within the six years prior
to the date of this Agreement, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any other person
or entity. The Company has not received any complaint, claim or notice
alleging any such infringement, violation or misappropriation.
c. Section 2.12(c) of the Disclosure Schedule
identifies each item of Intellectual Property owned by the Company,
identifies each pending application for registration of Intellectual
Property which the Company has made, and identifies each license or other
agreement pursuant to which the Company has granted any rights to any third
party with respect to any of its Intellectual Property, excluding the grant
of licenses to customers in the Ordinary Course of Business. The Company
has delivered to the Buyer a correct and complete list of all such
Intellectual Property, registrations, applications, licenses and agreements
(as amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership of,
and any claims or disputes relating to, each such item. Except as set forth
in Section 2.12(c) of the Disclosure Schedule, and for grants of licenses
to customers in the Ordinary Course of Business, with respect to each item
of Intellectual Property that the Company owns:
(i) the Company possesses all right, title and
interest in and to such item;
(ii) such item is not subject to any
outstanding judgment, order, decree, stipulation or injunction; and
9
(iii) the Company has not agreed to indemnify
any person or entity for or against any infringement, misappropriation or
other conflict with respect to such item.
d. Except for commercially available software subject
to standard "shrinkwrap" licenses and software in the "public domain,"
Section 2.12(d) of the Disclosure Schedule identifies each item of
Intellectual Property used in the operation of the business of the Company
that is owned by a party other than the Company. The Company has supplied
the Buyer with correct and complete copies of all licenses, sublicenses or
other agreements (as amended to date) pursuant to which the Company uses
such Intellectual Property. Except as set forth in Section 2.12(d) of the
Disclosure Schedule, with respect to each such item of Intellectual
Property:
(i) the license, sublicense or other agreement
covering such item is legal, valid, binding, enforceable and in full force
and effect;
(ii) such license, sublicense or other agreement
will continue to be legal, valid, binding, enforceable and in full force
and effect following the Closing in accordance with the terms thereof as in
effect prior to the Closing;
(iii) Neither the Company nor, to the knowledge
of the Company or either Principal Stockholder, any other party to such
license, sublicense or other agreement is in breach or default, and no
event has occurred which with notice or lapse of time or both would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) the underlying item of Intellectual
Property is not subject to any outstanding judgment, order, decree,
stipulation or injunction; and
(v) the Company has not agreed to indemnify
any person or entity for or against any interference, infringement,
misappropriation or other conflict with respect to such item.
e. Except for commercially available software subject
to standard "shrinkwrap" licenses and software in the "public domain,"
Section 2.12(e) of the Disclosure Schedule lists each item of Intellectual
Property in which the Company has any interest and which is not listed
elsewhere in Section 2.12 of the Disclosure Schedule, including but not
limited to all software programs and related documentation, unregistered
trademarks, trade names, service marks, logos and trade dress.
f. The Company's software products are presently not
able to perform correctly with respect to date-related functions during and
after the Year 2000. The Company is currently evaluating the programming
and testing effort necessary to correct for such deficiencies. Date-related
functions programmed into the Company's software are based on serialized
date math and sorting operations. The Company believes that correction and
testing efforts for Year 2000 compliance to require less than 1,500 hours
of programmer/analyst time, which is scheduled by the Company to be
completed prior to December 31, 1998.
10
13. Inventory. The Company's only inventory is work in process,
the amount of which is not excessive in the present circumstances of the
Company.
14. Real Property Leases. Section 2.14 of the Disclosure
Schedule lists all real property leased or subleased to the Company. The
Company has delivered to the Buyer correct and complete copies of the
leases and subleases (as amended to date) listed in Section 2.14 of the
Disclosure Schedule. With respect to each lease and sublease listed in
Section 2.14 of the Disclosure Schedule, and except as provided in such
Section 2.14 of the Disclosure Schedule:
a. the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
b. the lease or sublease will continue to be legal,
valid, binding, enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
prior to the Closing;
c. to the knowledge of the Company and the Principal
Stockholders, no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time or both,
would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
d. there are no disputes, oral agreements or
forbearance programs in effect as to the lease or sublease; and
e. the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold.
15. Contracts. Section 2.15 of the Disclosure Schedule lists
the following written arrangements (including without limitation written
agreements) to which the Company is a party:
a. any written arrangement (or group of related
written arrangements) for the lease of personal property from or to third
parties providing for lease payments in excess of $25,000 per annum;
b. any written arrangement (or group of related
written arrangements) for the purchase or sale of raw materials,
commodities, supplies, products or other personal property or for the
furnishing or receipt of services (i) which calls for performance over a
period of more than one year, (ii) which involves more than the sum of
$25,000, or (iii) in which the Company has granted "most favored nation"
pricing provisions or marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity of goods
or services or has agreed to purchase goods or services exclusively from a
certain party;
c. any written arrangement establishing a partnership
or joint venture;
d. any written arrangement (or group of related
written arrangements) under which it has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness
11
(including capitalized lease obligations) or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible or intangible;
e. any written arrangement concerning confidentiality
or noncompetition;
f. any written arrangement involving any of the
Stockholders or their affiliates ("Affiliates"), as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act");
g. any written arrangement not otherwise disclosed
under which the consequences of a default or termination could have a
material adverse effect on the business, properties, operations, financial
condition, assets or liabilities of the Company; and
h. any other written arrangement (or group of related
written arrangements) either involving more than $25,000 or not entered
into in the Ordinary Course of Business.
The Company has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Section 2.15 of the
Disclosure Schedule. With respect to each written arrangement so listed:
(i) the written arrangement is legal, valid, binding and enforceable and in
full force and effect; (ii) the written arrangement will continue to be
legal, valid, binding and enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as
in effect prior to the Closing; and (iii) to the knowledge of the Company
and the Principal Stockholders, no party is in breach or default, and no
event has occurred which with notice or lapse of time or both would
constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement. The Company is not a party to
any oral contract, agreement or other arrangement which, if reduced to
written form, would be required to be listed in Section 2.15 of the
Disclosure Schedule under the terms of this Section 2.15.
16. Accounts Receivable. All accounts receivable of the
Company reflected on the Most Recent Balance Sheet are valid receivables
subject to no setoffs or counterclaims and are current and collectible
(within 90 days after the date on which it first became due and payable),
net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. All accounts receivable reflected in the financial or accounting
records of the Company that have arisen since the Most Recent Period End
are valid receivables subject to no setoffs or counterclaims and are
collectible, net of a reserve for bad debts in an amount proportionate to
the reserve shown on the Most Recent Balance Sheet.
17. Insurance. Section 2.17 of the Disclosure Schedule sets
forth a list of each insurance policy (including fire, theft, casualty,
general liability, workers compensation, business interruption,
environmental, product liability and automobile insurance policies and bond
and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the
past five years. Copies of all such policies have been delivered to the
Buyer. The Company and the Principal Stockholders further represent that:
(i) each such insurance policy is enforceable and in full force and effect;
(ii) such policy will continue to be enforceable and in full force and
effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing; (iii) to the knowledge of the
Company and the Principal Stockholders, the Company is not in
12
breach or default (including with respect to the payment of premiums or the
giving of notices) under such policy, and no event has occurred which, with
notice or the lapse of time or both, would constitute such a breach or
default or permit termination, modification or acceleration, under such
policy and (iv) the Company has not received any notice from the insurer
disclaiming coverage or reserving rights with respect to a particular claim
or such policy in general.
18. Litigation. Section 2.18 of the Disclosure Schedule
identifies, and contains a brief description of, (a) any unsatisfied
judgment, order, decree, stipulation or injunction and (b) any claim,
complaint, action, suit, proceeding, hearing or investigation of or in any
Governmental Entity or before any arbitrator to which the Company is a
party or, to the knowledge of the Company and the Principal Stockholders,
is threatened to be made a party. None of the complaints, actions, suits,
proceedings, hearings and investigations set forth in Section 2.18 of the
Disclosure Schedule could have a material adverse effect on the business,
properties, operations, financial condition, assets or liabilities of the
Company.
