AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into as of this
9th day of September 1999, by and among XxxxXxxxxXxx.xxx plc, a corporation
organized under the laws of the England and Wales (the "Parent"); Xxxxxxxxx
Acquisition Corp., a Washington, United States corporation (the "Buyer");
Research Sales, Inc. d/b/a Xxxxxxxxx Research, a Washington corporation (the
"Company"); and the persons or corporations who are all of the stockholders of
the Company and whose signatures appear on the signature pages of this Agreement
(each a "Stockholder" and collectively the "Stockholders");
W I T N E S S E T H:
WHEREAS, the Stockholders are the record and beneficial owners of all of
the issued and outstanding capital stock of the Company (the "Stock"); and
WHEREAS, the Buyer, which is a wholly-owned subsidiary of the Parent,
desires to acquire the business of the Company pursuant to the Merger
hereinafter provided for;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereby covenant and agree
as follows:
1. THE MERGER.
1.1 The Merger. On the Closing Date, and in accordance with the
provisions of this Agreement and the applicable provisions of the Washington
Business Corporation Act ("Washington Law"), the Buyer shall be merged with and
into the Company (the "Merger") in accordance with the terms and conditions of
this Agreement and articles of merger in substantially the form of Exhibit A
annexed hereto (the "Articles of Merger"), with the Company as the surviving
corporation of such Merger (the Company being hereinafter sometimes referred to
as the "Surviving Corporation"). Thereupon, the separate existence of the Buyer
shall cease, and the Company, as the Surviving Corporation, shall continue its
corporate existence under Washington Law under its current name.
1.2 Effectiveness of the Merger. On the Closing Date (as such term
is hereinafter defined), the Buyer and the Company will cause the executed
Articles of Merger to be submitted for filing, and to be filed, with the
Washington Secretary of State; provided, however, that notwithstanding that the
effective filing date of the Articles of Merger may be subsequent to the Closing
Date, the Buyer's acquisition of the Company shall be effective and be deemed to
have occurred on and as of the Closing Date.
1.3 Effect of the Merger. Upon the filing of the Articles of Merger,
(a) the Surviving Corporation shall own and possess all assets and property of
every kind and description, and every interest therein, wherever located, and
all rights, privileges, immunities, powers, franchises and authority of a public
as well as of a private nature, of each of the Buyer and the Company (the
"Constituent Corporations"), and all obligations owed to, belonging to or
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due to each of the Constituent Corporations, all of which shall be vested in the
Surviving Corporation pursuant to Washington Law without further act or deed,
and (b) the Surviving Corporation shall be liable for all claims, liabilities
and obligations of the Constituent Corporations, all of which shall become and
remain the obligations of the Surviving Corporation pursuant to Washington Law
without further act or deed.
1.4 Surviving Corporation. Upon the filing of the Articles of
Merger, the Articles of Incorporation, By-Laws, directors and officers of the
Surviving Corporation shall be identical to those of the Buyer as in effect
immediately prior to the effectiveness of the Merger.
1.5 Status and Conversion of Shares. Upon the effectiveness of the
Merger:
(a) Each share of capital stock of the Company held by the
Company as treasury stock immediately prior to the effectiveness of the Merger
shall be cancelled and extinguished, and no payment or issuance of any
consideration shall be payable or shall be made in respect thereof;
(b) Each share of capital stock of the Buyer outstanding
immediately prior to the effectiveness of the Merger shall remain one (1)
outstanding share of common stock of the Surviving Corporation; and
(c) Each share of the Stock of the Company outstanding
immediately prior to the effectiveness of the Merger shall be cancelled and
extinguished and converted into the right to receive a proportionate amount of
each component of the Merger Consideration payable pursuant to Section 2.1
below, which Merger Consideration shall be paid and delivered to the
Stockholders, as the record holders of 100% of the outstanding Stock, following
(i) surrender to the Parent and the Buyer on the Closing Date of the
certificates representing such shares of outstanding Stock (all of which shall
be delivered free and clear of any and all pledges, liens, claims, charges,
options, calls, encumbrances, restrictions and assessments whatsoever, except
any restrictions which may be created by operation of state or federal
securities laws), and (ii) the execution and delivery of those additional
agreements, and the settlement of those obligations, described in Section 7
below.
1.6 Books and Records. On the Closing Date, the Stockholders shall
deliver, and shall cause the Company to deliver, to the Buyer all of the stock
books, records and minute books of the Company, all financial and accounting
books and records of the Company, and all referral, client, customer and sales
records of the Company.
2. MERGER CONSIDERATION. In sole consideration for the Merger, the
Stockholders of the Company shall be entitled to receive in the Merger in
respect of all of the outstanding Stock (the "Merger Consideration") 551,302
shares of common stock of the Parent (the "Parent Shares"), which is that amount
of stock which had an aggregate value on the agreed upon calculation date of
U.S.$4.5 million.
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The aggregate number of Parent Shares shall be allocated as among
the holders of the Stock in proportion to their relative holdings of the Stock
as set forth in Schedule 4.1 annexed hereto and the stock certificates
representing the Parent Shares shall be delivered to the Stockholder
Representative (as such term is hereinafter defined) for distribution to the
Stockholders within five (5) business days after the Closing Date (or as soon
thereafter as the Parent's transfer agent can furnish the certificates
representing such Parent Shares without undue expense).
3. TAX-FREE REORGANIZATION. The parties intend that the transactions
pursuant to this Agreement qualify, to the maximum extent possible within the
terms hereof, as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the parties shall report
these transactions and otherwise conduct their affairs so as to give effect to
such intention.
4. REPRESENTATIONS AND WARRANTIES OF ALL OF THE STOCKHOLDERS. In
connection with the Merger and in order to induce the Parent and the Buyer to
enter into this Agreement and to consummate the Merger, the Stockholders hereby
jointly and severally represent and warrant to the Parent and the Buyer as
follows:
4.1 Title to the Stock. Schedule 4.1 annexed hereto accurately sets
forth the ownership of the Stock. The Stockholders have good, valid and
marketable title to the Stock in the amounts and proportions as set forth on
Schedule 4.1, all of which Stock has been duly authorized and validly issued and
is fully paid and non-assessable, and is free and clear of all pledges, liens,
claims, charges, options, calls, encumbrances, restrictions and assessments
whatsoever, except any restrictions which may be created by operation of state
or federal securities laws.
4.2 Valid and Binding Agreement. The execution, delivery and
performance of this Agreement, and the consummation of the Merger and the other
transactions contemplated hereby, by the Company have been duly and validly
authorized by the Board of Directors and the Stockholders of the Company; and
the Company and the Stockholders have full legal right, power and authority to
execute and deliver this Agreement, to perform their respective obligations
hereunder, and to consummate the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of the Company and
the Stockholders, enforceable against the Company and the Stockholders in
accordance with its terms.
4.3 Investment Representation; Restricted Shares. Each of the
Stockholders is acquiring his or her Parent Shares described in Section 2.1
above for his or her own account for investment, and not with a view to the
resale or distribution thereof in violation of any applicable securities laws.
None of the Stockholders have any present intention of disposing of any of such
Parent Shares. Each of the Stockholders is sophisticated in making investments
of the type represented by the Parent Shares. Each of the Stockholders has been
given access to such information concerning the Parent and the Buyer and their
respective businesses as they have requested provided, that this statement shall
in no way diminish the rights of the Stockholders to
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rely upon the representations and warranties of the Parent and the Buyer herein.
Each of the Stockholders has sufficient financial resources to invest in the
Parent Shares, to hold that investment without disposing of the same for an
indefinite period of time, and to bear the risk of loss of that investment
without undue financial hardship, provided that nothing herein shall in any way
diminish the rights of the Stockholders to pursue their remedies at contract or
at law. The Stockholders acknowledge and agree that the Parent Shares acquired
pursuant to this Agreement are not registered under U.S. federal, state, or
other securities laws, will be restrictively legended to reflect the same, and
may not be transferred except in compliance with applicable securities laws. The
Stockholders also acknowledge that the only securities of the Parent which are
freely tradeable in the U.S. at this time are American Depositary Shares,
evidenced by American Depositary Receipts. As soon as practicable under
applicable laws and requirements of the Parent's Depositary institutions, at the
request of all of the Stockholders, on the one hand, or the Parent, on the other
hand, the parties shall cooperate, at the Parent's expense in exchanging the
Stockholders' ordinary shares of the Parent acquired by them pursuant to this
Agreement for American Depositary Shares evidencing such ordinary shares of the
Parent, represented by American Depositary Receipts, except that with respect to
any fees and expenses associated with any registration of securities under U.S.
and state securities laws, the Parent will only pay its own attorneys' and
accountants' fees and expenses, Securities Exchange Commission filing fees, and
AMEX listing fees, and the Stockholders will be responsible for the fees and
expenses of their own attorneys and accountants, if any, printing, mailing or
other delivery expenses, state "blue sky" filing fees, if applicable, and any
fees, expenses or discounts payable to underwriters or their counsel, if any.