19. Product Warranty. The Company has not agreed with any
customer with respect to any product manufactured, sold, leased, licensed
or delivered by the Company to any guaranty, warranty, right of return or
other indemnity beyond the applicable written terms and conditions of such
sale, lease, license or delivery.
20. Employees. Section 2.20 of the Disclosure Schedule
contains a list of all employees of the Company, along with the position
and the annual rate of compensation of each such person and all agreements
between the Company and its employees. Except as set forth in Section 2.20
of the Disclosure Schedule, each such employee has entered into a
confidentiality agreement with the Company, a copy of which has previously
been delivered to the Buyer. To the knowledge of the Company and the
Principal Stockholders, no key employee or group of employees has any plans
to terminate employment with the Company. The Company is not a party to or
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company and the Principal Stockholders have no
knowledge of any organizational effort made or threatened, either currently
or within the past three years, by or on behalf of any labor union with
respect to employees of the Company.
21. Employee Benefit Plans.
a. Section 2.21 of the Disclosure Schedule sets forth
an accurate schedule of all employee benefit or welfare benefit plans or
arrangements of the Company, including without limitation any pension,
profit sharing, bonus, stock option, incentive, deferred compensation,
hospitalization, medical, insurance or other plan or arrangement and any
employment agreement containing "golden parachute" provisions. All employee
benefit plans listed in Section 2.21 of the Disclosure Schedule are in
compliance with any applicable provisions of the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the
regulations issued thereunder, as well as with all other applicable
federal, state and local statutes, ordinances and regulations.
b. All plans listed in Section 2.21 of the Disclosure
Schedule that are intended to qualify (the "Qualified Plans") under Section
401(a) of the Code have been determined by the Internal
13
Revenue Service to be so qualified, and copies of such determination
letters are included as part of Section 2.21 of the Disclosure Schedule.
All reports and other documents required to be filed with any Governmental
Entity or distributed to plan participants or beneficiaries (including, but
not limited to, actuarial reports, audits and tax returns) have been timely
filed or distributed, and true copies thereof have been delivered to the
Buyer. Neither the Stockholders, any such plan listed in Section 2.21 of
the Disclosure Schedule nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406
of ERISA. The Company has not incurred any liability for excise tax or
penalty due to the Internal Revenue Service nor any liability to the
Pension Benefit Guaranty Corporation. The Company has never maintained a
plan that is subject to Title IV of ERISA or Section 412 of the Code. The
Company has never been required to contribute to a multiemployer plan as
defined in Section 4001 of ERISA.
22. Environmental Matters. The Company has not disposed of,
or contracted for the disposal of, hazardous wastes, hazardous substances,
infectious or medical waste, as those terms are defined by the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any comparable state laws, rules or
regulations. There has been no storage or treatment of solid wastes or
hazardous wastes (as defined in RCRA) by the Company at any site or other
facility owned or operated by the Company in violation of any applicable
law, rule, regulation, order, judgment or permit or that would require any
remedial action under any applicable law. Except as disclosed in Section
2.22 of the Disclosure Schedule, (a) the Company has not received any
notice of any violation with respect to asbestos or other toxic or
dangerous materials at any of its sites, and (b) there has been no spill,
discharge, leak, emission, injection, escape, dumping or release of any
kind by the Company onto any property leased by the Company, or into the
environment surrounding any such property of any toxic or hazardous
substances as defined under any local, state or federal regulations or
laws. Except as disclosed in Section 2.22 of the Disclosure Schedule, no
employee of the Company has, in the course and scope of his employment,
been exposed by the Company in violation of any law or regulation to
hazardous, infectious or toxic wastes or substances. In addition, neither
the Company nor the Principal Stockholders have knowledge of any assertion
by any Governmental Entity of any enforcement action. Section 2.22 of the
Disclosure Schedule sets forth a complete list of all disposal sites
utilized in the past five years by the Company.
23. Legal Compliance. The Company, and the conduct and
operations of its business, is in compliance with each law (including rules
and regulations thereunder) of any federal, state, local or foreign
government, or any Governmental Entity, which (a) affects or relates to
this Agreement or the transactions contemplated hereby or (b) is applicable
to the Company or its business, except for any violation of or default
under a law referred to in clause (b) which reasonably may be expected not
to have a material adverse effect on the business, properties, operations,
financial condition, assets or liabilities of the Company.
24. Permits. Section 2.24 of the Disclosure Schedule sets
forth a list of all permits, licenses, registrations, certificates, orders
or approvals from any Governmental Entity (including without limitation
those issued or required under environmental laws and those relating to the
occupancy or use of owned or leased real property) ("Permits") issued to or
held by the Company. Such listed Permits are the only Permits that are
required for the Company to conduct its business as presently conducted or
as proposed
14
to be conducted, except for those the absence of which would not have any
material adverse effect on the business, properties, operations, financial
condition, assets or liabilities of the Company. Each such Permit is in
full force and effect and, to the knowledge of the Company and the
Principal Stockholders, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be
renewable upon expiration. Each such Permit will continue in full force and
effect immediately following the Closing.
25. Certain Business Relationships With Affiliates. Except as
described in Section 2.25 of the Disclosure Schedule, no Affiliate of the
Company: (a) owns any property or right, tangible or intangible, which is
used in the business of the Company; (b) has any claim or cause of action
against the Company or (c) owes any money to the Company.
26. Brokers' Fees. The Company has no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect
to the transactions contemplated by this Agreement.
27. Books and Records. The minute books and other similar
records of the Company contain true and complete records of all actions
taken at any meetings of the Company's stockholders, Board of Directors or
any committee thereof and of all written consents executed in lieu of the
holding of any such meeting. The books and records of the Company
accurately reflect in all material respects the business, properties,
operations, financial condition, assets and liabilities of the Company and
have been maintained in accordance with good business and bookkeeping
practices.
28. Customers and Suppliers. Except as disclosed in Section
2.28 of the Disclosure Schedule, no material supplier of the Company has
indicated in writing within the past year that it will stop, or decrease
the rate of, supplying materials, products or services to them and no
material customer of the Company has indicated in writing within the past
year that it will stop, or decrease the rate of, buying, leasing or
licensing materials, products or services from them. Section 2.28 of the
Disclosure Schedule sets forth a list of (a) each customer that accounted
for more than 1% of the revenues of the Company during the last full fiscal
year or the eleven months ended November 30, 1997 and the amount of
revenues accounted for by such customer during each such period and (b)
each supplier that is the sole supplier of any significant product or
component to the Company.