4.4 Disclosure and Duty of Inquiry. The Buyer is not and will not be
required to undertake any independent investigation to determine the truth,
accuracy and completeness of the representations and warranties made by the
Stockholders in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER. In
connection with the Merger and in order to induce the Parent and the Buyer to
enter into this Agreement and to consummate the Merger, Xxxxx X. Xxxxxxxxx, (the
"Principal Stockholder," and any reference to "Stockholder" elsewhere in this
Agreement shall include, without limitation, the Principal Stockholder)
represents and warrants to the Parent and the Buyer, as follows:
5.1 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by the Company or the Stockholders, nor compliance
with the terms and provisions of this Agreement on the part of the Company and
the Stockholders, will: (a) violate any statute or regulation of any
governmental authority, domestic or foreign, affecting the Company or any of the
Stockholders; (b) require the issuance of any authorization, license, consent or
approval of any federal or state governmental agency; (c) conflict with or
result in a breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which the Company or any of the Stockholders is a
party, or by which the Company or any of the Stockholders is bound, or
constitute a default thereunder; or (d) result in the creation or imposition of
any further lien or encumbrance on any assets of the Company.
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5.2 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington, with full corporate power and authority to own its
assets and conduct its business as owned and conducted on the date hereof. The
Company is not required to be qualified as a foreign corporation under the laws
of any jurisdiction. True and complete copies of the Articles of Incorporation
and By-Laws of the Company (including all amendments thereto), and a correct and
complete list of the officers and directors of the Company, are annexed hereto
as Schedule 5.2.
5.3 Capital Structure; Stock Ownership.
(a) The authorized capital stock of the Company as set forth
in its Articles of Incorporation is included in Schedule 5.3, and the Stock
constitutes and represents all of the issued and outstanding Stock of the
Company. The shares of the Stock and the record and beneficial owners thereof
are as set forth on Schedule 4.1, and no other shares of capital stock or other
securities of the Company are issued or outstanding.
(b) Except as provided in the existing employment agreements
for Xxx Xxxxxx and Xxxx Xxxxxxx there are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements or calls, demands
or commitments obligating the Company to issue, transfer or purchase any shares
of its capital stock or other securities, or obligating any Stockholder to
transfer any shares of the Stock. No shares of capital stock or other securities
of the Company are in the Company's treasury, and no shares of capital stock or
other securities of the Company are reserved for issuance pursuant to stock
options, rights, warrants, convertible securities, agreements or other rights to
purchase capital stock or other securities except as stated above. Closing is
conditioned in part upon the parties reaching a mutually satisfactory resolution
with regard to the settlement or transfer of these obligations.
(c) The Company does not own, directly or indirectly, any
stock or other securities of any corporation or entity, and does not have any
direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business other than the business conducted
by the Company.
5.4 Financial Information.
(a) Annexed hereto as Schedule 5.4(a) are true and complete
copies of the Company's unaudited financial as of the date (the "Interim
Financials Date"), either July 31, 1999 or August 31, 1999, the Principal
Stockholder may choose, and the seven (7) or eight (8) months then ended
(collectively, the "Financial Statements"). The Financial Statements are true,
complete and accurate in all material respects, and fairly present the financial
condition and results of operations of the Company as of the dates thereof and
for the periods covered thereby, substantially in accordance with generally
accepted accounting principles consistently applied (subject to audit
adjustments which would not, in the aggregate, be material, and to the absence
of certain footnote disclosures, the absence of which does not render the
Financial Statements materially misleading). The Financial Statements have been
prepared from the books and
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records of the Company, which books and records fairly reflect all transactions
to which the Company was and is a party.
(b) Schedule 5.4(b) annexed hereto contains: (i) aging
schedules of the accounts receivable and accounts payable of the Company as of
the Interim Financials Date; (ii) a list of the outstanding principal balance of
and approximate accrued interest on all indebtedness (other than accounts
payable), loans and/or notes payable of the Company as of the Interim Financials
Date; (iii) a list of any leasehold or other contractual obligations of the
Company to any of the Stockholders and/or any of their respective Affiliates on
the date hereof; (iv) a list of all obligations of the Company guaranteed by any
of the Stockholders and/or any of their respective Affiliates on the date
hereof, and the terms of such guarantees; (v) a list reflecting the nature and
amount of all obligations owed to the Company on the date hereof by any of the
Stockholders and/or any of their respective Affiliates; and (vi) a list
reflecting the nature and amount of all obligations owed by the Company on the
date hereof to any of the Stockholders and/or any of their respective
Affiliates. Wherever used in this Agreement, the term "Affiliate" means, as
respects any person or entity, any other person or entity that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the first person or entity.
5.5 No Material Changes. Since the Interim Financials Date, except
as disclosed to Parent in the budget set forth in Schedule 10.6 (a) the business
of the Company has been operated solely in the normal course, (b) there has been
no material adverse change in the financial condition, operations or business of
the Company from that reflected in the Financial Information, (c) the Company
has not incurred any material obligation or liability or entered into any
material transaction or commitment except in the normal course of business, and
(d) there has not been any (i) declaration, setting aside or payment of any
dividend, distribution or redemption payment with respect to the capital stock
of the Company, (ii) increase in the rate of salary or compensation paid or
payable by the Company to any employee, consultant or other person, (iii)
forgiveness of any debt or obligation owed to the Company by any of the
Stockholders and/or any of their respective Affiliates, (iv) other payment or
consideration of any kind paid by the Company to any of the Stockholders and/or
any of their respective Affiliates outside of the ordinary course of business,
(v) damage, destruction or loss (whether covered by insurance or not) materially
and adversely affecting the business, operations, assets or financial condition
of the Company, or (vi) other event or condition arising from or out of the
operation of the Company which has or may materially and adversely affect the
business, operations, assets or financial condition of the Company. The Company
has not, since December 31, 1998, altered its practices with respect to payment
of accounts payable, collection of accounts receivable or receiving prepayments
for future services.
5.6 Tax Matters.
(a) The Company has, to the date hereof, filed all tax returns
and tax reports required to be filed by the Company on or prior to the date
hereof, and has paid (or set aside for payment, if not yet due and payable) all
taxes, assessments and other impositions as and to the extent required by
applicable law. Without limitation of the foregoing, the Company has
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made all required filings and has made (or set aside, if not yet due and
payable) all required payments to the date hereof in respect of franchise,
sales, use, property, excise, payroll withholding and other taxes (including
interest and penalties and including estimated tax installments as required),
and there are no outstanding or pending claims, deficiencies or assessments
with respect to any taxes, interest or penalties of the Company.
(b) There are no audits pending with respect to any federal,
state or local tax reports or tax returns of the Company, and no waiver of
statutes of limitations have been given or requested with respect to any tax
years or tax filings of the Company.
5.7 Title to the Assets. The Company has and owns good and
marketable title to all of its assets, free and clear of all liens, pledges,
claims, security interests and encumbrances of every kind and nature
(collectively, "Liens") other than those Liens identified on Schedule 5.7
annexed hereto (which Liens secure only those obligations disclosed in Schedule
5.7). All material items of machinery, equipment, vehicles and other fixed
assets owned or leased by the Company are listed in Schedule 5.7, all of which
are in good operating condition and repair (reasonable wear and tear excepted),
are adequate for their use in the Company's business as presently conducted, and
are sufficient for the continued conduct of such business.
5.8 Accounts Receivable. All accounts receivable reflected in the
Financial Statements, and all accounts receivable thereafter created or acquired
by the Company prior to the date hereof, have arisen in the normal course of the
Company's business, and are and will be subject to no counterclaims, set-offs,
allowances or discounts of any kind. All of the Company's accounts receivable as
of the Closing Date will be fully collectible without requirement of legal
proceedings within six (6) months after the Closing Date.
5.9 Inventories. The supplies and other inventories owned by the
Company as reflected in the Financial Statements, and all supplies and other
inventories acquired subsequent to the date of the Financial Statements, have
been recorded at the lower of cost or market; and such supplies and other
inventories are of a quality and quantity which are useable in the ordinary
course of the Company's business.