29. Pooling. To the best knowledge of the Company and the
Principal Stockholders, neither the Company nor any of its Affiliates has
through the date of this Agreement taken or agreed to take any action that
would prevent the Company and the Buyer from accounting for the business
combination to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
30. Disclosure. No representation or warranty by the Company
or the Principal Stockholders contained in this Agreement, and no statement
contained in the Disclosure Schedule or any other document, certificate or
other instrument delivered to or to be delivered by or on behalf of the
Company pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
15
31. Additional Representations and Warranties of the
Stockholders. Each of the Stockholders severally represents and warrants to
the Company as follows:
a. such Stockholder is acquiring the shares of Buyer
Common Stock for his or her own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by this Agreement, such Stockholder has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness
or commitment providing for the disposition thereof;
b. such Stockholder has had such opportunity as he has
deemed adequate to obtain from representatives of the Buyer such
information as is necessary to permit the Stockholder to evaluate the
merits and risks of my investment in the Buyer. The Stockholder has
sufficient experience in business, financial and investment matters to be
able to evaluate the risks involved in the acquisition of the Merger Shares
and to make an informed investment decision with respect to such
acquisition. The Stockholder understands that: (i) the Merger Shares have
not been registered under the Securities Act and are "restricted
securities" within the meaning of Rule 144 under the Securities Act, and
(ii) the Merger Shares cannot be sold, transferred or otherwise disposed of
unless they are subsequently registered under the Securities Act or an
exemption from registration is then available;
c. such Stockholder has full power and authority to
enter into and to perform this Agreement in accordance with its terms;
d. such Stockholder has good, valid and marketable
title to the Company Shares held by him or her, free and clear of all
liens, claims, pledges, options, adverse claims, charges, encumbrances,
assessments or restrictions or any other charges of any nature whatsoever;
and
e. subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law and the Articles of
Merger as required by The Business Corporation Act of the State of
Illinois, neither the execution and delivery of this Agreement by such
Stockholder, nor the consummation by such Stockholder of the transactions
contemplated hereby, will (a) require on the part of such Stockholder any
filing with, or permit, authorization, consent or approval of, any
Governmental Entity; (b) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under,
result in the acceleration of, create in any party any right to accelerate,
terminate, modify or cancel, or require any notice, consent or waiver
under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which such
Stockholder is a party or by which such Stockholder is bound or to which
any of his or her assets are subject or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to such
Stockholder or any of his or her properties or assets.
16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and
warrants to the Company and the Principal Stockholders as follows:
1. Organization. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of the Buyer and the
Transitory Subsidiary is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties requires such qualification, except when the failure to so
qualify would not have a material adverse effect on the businesses of the
Buyer and the Transitory Subsidiary taken as a whole. Each of the Buyer and
the Transitory Subsidiary has all requisite corporate power and authority
to carry on the business in which it is engaged and to own and use the
properties owned and used by it.
2. Capitalization. The authorized capital stock of the Buyer
consists of (a) 25,000,000 shares of Buyer Common Stock, of which
12,744,743 shares are issued and outstanding and 1,350,930 shares are held
in the treasury of the Buyer, and (b) 1,000,000 shares of Preferred Stock,
$.01 par value per share, of which no shares are issued or outstanding. All
of the issued and outstanding shares of Buyer Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights. The authorized
capital stock of the Transitory Subsidiary consists of 3,000 shares of
common stock, $.01 par value, of which 100 shares are issued and
outstanding and no shares are held in the treasury of the Transitory
Subsidiary. All of the issued and outstanding shares of capital stock of
the Transitory Subsidiary are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All shares of the
Transitory Subsidiary are held of record and beneficially by the Buyer and
are held or owned free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws),
claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands.
3. Authorization of Transaction. Each of the Buyer and the
Transitory Subsidiary has all requisite power and authority to execute and
deliver this Agreement and (in the case of the Buyer) the Escrow Agreement
and to perform its obligations hereunder and thereunder. The execution and
delivery of this Agreement and (in the case of the Buyer) the Escrow
Agreement by the Buyer and the Transitory Subsidiary and the performance of
this Agreement and (in the case of the Buyer) the Escrow Agreement, and the
consummation of the transactions contemplated hereby and thereby, by the
Buyer and the Transitory Subsidiary have been duly and validly authorized
by all necessary corporate action on the part of the Buyer and Transitory
Subsidiary. This Agreement and (in the case of the Buyer) the Escrow
Agreement have been duly and validly executed and delivered by the Buyer
and the Transitory Subsidiary and constitute valid and binding obligations
of the Buyer and the Transitory Subsidiary, enforceable against them in
accordance with their respective terms.
4. Noncontravention. Except for the filing of the
Certificate of Merger as required by the Delaware General Corporation Law
and the Articles of Merger as required by The Business Corporation Act of
the State of Illinois, neither the execution and delivery of this Agreement
or (in the case of the Buyer) the Escrow Agreement by the Buyer or the
Transitory Subsidiary, nor the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated hereby or thereby, will (a)
conflict or violate any provision of the Certificate of Incorporation or
By-laws of the Buyer or the Transitory
17
Subsidiary; (b) require on the part of the Buyer or the Transitory
Subsidiary any filing with, or permit, authorization, consent or approval
of, any Governmental Entity; (c) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which
the Buyer or Transitory Subsidiary is a party or by which either is bound
or to which any of their assets are subject or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer or
the Transitory Subsidiary or any of their properties or assets. The
exercise by the Principal Stockholders of the registration rights set forth
in Section 8.1 of this Agreement will not trigger any incidental or
"piggyback" registration rights currently held by stockholders of the
Buyer.
5. Reports and Financial Statements. The Buyer has
previously furnished to the Company complete and accurate copies, as
amended or supplemented, of its (a) Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission (the "SEC") and (b) all other reports filed by the
Buyer under Section 13 of the Exchange Act with the SEC since December 31,
1996 (such reports are collectively referred to herein as the "Buyer
Reports"). The Buyer Reports constitute all of the documents required to be
filed by the Buyer under Section 13 of the Exchange Act with the SEC since
December 31, 1996. As of their respective dates, the Buyer Reports did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim
financial statements of the Buyer included in the Buyer Reports: (i) comply
as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
(ii) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except as may be indicated
therein or in the notes thereto, and in the case of quarterly financial
statements, as permitted by Form 10-Q under the Exchange Act), (iii) fairly
present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the
periods referred to therein and (iv) are consistent with the books and
records of the Buyer.
6. Absence of Material Adverse Changes. Since September 30,
1997, there has not been any material adverse change in the business,
properties, operations, financial condition, assets or liabilities of the
Buyer, nor has there occurred any event or development which could
reasonably be foreseen to result in such a material adverse change in the
future.
7. Brokers' Fees. Neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees or commissions
to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
8. Legal Compliance. The Buyer, and the conduct and
operations of its business, is in compliance with each law (including rules
and regulations thereunder) of any federal, state, local or foreign
government, or any Governmental Entity, which (a) affects or relates to
this Agreement or the transactions contemplated hereby or (b) is applicable
to the Buyer or its business, except for any violation of or default under
a law referred to in clause (b) which reasonably may be expected not to
have a material adverse effect on the business, properties, operations,
financial condition, assets or liabilities of the Buyer.
18
9. Disclosure. No representation or warranty by the Buyer
contained in this Agreement, and no statement contained in the any
document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Buyer pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omit or will omit to
state any material fact necessary, in light of the circumstances under
which it was or will be made, in order to make the statements herein or
therein not misleading.
10. Negotiations. The Buyer is not currently involved in any
negotiations or discussions concerning any change in control, merger or
acquisition transaction with a party of equal size to, or larger than, the
Buyer, in terms of such party's annual gross revenue.
ARTICLE IV
COVENANTS
1. Best Efforts. Each of the Parties shall use its best
efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement.
2. Notices and Consents. Each of the Parties shall use its
best efforts to obtain, at its expense, all such waivers, permits,
consents, approvals or other authorizations from third parties and
Governmental Entities, and to effect all such registrations, filings and
notices with or to third parties and Governmental Entities, as may be
required by or with respect to such Party in connection with the
transactions contemplated by this Agreement (including without limitation
those listed in Section 2.4 or Section 2.24 of the Disclosure Schedule).