5.10 Real Property.
(a) The Company does not own any real estate or any interest
therein of any kind, except to the extent of the Company's leasehold interest in
and use and occupancy of its business premises pursuant to any lease agreement,
copies of which are annexed hereto as Schedule 5.10 (the "Lease").
(b) The Lease is in full force and effect. The Company (and,
to the best of the Principal Stockholder's knowledge, the landlord thereunder)
is presently in compliance in all material respects with all of its obligations
under the Lease, and the premises leased thereunder are in good condition
(reasonable wear and tear excepted) and are adequate for the operation of the
Company's business as presently conducted.
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(c) To the best of the Principal Stockholder's knowledge, the
Company's use of the premises leased pursuant to the Lease is in conformity with
all applicable building, zoning and other laws and ordinances.
5.11 Insurance Policies. Schedule 5.11 annexed hereto contains a
true and correct schedule of all insurance coverages held by the Company
concerning its business and properties (including, but not limited to,
professional liability insurance). The Company has paid all premiums due and
payable in respect of such insurance coverages, and all of such coverages are
presently in full force and effect.
5.12 Permits and Licenses. The Company possesses all required
permits, licenses and/or franchises, from whatever governmental authorities or
agencies (domestic and/or foreign) requiring the same and having jurisdiction
over the Company, necessary in order to operate its business in the manner
presently conducted, all of which permits, licenses and/or franchises are valid,
current and in full force and effect. None of such permits, franchises or
licenses will be voided, revoked or terminated, or voidable, revocable or
terminable, upon and by reason of the Merger and the change of ownership of the
Company pursuant to this Agreement.
5.13 Contracts and Commitments.
(a) Schedule 5.13 annexed hereto lists all material contracts,
leases, commitments, indentures and other agreements to which the Company is a
party (collectively,whether or not listed on Schedule 5.13, "Material
Contracts"), except that Schedule 5.13 need not list any such agreement that is
listed on any other Schedule hereto, or was entered into in the ordinary course
of the Company's business and that, in any case: (i) is for the purchase of
supplies or other inventory items in the ordinary course of business; (ii) is
related to the purchase or lease of any capital asset involving aggregate
payments of less than $2,500 per annum; or (iii) may be terminated without
penalty, premium or liability by the Company on not more than thirty (30) days'
prior written notice.
(b) Except as set forth in Schedule 5.13: (i) all Material
Contracts are in full force and effect; (ii) the Company and, to the best of the
Principal Stockholder's knowledge, each other party thereto, is in compliance in
all material respects with all of its obligations under the Material Contracts,
and the Company has not received any written notice that any Material Contract
is in material breach or default or is now subject to any condition or event
which has occurred and which, after notice or lapse of time or both, would
constitute a material default by any party under any such contract, lease,
agreement or commitment; and (iii) none of the Material Contracts will be
voided, revoked or terminated, or voidable, revocable or terminable, upon and by
reason of the Merger and the change of ownership of the Company pursuant to this
Agreement.
(c) To the best of the Principal Stockholder's knowledge, no
purchase or lease commitment by the Company is materially in excess of the
normal, ordinary and usual requirements of the business of the Company.
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(d) Except as set forth in Schedule 5.13 or in Schedule 5.15,
the Company does not have any outstanding contracts with or commitments to
officers, employees, technicians, agents, consultants or advisors that are not
cancelable by the Company without penalty, premium or liability (for severance
or otherwise) on less than thirty (30) days' prior written notice.
5.14 Customers and Suppliers. Neither the Company nor the Principal
Stockholder has received any written notice of any existing, announced or
anticipated changes in the policies of any material clients, customers, referral
sources or suppliers which will materially adversely affect the business
presently being conducted by the Company.
5.15 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 5.15 annexed hereto, the
Company is not a party to (i) any collective bargaining agreement or other labor
agreement, or (ii) any agreement with respect to the employment or compensation
of any non-hourly and/or non-union employee(s). Schedule 5.15 sets forth the
amount of all compensation or remuneration (including any discretionary bonuses)
paid or payable by the Company during or with respect to the 1999 calendar year
to employees or consultants who presently receive aggregate compensation or
remuneration at an annual rate in excess of $35,000.