3. Operation of Business. Except as contemplated by this
Agreement (including without limitation Section 4.10), during the period
from the date of this Agreement to the Effective Time, the Company shall
conduct its operations in the Ordinary Course of Business and in compliance
with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current
business organization, keep its physical assets in good working condition,
keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be impaired in any material respect. Without limiting the
generality of the foregoing, from the date hereof through the Effective
Time, the Company shall not, without the written consent of the Buyer:
a. issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase, any
stock of any class or any other securities or any rights, warrants or
options to acquire any such stock or other securities;
b. split, combine or reclassify any shares of its
capital stock or declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock;
c. create, incur or assume any debt not currently
outstanding (including obligations
19
in respect of capital leases); assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person
or entity;
d. enter into, adopt or amend any plan referred to in
Section 2.21 (collectively, "Employee Benefit Plans") or any employment or
severance agreement or arrangement or (except for normal increases in the
Ordinary Course of Business) increase in any manner the compensation or
fringe benefits of, or materially modify the employment terms of, its
directors, officers or employees, generally or individually, or pay any
benefit not required by the terms in effect on the date hereof of any
existing Employee Benefit Plan;
e. acquire, sell, lease, encumber or dispose of any
assets or property (including without limitation any shares or other equity
interests in or securities of any corporation, partnership, association or
other business organization or division thereof), other than purchases and
sales of assets in the Ordinary Course of Business;
f. amend its Articles of Incorporation or By-laws;
g. change in any material respect its accounting
methods, principles or practices, except insofar as may be required by a
generally applicable change in GAAP;
h. discharge or satisfy any Security Interest or pay
any obligation or liability other than in the Ordinary Course of Business;
i. mortgage or pledge any of its property or assets
or subject any such assets to any Security Interest;
j. sell, assign, transfer or license any Intellectual
Property, other than in the Ordinary Course of Business;
k. enter into, amend, terminate, take or omit to take
any action that would constitute a violation of or default under, or waive
any rights under, any material contract or agreement;
l. make or commit to make any capital expenditure in
excess of $15,000 per item;
m. take any action or fail to take any action
permitted by this Agreement with the knowledge that such action or failure
to take action would result in: (i) any of the representations and
warranties of the Company set forth in this Agreement becoming untrue or
(ii) any of the conditions to the Merger set forth in Article V not being
satisfied;
n. take any action that would jeopardize the treatment
of the Merger as a "pooling of interests" for accounting purposes; or
o. agree in writing or otherwise to take any of the
foregoing actions.
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4. Full Access. The Company shall permit representatives of
the Buyer to have full access (at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the Company) to
all premises, properties, financial and accounting records, contracts,
other records and documents, and personnel, of or pertaining to the
Company.
5. Notice of Breaches. The Company shall promptly deliver to
the Buyer written notice of any event or development that would: (a) render
any statement, representation or warranty of the Company in this Agreement
(including the Disclosure Schedule) inaccurate or incomplete in any
material respect, or (b) constitute or result in a breach by the Company
of, or a failure by the Company to comply with, any agreement or covenant
in this Agreement applicable to such party. The Buyer or the Transitory
Subsidiary shall promptly deliver to the Company written notice of any
event or development that would: (i) render any statement, representation
or warranty of the Buyer or the Transitory Subsidiary in this Agreement
inaccurate or incomplete in any material respect or (ii) constitute or
result in a breach by the Buyer or the Transitory Subsidiary of, or a
failure by the Buyer or the Transitory Subsidiary to comply with, any
agreement or covenant in this Agreement applicable to such party. No such
disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
6. Agreements from Certain Affiliates of the Company.
Concurrently with the execution of this Agreement, the Company shall
deliver to the Buyer a list of all persons or entities who are at such time
Affiliates of the Company (the "Company Affiliates"). To help ensure that
the Merger will be accounted for as a "pooling of interests," and that the
issuance of Merger Shares will comply with the Securities Act, the Company
shall cause each Company Affiliate to execute and deliver to the Buyer,
prior to Closing, a written agreement substantially in the form attached
hereto as Exhibit B (the "Affiliate Agreement"). If any Company Affiliate
fails to execute and deliver an Affiliate Agreement, the Buyer shall be
entitled to place appropriate legends on the certificates evidencing the
Merger Shares to be issued to such person or entity, and to issue
appropriate stock transfer instructions to the transfer agent for the Buyer
Common Stock, to the effect that such shares may only be sold, transferred
or otherwise disposed of, and the holder thereof may only reduce his or its
interest in or risk relating to such shares, after financial results
covering at least 30 days of combined operations of the Company and the
Buyer after the Effective Time shall have been publicly released.
7. Listing of Merger Shares. The Buyer shall use its best
efforts to list the Merger Shares on the Nasdaq National Market.
8. Bonus Pool. By the 30th day following the Closing Date,
the Buyer agrees to award annual bonuses in the aggregate amount of
$350,000 to employees of the Surviving Corporation other than the Principal
Stockholders for services rendered in 1997.
9. Option Pool. On the Closing Date, the Buyer agrees to
grant options (the "Employee Options") that qualify (to the extent
allowable by law) as incentive stock options within the meaning of Section
422 of the Code to purchase an aggregate of 150,000 shares of Buyer Common
Stock to the employees of the Company listed on Section 4.9 of the
Disclosure Schedule. The Employee Options shall be granted at an exercise
price equal to the closing sale price of the Buyer Common Stock on the
Nasdaq National Market on the Closing Date. The Employee Options shall be
cumulatively exercisable (i) with respect to 25% of the shares underlying
each such Employee Option, on the first anniversary of the
21
Closing Date, and (ii) with respect to the remaining 75% of the shares
underlying each such Employee Option, in 36 equal monthly installments on
the same day of the month as the Closing Date commencing on the 13th month
following the Closing Date. By the 30th day following the Closing Date, the
Buyer agrees to deliver to the respective employees executed agreements
evidencing the Employee Options and containing the Buyer's standard terms
and conditions.
10. Repayment of Loans; Deferred Compensation. Within 30 days
following the Closing, the Buyer agrees to cause the Company to repay up to
an aggregate of $300,000 of loans, plus accrued interest, made by the
Principal Stockholders to the Company and reflected on the Company's
balance sheet as of the Closing Date (the "Closing Balance Sheet").
Deferred Compensation of $158,333 reflected on the Closing Balance Sheet
shall be paid by the Company to its employees prior to Closing.
11. Tax-Free Reorganization. The Buyer, the Transitory
Subsidiary, the Company and the Principal Stockholders shall each use its
best efforts to cause the Merger to be treated as a reorganization within
the meaning of sections 368(a)(1)(A) and 368(a)(2)(E) of the Code and to
obtain an opinion of its respective counsel to such effect. The Buyer shall
not, nor shall the Buyer permit any of its affiliates to, take any action
which would cause the Merger to fail to qualify as a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. The
Stockholders have not, and shall not, take any action which would cause the
Merger to fail to qualify as a reorganization under Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Code.
4.12 Tax Returns.
(a) The Principal Stockholders shall cause Xxxxxxxx &
Associates Ltd. (the "Company Accountants") to prepare the federal and
state S Corporation income tax returns required to be filed by the Company
for the taxable year beginning January 1, 1997 and ending on the day before
the Closing Date (individually, an "S Corporation Return" and collectively,
the "S Corporation Returns"). Each S Corporation Return shall be prepared
using accounting methods and other practices that are consistent with those
used by the Company in its prior returns and items to be taken into account
in the S Corporation Returns for the period ending on the date before the
Closing Date shall be determined under "closing-the-books" method as
described in Section 1362(e)(3) of the Code, and the regulations
thereunder, and the parties agree to make an election, if necessary, under
Section 1362(e)(3) of the Code. All fees and expenses of the Company
Accountants in preparing the S Corporation Returns shall be paid by the
Stockholders. The Buyer agrees to make available to the Company Accountants
all books and records of the Company needed for the preparation of the
returns. The Principal Stockholders shall cause the Company Accountants to
deliver a draft of each S Corporation Return to the Buyer not less than
thirty days before the due date for filing such Return, and the Buyer shall
provide to the Company Accountants its comments on, and proposed changes
to, the draft of each S Corporation Return not later than twenty days
before such due date. If any aspect of any S Corporation Return remains in
dispute within ten days before the due date for filing such Return, the
matters in dispute shall be submitted to a mutually acceptable "Big Six"
accounting firm (the "Accounting Firm") for resolution. The decision of the
Accounting Firm concerning any disputed item shall be final and binding on
the parties and the fees and expenses of the Accounting Firm shall be paid
one-half by the Stockholders and one-half by the Buyer. After each S
Corporation Return has been prepared, reviewed and approved (and any
disputes concerning any items on such Return have been resolved by the
Accounting Firm, if necessary), the Buyer will cause
22
the appropriate officers of the Company to sign and file the applicable S
Corporation Return with the applicable taxing authority.
(b) Amended Tax Filings. The Buyer and the Company shall
consult with the Principal Stockholders with respect to the filing of any
amended federal or state income tax filing where such filings would impact
the tax liability of the Stockholders and not file such amended return
without the consent of the Principal Stockholders. If the filing of an
amended return remains in dispute for a period of thirty days following
delivery of the proposed amended return to the Principal Stockholders, it
shall be submitted to the Accounting Firm for resolution. The decision of
the Accounting Firm concerning filing of the amended return shall be final
and binding on the parties, and the fees and expenses of the Accounting
Firm relating to the resolution of the dispute shall be paid one-half by
the Stockholders and one-half by the Buyer.
(c) [Intentionally omitted].
(d) Agreement of Cooperation. After the Closing, the
Buyer shall make available to the Stockholders such records as the
Stockholders may reasonably require for the preparation of any Tax Returns
or other similar governmental reports or forms required to be filed by the
Stockholders and such records as the Stockholders may require for the
defense of any audit, examination, administrative appeal or litigation of
any such Tax Return or other similar governmental reports or forms
(including allowing the Stockholders reasonable access to the relevant
computer records and personnel of the Buyer). After the Closing, the
Stockholders shall make available to the Buyer such records as the Buyer
may reasonably require for the preparation of any Tax Returns or other
similar governmental reports or forms required to be filed by the Buyer and
such records as the Buyer may require for the defense of any audit,
examination, administrative appeal or litigation of any such Tax Return or
other similar governmental report or form (including allowing the Buyer
reasonable access to the relevant computer records of the Stockholders).
(e) Tax Accounting Methods. The Buyer and the Company
will not file any requests for change in accounting method that would
impact the timing for reporting of income and deductions for any taxable
year for which an S Corporation Return was filed.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
1. Conditions to Each Party's Obligations. The respective
obligations of each Party to consummate the Merger are subject to the
satisfaction of the following conditions:
a. the stockholders of the Company will have duly
approved this Agreement and the Merger in accordance with The Business
Corporation Act of the State of Illinois and the Articles of Incorporation
and By-laws of the Company; and
b. no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) affect
23
adversely the right of the Buyer to own, operate or control any of the
assets and operations of the Surviving Corporation following the Merger,
and no such judgment, order, decree, stipulation or injunction shall be in
effect.
2. Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory
Subsidiary to consummate the Merger is subject to the satisfaction of the
following additional conditions:
a. the Company shall have obtained all of the waivers,
permits, consents, approvals or other authorizations, and effected all of
the registrations, filings and notices, referred to in Section 4.2;
b. the representations and warranties of the Company
and the Stockholders set forth in Article II shall be true and correct when
made on the date hereof and shall be true and correct as of the Effective
Time as if made as of the Effective Time, except for representations and
warranties made as of a specific date, which shall be true and correct as
of such date;
c. the Company shall have performed or complied with
its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Effective Time;
d. the Company shall have delivered to the Buyer and
the Transitory Subsidiary a certificate (without qualification as to
knowledge or materiality or otherwise) to the effect that each of the
conditions specified in Section 5.1 and clauses (a) through (c) of this
Section 5.2 is satisfied in all respects;
e. the Buyer and the Transitory Subsidiary shall have
received from Xxxxx, Xxxxx & Xxxxx, counsel to the Company, an opinion in
the form attached hereto as Exhibit C, addressed to the Buyer and the
Transitory Subsidiary and dated as of the Closing Date;
f. the Company shall have delivered to the Buyer a
certificate of the Secretary of the Company attesting to the incumbency of
the Company's officers, the authenticity of the resolutions authorizing the
transactions contemplated by this Agreement, and the authenticity and
continuing validity of the Company's Articles of Incorporation and By-laws;
g. the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Effective Time, of each
director and officer of the Company specified by the Buyer in writing prior
to the Closing;
h. the Buyer shall have received an opinion from Xxxx
and Xxxx LLP, in a form reasonably satisfactory to the Buyer, dated the
Closing Date, based upon certain factual representations of the Company,
the Stockholders and the Buyer reasonably requested by such counsel, to the
effect that the Merger will constitute a reorganization for federal income
tax purposes within the meaning of Section 368(a) of the Code and no gain
or loss will be recognized by the Company, the Buyer or the Transitory
Subsidiary as a result of the Merger;
i. Xxxxxx X. Xxxxxx shall have entered into an
employment agreement with the
24
Buyer substantially in the form attached hereto as Exhibit D (the "Xxxxxx
Xxxxxx Employment Agreement");
j. Xxxxx X. Xxxxxx shall have entered into an
employment agreement with the Buyer substantially in the form attached
hereto as Exhibit E (the "Xxxxx Xxxxxx Employment Agreement");
k. [intentionally omitted];
l. the Buyer shall have received Affiliate Agreements
from all Company Affiliates;
m. the Principal Stockholders and the Escrow Agent
shall have entered into the Escrow Agreement; and
n. all actions to be taken by the Company in
connection with the consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Buyer and the Transitory
Subsidiary.
3. Conditions to Obligations of the Company. The obligation
of the Company to consummate the Merger is subject to the satisfaction of
the following additional conditions:
a. the representations and warranties of the Buyer
and the Transitory Subsidiary set forth in Article III shall be true and
correct when made on the date hereof and shall be true and correct as of
the Effective Time as if made as of the Effective Time, except for
representations and warranties made as of a specific date, which shall be
true and correct as of such date;
b. each of the Buyer and the Transitory Subsidiary
shall have performed or complied with its agreements and covenants required
to be performed or complied with under this Agreement as of or prior to the
Effective Time;
c. each of the Buyer and the Transitory Subsidiary
shall have delivered to the Company a certificate (without qualification as
to knowledge or materiality or otherwise) to the effect that each of the
conditions specified in clauses (a) and (b) of this Section 5.3 is
satisfied in all respects;
d. the Company shall have received from Xxxx and Xxxx
LLP, counsel to the Buyer and the Transitory Subsidiary, an opinion in the
form attached hereto as Exhibit F, addressed to the Company and dated as of
the Closing Date;
e. the Company shall have received an opinion from
Xxxxx, Xxxxx & Xxxxx, in a form reasonably satisfactory to the Company,
dated the Closing Date, based upon certain factual representations of the
Company, the Stockholders and the Buyer reasonably requested by such
counsel, to the effect that the Merger will constitute a reorganization for
federal income tax purposes within the meaning of Section 368(a) of the
Code and, except for cash received in lieu of fractional Merger Shares, no
Stockholder who received Merger Shares in exchange for Company Shares in
the Merger shall recognize taxable gain or loss upon such exchange;
25
f. the Buyer shall have entered into the Xxxxxx Xxxxxx
Employment Agreement;
g. the Buyer shall have entered into the Xxxxx Xxxxxx
Employment Agreement;
h. the Buyer and the Escrow Agent shall have entered
into the Escrow Agreement;
i. the Merger Shares shall have been authorized for
listing on the Nasdaq National Market upon official notice of issuance;
j. each of the Buyer and the Transitory Subsidiary
shall have delivered to the Company a certificate of its Secretary
attesting to the incumbency of such entity's officers, the authenticity of
the resolutions authorizing the transactions contemplated by this
Agreement, and the authenticity and continuing validity of such entity's
Certificate of Incorporation and By-laws; and
k. all actions to be taken by the Buyer and the
Transitory Subsidiary in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance
to the Company.