(b) No union is now certified or, to the best of the Principal
Stockholder's knowledge, claims to be certified as a collective bargaining agent
to represent any employees of the Company, and there are no labor disputes
existing or, to the best of the Principal Stockholder's knowledge, threatened,
involving strikes, slowdowns, work stoppages, job actions or lockouts of any
employees of the Company.
(c) There are no unfair labor practice charges or petitions
for election pending or being litigated before the National Labor Relations
Board or any other federal or state labor commission relating to any employees
of the Company. Neither the Company nor any of the Stockholders has received any
written notice of any actual or alleged violation of any law, regulation, order
or contract term affecting the collective bargaining rights of employees, equal
opportunity in employment, or employee health, safety, welfare, or wages and
hours.
(d) With respect to any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) to which the Company has at any time been required to make
contributions, the Company has not, at any time on or after April 29, 1980,
suffered or caused any "complete withdrawal" or "partial withdrawal" (as such
terms are respectively defined in Sections 4203 and 4205 of ERISA) therefrom on
its part.
(e) Except as disclosed in Schedule 5.15, the Company does not
maintain, or have any liabilities or obligations of any kind with respect to,
any bonus, deferred compensation, pension, profit sharing, retirement or other
such benefit plan, or has any potential
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or contingent liability in respect of any actions or transactions relating to
any such plan other than to make contributions thereto if, as and when due
(prior to imposition of any interest or penalties) in respect of periods
subsequent to the date hereof. Without limitation of the foregoing, (i) the
Company has made all required contributions to or in respect of any and all
such benefit plans, (ii) no "accumulated funding deficiency" (as defined in
Section 412 of the Code) has been incurred in respect of any of such benefit
plans, and the present value of all accrued benefits thereunder does not, on
the date hereof, exceed the assets of any such plan allocable to the vested
accrued benefits thereunder, (iii) there has been no "prohibited transaction"
(as defined in Section 4975 of the Code) with respect to any such plan, and no
transaction which could give rise to any tax or penalty under Section 4975 of
the Code or Section 502 of ERISA, and (iv) there has been no "reportable event"
(within the meaning of Section 4043(b) of ERISA) with respect to any such plan.
All of such plans which constitute, are intended to constitute, or have been
treated by the Company as "employee pension benefit plans" or other plans
within Section 3 of ERISA have been determined by the Internal Revenue Service
to be "qualified" under Section 401(a) of the Code, and have been administered
and are in compliance with ERISA and the Code; and the Principal Stockholder
is not aware of any state of facts, conditions or occurrences such as would
impair the "qualified" status of any of such plans.
(f) Except for the group insurance programs listed in Schedule
5.15, the Company does not maintain any medical, health, life or other employee
benefit insurance programs or any welfare plans (within the meaning of Section
3(1) of ERISA) for the benefit of any current or former employees, and, except
as required by law, the Company does not have any liability, fixed or
contingent, for health or medical benefits to any former employee.
5.16 Compliance with Laws.
(a) To the best of the Principal Stockholder's knowledge, the
Company has not, at any time during the five (5) year period prior to the date
hereof, (i) handled, stored, used, generated, processed, transported or disposed
of any hazardous substances in violation of any federal, state or local
environmental laws or regulations, (ii) otherwise committed any material
violation of any federal, state or local environmental laws, statutes or
regulations or any material violation of the Occupational Safety and Health Act,
or (iii) been in material violation of any requirements of its insurance
carriers from time to time.
(b) Neither the Company nor the Principal Stockholder has
received any written notice of default or violation, nor, to the best of the
Principal Stockholder's knowledge, is the Company or any of its directors,
officers or employees in default or violation, with respect to any judgment,
order, writ, injunction, decree, demand or assessment issued by any court or any
federal, state, local, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, domestic or foreign, relating
to any aspect of the Company's business, affairs, properties or assets. Neither
the Company nor the Principal Stockholder has received written notice of, been
charged with, or, to the best of the Principal Stockholder's knowledge, is under
investigation with respect to, any violation of any provision of any federal,
state, local, municipal or other law or administrative rule or regulation,
domestic or foreign, relating to any aspect of the Company's business, affairs,
properties or assets, which
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violation would have a material adverse effect on the Company, its business or
any material portion of its assets.
(c) Schedule 5.16 annexed hereto sets forth the date(s) of the
last known audits or inspections (if any) of the Company conducted by or on
behalf of the Environmental Protection Agency, the Occupational Safety and
Health Administration, and/or any other governmental and/or quasi-governmental
agency (federal, state and/or local).