26
ARTICLE VI
INDEMNIFICATION
1. Indemnification. The Principal Stockholders, jointly and
severally, and the Stockholders other than the Principal Stockholders,
severally, shall indemnify the Surviving Corporation and the Buyer (the
"Indemnified Persons") in respect of, and hold the Indemnified Persons
harmless against, any and all debts, obligations and other liabilities
(whether absolute, accrued, contingent, fixed or otherwise, or whether
known or unknown, or due or to become due or otherwise), monetary damages,
fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement,
interest, court costs, costs of investigators, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other
expenses of litigation) incurred or suffered by the Indemnified Persons or
any Affiliate thereof ("Damages"):
a. resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company or the Stockholders contained in this Agreement
(other than Section 2.12(f) hereof);
b. resulting from any failure of any Stockholders to
have good, valid and marketable title to the issued and outstanding Company
Shares held by such Stockholders, free and clear of all liens, claims,
pledges, options, adverse claims or charges of any nature whatsoever;
c. resulting from any claim by a stockholder or former
stockholder of the Company, or any other person, firm, corporation or
entity, seeking to assert, or based upon: (i) ownership or rights to
ownership of any shares of stock of the Company; (ii) any rights of a
stockholder (other than the right to receive the Merger Shares pursuant to
this Agreement or appraisal rights under the applicable provisions of The
Business Corporation Act of the State of Illinois), including any option,
preemptive rights or rights to notice or to vote; (iii) any rights under
the Articles of Incorporation or By-laws of the Company or (iv) any claim
that his, her or its shares were wrongfully repurchased by the Company;
d. resulting from, relating to or constituting any
misrepresentation or breach of warranty by the Company with respect to
Section 2.12(f) hereof; or
e. resulting from any federal tax liability
attributable to the conversion of the Company from a C Corporation to an S
Corporation.
If a notice of audit is given, an audit is begun, an audit adjustment is
(or has been) proposed or any other claim is (or has been) made by any
taxing authority which could result in an indemnification obligation under
Section 6.1(e), the Buyer shall promptly notify the Principal Stockholders
of such event. The Buyer shall permit the Principal Stockholders, at the
Stockholders' expense: (i) to participate in the audit process, attend all
meetings and participate fully in all material discussions with a taxing
authority as to those matters relating to the indemnification obligation
under Section 6.1(e); and (ii) to contest any claim made by a taxing
authority on audit or in a related administrative proceeding or judicial
proceeding with respect to the indemnification obligation under Section
6.1(e). The Buyer shall not settle, compromise or concede an adjustment or
claim for which the Principal Stockholders would be financially responsible
27
under Section 6.1(e) without the Principal Stockholders' consent, which
consent shall not be unreasonably withheld.
2. Method of Asserting Claims.
a. All claims for indemnification by an Indemnified
Person pursuant to this Article VI shall be made in accordance with the
provisions of the Escrow Agreement.
b. If a third party asserts that an Indemnified Person
is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Person may be
entitled to indemnification pursuant to this Article VI, and such
Indemnified Person reasonably determines that it has a valid business
reason to fulfill such obligation, then: (i) such Indemnified Person shall
be entitled to satisfy such obligation, without prior notice to or consent
from the Indemnification Representatives; (ii) such Indemnified Person may
make a claim for indemnification pursuant to this Article VI in accordance
with the provisions of the Escrow Agreement and (iii) such Indemnified
Person shall be reimbursed, in accordance with the provisions of the Escrow
Agreement, for any such Damages for which it is entitled to indemnification
pursuant to this Article VI (subject to the right of the Indemnification
Representatives to dispute the Indemnified Person's entitlement to
indemnification under the terms of this Article VI).
c. The Indemnified Person shall give prompt written
notification to the Indemnification Representatives of the commencement of
any action, suit or proceeding relating to a third party claim for which
indemnification pursuant to this Article VI may be sought; provided,
however, that no delay on the part of the Indemnified Person in notifying
the Indemnification Representatives shall relieve the Stockholders of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnification Representatives may,
upon written notice thereof to the Indemnified Person, assume control of
the defense of such action, suit or proceeding with counsel reasonably
satisfactory to the Indemnified Person, provided the Indemnification
Representatives acknowledge in writing to the Indemnified Person that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Person in connection with such action, suit or proceeding
constitute Damages for which the Indemnified Person shall be entitled to
indemnification pursuant to this Article VI. If the Indemnification
Representatives do not so assume control of such defense, the Indemnified
Person shall control such defense. The party not controlling such defense
may participate therein at its own expense; provided that if the
Indemnification Representatives assume control of such defense and the
Indemnified Person reasonably concludes that the indemnifying parties and
the Indemnified Person have conflicting interests or different defenses
available with respect to such action, suit or proceeding, the reasonable
fees and expenses of counsel to the Indemnified Person shall be considered
"Damages" for purposes of this Agreement. The party controlling such
defense shall keep the other party advised of the status of such action,
suit or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. The
Indemnified Person shall not agree to any settlement of such action, suit
or proceeding without the prior written consent of the Indemnification
Representatives, which shall not be unreasonably withheld. The
Indemnification Representatives shall not agree to any settlement of such
action, suit or proceeding without the prior written consent of the
Indemnified Person, which shall not be unreasonably withheld.
28
3. Survival. The representations and warranties of the
Company and the Stockholders set forth in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby and
continue until the earlier of (i) the first anniversary of the Closing Date
or (ii) the issuance of the Buyer's audited consolidated financial
statements for the year ending December 31, 1997; provided, however, that
(x) the representations and warranties set forth in Section 2.12(f) hereof
shall survive the Closing and the consummation of the transactions
contemplated hereby and continue until the first anniversary of the Closing
Date and (y) the indemnification obligations set forth in Section 6.1(e)
hereof shall survive the Closing and the consummation of the transactions
contemplated hereby and continue until March 15, 1999. The representations
and warranties of the Company and the Stockholders shall not be affected by
any examination made for or on behalf of the Buyer or the knowledge of any
of the Buyer's officers, directors, stockholders, employees or agents. If a
notice is given in accordance with the Escrow Agreement before expiration
of such period, then (notwithstanding the expiration of such time period)
the representation or warranty applicable to such claim shall survive
until, but only for purposes of, the resolution of such claim.
4. Limitations. Notwithstanding anything to the contrary
herein: (a) the aggregate liability of the Stockholders for Damages under
this Article VI shall not exceed the fair market value of the Escrow
Property (as defined in the Escrow Agreement), (b) the aggregate liability
of the Stockholders for Damages pursuant to Sections 6.1(a), 6.1(b) and
6.1(c) shall be subject to the limitations set forth in Section 4(c) of the
Escrow Agreement, (c) the aggregate liability of the Stockholders for
Damages pursuant to Section 6.1(d) shall be subject to the limitations set
forth in Section 4(c) of the Escrow Agreement, (d) the aggregate liability
of the Stockholders for Damages pursuant to Section 6.1(e) shall be subject
to the limitations set forth in Section 4(c) of the Escrow Agreement and
(e) the Stockholders shall be liable under this Article VI for only that
portion of the aggregate Damages which exceeds $60,000. Except with respect
to claims based on fraud, the rights of the Indemnified Persons under this
Article VI shall be the exclusive remedy of the Indemnified Persons with
respect to claims resulting from or relating to any misrepresentation,
breach of warranty or failure to perform any covenant or agreement of the
Company or the Stockholders contained in this Agreement (provided that
nothing contained in this Agreement shall limit or restrict any right or
remedy the Buyer or the Surviving Corporation may have under any
environmental law). No Stockholder shall have any right of contribution
against the Company with respect to any breach by the Company of any of its
representations, warranties, covenants or agreements.
ARTICLE VII
TERMINATION
1. Termination of Agreement. The Parties may terminate this
Agreement prior to the Effective Time as provided below:
a. the Parties may terminate this Agreement by mutual
written consent;
b. the Buyer may terminate this Agreement by giving
written notice to the Company in the event the Company or any Stockholder
is in breach, and the Company may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary in the event the
Buyer or
29
the Transitory Subsidiary is in breach, of any material representation,
warranty or covenant contained in this Agreement, and such breach is not
remedied within 10 days of delivery of written notice thereof;
c. the Buyer may terminate this Agreement by giving
written notice to the Company if the Closing shall not have occurred on or
before December 31, 1997 by reason of the failure of any condition
precedent under Sections 5.1 or 5.2 hereof (unless the failure results
primarily from a breach by the Buyer or the Transitory Subsidiary of any
representation, warranty or covenant contained in this Agreement); or
d. the Company may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary if the Closing
shall not have occurred on or before December 31, 1997 by reason of the
failure of any condition precedent under Sections 5.1 or 5.3 hereof (unless
the failure results primarily from a breach by the Company or any
Stockholder of any representation, warranty or covenant contained in this
Agreement).
2. Effect of Termination. If any Party terminates this
Agreement pursuant to Section 7.1, all obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party
(except for any liability of any Party for breaches of this Agreement);
provided, however, that the confidentiality provisions contained in the
Confidentiality Agreement dated October 9, 1997 between the Buyer and the
Company shall survive any such termination.
ARTICLE VIII
REGISTRATION RIGHTS
1. Registration of Shares. At the written request of either
of the Principal Stockholders at any time on or after June 1, 1998 but
prior to June 1, 1999, the Buyer shall file with the SEC, as promptly as
practicable following such request, a registration statement on Form S-3
covering the resale to the public by the Principal Stockholders of the
Merger Shares held by the Principal Stockholders (the "Stockholder
Registration Statement"). The Buyer shall use its best efforts to cause the
Stockholder Registration Statement to be declared effective by the SEC as
soon as practicable, provided that the Stockholder Registration Statement
shall not be declared effective until after financial results covering at
least 30 days of combined operations of the Company and the Buyer after the
Effective Time shall have been publicly released. The Buyer shall cause the
Stockholder Registration Statement to remain effective until the date six
months after the effective date of the Stockholder Registration Statement
(the "Six- Month Date") or such earlier time as all of the Merger Shares
covered by the Stockholder Registration Statement have been sold pursuant
thereto. The Buyer and the Principal Stockholders agree that the
Stockholder Registration Statement shall not cover the resale to the public
of any Merger Shares of the Principal Stockholders that are held in escrow
pursuant to the Escrow Agreement at the time the Stockholder Registration
Statement is declared effective. Notwithstanding the foregoing, however, if
Escrow Shares held by the Principal Stockholders are released from escrow
prior to the Six-Month Date and are not otherwise included in an effective
Stockholder Registration Statement, the Buyer shall file with the SEC, as
promptly as practicable following the release of such Escrow Shares from
escrow, a registration statement on Form S-3 covering the resale to the
public by the Principal Stockholders of the Escrow Shares held by the
Principal Stockholders. The Buyer shall use its best efforts to cause the
registration
30
statement referred to in the immediately preceding sentence to be declared
effective by the SEC as soon as practicable and to remain effective until
the Six-Month Date, or such earlier time as all of the Escrow Shares
covered by such registration statement have been sold pursuant thereto. The
term "Stockholder Registration Statement" as used in this Agreement shall
be deemed to include the registration statement referred to in the two
sentences immediately preceding this sentence.
2. Limitations on Registration Rights.
a. The Buyer may, by written notice to the Principal
Stockholders: (i) delay the filing or effectiveness of the Stockholder
Registration Statement or (ii) suspend the Stockholder Registration
Statement after effectiveness and require that the Principal Stockholders
immediately cease sales of shares pursuant to the Stockholder Registration
Statement, in the event that (A) the Buyer files a registration statement
(other than a registration statement on Form S-4 or Form S-8 or any
successor form) with the SEC for a public offering of its securities, (B)
the Buyer is engaged in any activity or transaction or preparations or
negotiations for any activity or transaction that the Buyer desires to keep
confidential for business reasons, if the Buyer determines in good faith
that the public disclosure requirements imposed on the Buyer under the
Securities Act in connection with the Stockholder Registration Statement
would require disclosure of such activity, transaction, preparations or
negotiations or (C) the Buyer is ineligible for use of a Form S-3.
b. If the Buyer delays or suspends the Stockholder
Registration Statement or requires the Principal Stockholders to cease
sales of shares pursuant to paragraph (a) above, the Buyer shall, as
promptly as practicable following the termination of the circumstance which
entitled the Buyer to do so, take such actions as may be necessary to file
or reinstate the effectiveness of the Stockholder Registration Statement
and/or give written notice to all Principal Stockholders authorizing them
to resume sales pursuant to the Stockholder Registration Statement. If as a
result thereof the prospectus included in the Stockholder Registration
Statement has been amended to comply with the requirements of the
Securities Act, the Buyer shall enclose such revised prospectus with the
notice to Principal Stockholders given pursuant to this paragraph (b), and
the Principal Stockholders shall make no offers or sales of shares pursuant
to the Stockholder Registration Statement other than by means of such
revised prospectus. Moreover, if the Buyer delays or suspends the
Stockholder Registration Statement or requires the Principal Stockholders
to cease sales of shares pursuant to clause (i) of paragraph (a) above, the
Buyer shall permit each Principal Stockholder to include in a registration
statement filed by the Buyer during such period, any Merger Shares that
would have been included in the Stockholder Registration Statement, subject
to the right of the Buyer to limit the number of Merger Shares to be
included in a registration statement relating to a unwritten offering of
Common Stock of the Buyer if the managing underwriter of such offering
determines that the inclusion of such Merger Shares in such offering would
adversely affect the marketability of such offering.
3. Registration Procedures.
a. In connection with the filing by the Buyer of the
Stockholder Registration Statement under Section 8.2 hereof, the Buyer
shall furnish to each Principal Stockholder such number of copies as the
Principal Stockholder shall reasonably request of the prospectus, including
a preliminary prospectus and any amendments or supplements thereto, in
conformity with the requirements of the Securities Act.
31
b. The Buyer shall use its best efforts to register or
qualify the Merger Shares covered by the Stockholder Registration Statement
under the securities laws of such states as the Principal Stockholders
shall reasonably request; provided, however, that the Buyer shall not be
required in connection with this paragraph (b) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
c. If the Buyer has delivered preliminary or final
prospectuses to the Principal Stockholders and after having done so the
prospectus is amended to comply with the requirements of the Securities
Act, the Buyer shall promptly notify the Principal Stockholders and, if
requested by the Buyer, the Principal Stockholders shall immediately cease
making offers or sales of shares under the Stockholder Registration
Statement and return all prospectuses to the Buyer. The Buyer shall
promptly provide the Principal Stockholders with revised prospectuses and,
following receipt of the revised prospectuses, the Principal Stockholders
shall be free to resume making offers and sales under the Stockholder
Registration Statement.
d. The Buyer shall pay the expenses incurred by it in
complying with its obligations under this Article VIII, including all
registration and filing fees, exchange listing fees, expenses for the
preparation of the Stockholder Registration Statement, prospectus and any
amendments and supplements thereto, printing and photocopy expenses, fees
and expenses of counsel for the Buyer, and fees and expenses of accountants
for the Buyer, but excluding: (i) any brokerage fees, selling commissions
or underwriting discounts incurred by the Principal Stockholders in
connection with sales under the Stockholder Registration Statement and (ii)
the fees and expenses of any counsel retained by the Principal
Stockholders.
4. Requirements of Principal Stockholders. The Buyer shall not
be required to include any Merger Shares in the Stockholder Registration
Statement unless:
a. the Principal Stockholder owning such shares
furnishes to the Buyer in writing such information regarding such Principal
Stockholder and the proposed sale of Merger Shares by such Principal
Stockholder as the Buyer may reasonably request in writing in connection
with the Stockholder Registration Statement or as shall be required in
connection therewith by the SEC or any state securities law authorities;
and
b. such Principal Stockholder shall have provided to
the Buyer its written agreement:
(i) to indemnify the Buyer and each of its
directors and officers against, and hold the Buyer and each of its
directors and officers harmless from, any losses, claims, damages, expenses
or liabilities (including reasonable attorneys fees) to which the Buyer or
such directors and officers may become subject by reason of any statement
or omission in the Stockholder Registration Statement made in reliance
upon, or in conformity with, a written statement by such Principal
Stockholder furnished pursuant to this Section 8.4; and
(ii) to report to the Buyer sales made pursuant
to the Stockholder Registration Statement.
32
5. Indemnification. The Buyer agrees to indemnify and hold
harmless each Principal Stockholder whose shares are included in the
Stockholder Registration Statement against any losses, claims, damages,
expenses or liabilities to which such Principal Stockholder may become
subject by reason of any untrue statement of a material fact contained in
the Stockholder Registration Statement or any omission to state therein a
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
expenses or liabilities arise out of or are based upon information
furnished to the Buyer by a Principal Stockholder for use in the
Stockholder Registration Statement. The Buyer shall have the right to
assume the defense and settlement of any claim or suit for which the Buyer
may be responsible for indemnification under this Section 8.5. This
indemnification survives registration and sale of the Merger Shares and the
termination of this Agreement.
6. Assignment of Rights. A Principal Stockholder may not
assign any of its rights under this Article VIII except in connection with
the transfer of some or all of his or her Merger Shares to a child or
spouse or other family member, or trust for their benefit, provided each
such transferee agrees in a written instrument delivered to the Buyer to be
bound by the provisions of this Article VIII.
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following
defined terms is defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
Accounting Firm 4.12(a)
Affiliate 2.15(f)
Affiliate Agreement 4.6
Agreement Introduction
Articles of Merger 1.1
Buyer Introduction
Buyer Common Stock 1.5(a)
Buyer Reports 3.5
CERCLA 2.22
Certificate of Merger 1.1
Certificates 1.6(a)
Closing 1.2
Closing Balance Sheet 4.10
Closing Date 1.2
Code 2.9(a)
Company Introduction
Company Accountants 4.12(a)
Company Affiliate 4.6
33
Company Shares 1.5(a)
Confidential Business Information 2.12(a)
Conversion Ratio 1.5(a)
Damages 6.1
Disclosure Schedule Article II
Effective Time 1.1
Employee Benefit Plan 4.3(d)
Employee Options 4.9
ERISA 2.21(a)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Property 6.4
Escrow Shares 1.5(a)
Exchange Act 2.15(f)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.3
Indemnified Persons 6.1
Initial Shares 1.5(a)
Intellectual Property 2.12(a)
Xxxxx Xxxxxx Employment Agreement 5.2(j)
Merger 1.1
Merger Documents 1.1
Merger Shares 1.5(a)
Most Recent Balance Sheet 2.8
Most Recent Period End 2.6
Ordinary Course of Business 2.4
Party Introduction
Permit 2.24
Principal Stockholder Article II
Qualified Plans 2.21(b)
RCRA 2.22
Xxxxxx Xxxxxx Employment Agreement 5.2(i)
S Corporation Return 4.12(a)
SEC 3.5
Securities Act 1.6(d)
Security Interest 2.4
Six-Month Date 8.1
Stockholder Introduction
Stockholder Registration Statement 8.1
Surviving Corporation 1.1
Taxes 2.9(b)
Tax Returns 2.9(b)
Transitory Subsidiary Introduction
34
ARTICLE X
MISCELLANEOUS
1. Press Releases and Announcements. No Party shall issue
any press release or public disclosure relating to the subject matter of
this Agreement without the prior written approval of the other Parties;
provided, however, that any Party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing Party shall advise the other Parties and provide them with a
copy of the proposed disclosure prior to making the disclosure).
2. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
3. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, with respect to the subject matter
hereof, other than the confidentiality provisions of the Confidentiality
Agreement dated October 9, 1997 between the Buyer and the Company.
4. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Parties; provided that the
Transitory Subsidiary may assign its rights, interests and obligations
hereunder to an Affiliate of the Buyer.
5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
7. Notices. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after
it is sent via a reputable nationwide overnight courier service, in each
case to the intended recipient as set forth below:
If to the Company or any Stockholder: Copy to:
------------------------------------ -------
Xxxxxx Xxxxx Systems, Inc. Xxxxxxx X. Xxxxxx, Esq.
00 Xxxx Xxxxxx Xxxxx, Xxxxx & Xxxxx
Xxxxx 000 000 Xxxxx Xx Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attn: President
35
If to the Buyer: Copy to:
--------------- -------
SS&C Technologies, Inc. Xxxx X. Xxxxxxx, Esq.
Corporate Place Xxxx and Xxxx LLP
000 Xxxxxxxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: Chief Executive Officer
If to the Transitory Subsidiary: Copy to:
------------------------------- -------
Securities Software Acquisition Corp. Xxxx X. Xxxxxxx, Esq.
c/o SS&C Technologies, Inc. Xxxx and Xxxx XXX
Xxxxxxxxx Xxxxx 00 Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx Xxxxxx, XX 00000
Xxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Delaware,
excluding its conflicts of laws principles.
9. Amendments and Waivers. The Parties may mutually amend
any provision of this Agreement at any time prior to the Effective Time. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
10. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any term
or provision hereof is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which
the judgment may be appealed.
36
11. Expenses. The costs and expenses (including legal and
accounting fees and expenses) incurred by the Buyer and the Transitory
Subsidiary in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Buyer, and the costs and expenses
(including legal and accounting fees and expenses) incurred by the Company
and the Principal Stockholders in connection with this Agreement and the
transactions contemplated hereby shall be borne by the Company and the
Principal Stockholders, respectively. Notwithstanding the foregoing, any
costs and expenses (including legal and accounting fees and expenses)
incurred by the Company in connection with this Agreement and the
transactions contemplated hereby that are in excess of $75,000 shall be
borne by the Principal Stockholders.
12. Specific Performance. Each of the Parties acknowledges
and agrees that one or more of the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other Parties
shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
13. Construction. The language used in this Agreement shall
be deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against
any Party. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
14. Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
[Remainder of page intentionally left blank.]
37
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
SS&C TECHNOLOGIES, INC.
---------------------------------------
By: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
SECURITIES SOFTWARE ACQUISITION
CORP.
---------------------------------------
By: Xxxxxxx X. Xxxxx
Title: President
XXXXXX XXXXX SYSTEMS, INC.
---------------------------------------
By:
Title:
STOCKHOLDERS
---------------------------------------
Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxx
---------------------------------------
Xxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx
38
The undersigned, being the duly elected Secretary of the
Transitory Subsidiary, hereby certifies that this Agreement has been
adopted by a majority of the votes represented by the outstanding shares of
capital stock of the Transitory Subsidiary entitled to vote on this
Agreement.
---------------------------------------
Secretary
The undersigned, being the duly elected Secretary of the Company,
hereby certifies that this Agreement has been adopted by all of the votes
represented by the outstanding Company Shares entitled to vote on this
Agreement.
---------------------------------------
Secretary
39