5.17 Litigation. Except as disclosed in Schedule 5.17 annexed
hereto, there is no suit, action, arbitration, or legal, administrative or other
proceeding, or governmental investigation (including, without limitation, any
claim alleging the invalidity, infringement or interference of any patent,
patent application, or rights thereunder owned or licensed by the Company)
pending, or to the best knowledge of the Principal Stockholder, threatened, by
or against the Company or any of its assets or properties. The Principal
Stockholder is not aware of any state of facts, events, conditions or
occurrences which would properly constitute grounds for or the basis of any
meritorious suit, action, arbitration, proceeding or investigation against or
with respect to the Company.
5.18 Intellectual Property. Schedule 5.18 attached hereto is a true
and correct list and brief description of the nature and ownership of all
trademarks, service marks, trade names, copyrights, know-how, patents, trade
secrets, licenses and other intellectual property used in the conduct of the
Company's business (the "Intellectual Property"). The Company has full legal
right, title and interest in and to the Intellectual Property. The conduct of
the business of the Company as presently conducted, and the unrestricted conduct
and the unrestricted use and exploitation of the Intellectual Property, does not
infringe or misappropriate any rights held or asserted by any Person and, to the
knowledge of the Company, no person is infringing on any Intellectual Property
of the Company. Except as disclosed in Schedule 5.18, noNo payments are required
for the continued use of the Intellectual Property. None of the Intellectual
Property has ever been declared invalid or unenforceable, or is the subject of
any pending or threatened action for opposition, cancellation, declaration,
infringement, or invalidity, unenforceability or misappropriation or like claim,
action or proceeding.
5.19 Transactions with Affiliates. No material asset employed in the
business of the Company is owned by, leased from or leased to any of the
Stockholders, any of their respective Affiliates, members of their families or
any partnership, corporation or trust for their benefit, or any other officer,
director or employee of the Company or any Affiliate of the Company.
5.20 Bank Accounts. Annexed hereto as Schedule 5.20 is a correct and
complete list of all bank accounts and safe deposit boxes maintained by or on
behalf of the Company, with indication of all persons having signatory, access
or other authority with respect thereto.
5.21 Schedules Incorporated by Reference. The making of any
recitation in any Schedule hereto shall be deemed to constitute a representation
and warranty that such recitation
11
is an accurate statement and disclosure of the information required by the
corresponding Section(s) of this Agreement, as, to the extent, and subject to
the qualifications and limitations, set forth in such corresponding Section(s).
5.22 Review of Disclosure Materials. The Stockholders have received
and reviewed those disclosure documents of the Parent described Section 6.7
below, and have received satisfactory answers to any and all questions which
they have had regarding such disclosures.
5.23 Disclosure and Duty of Inquiry. The Buyer is not and will not
be required to undertake any independent investigation to determine the truth,
accuracy and completeness of the representations and warranties made by the
Stockholders in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BUYER. In
connection with the Merger, and in order to induce the Company and the
Stockholders to enter into this Agreement and to consummate the Merger, the
Parent and the Buyer hereby jointly and severally represent and warrant to the
Stockholders as follows:
6.1 Organization, Good Standing and Qualification. The Parent is a
corporation duly organized, validly existing and in good standing under the laws
of England and Wales and the Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington. Each of
the Parent and the Buyer has all necessary power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder, and
to consummate the transactions contemplated hereby.
6.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Parent and the Buyer has been duly and validly
authorized by the Board of Directors of the Parent, and by the Board of
Directors and sole stockholder of the Buyer. No further corporate authorization
is required on the part of the Parent or the Buyer to consummate the
transactions contemplated hereby.
6.3 Valid and Binding Agreement. This Agreement constitutes the
legal, valid and binding obligation of the Parent and the Buyer, enforceable
against the Parent and the Buyer in accordance with its terms.
6.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by the Parent and the Buyer, nor compliance with the
terms and provisions of this Agreement on the part of the Parent and the Buyer,
will: (a) violate any statute or regulation of any governmental authority,
domestic or foreign, affecting the Parent or the Buyer; (b) require the issuance
of any authorization, license, consent or approval of any federal or state
governmental agency; or (c) conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree,
note, indenture, loan agreement or other agreement or instrument to which the
Parent or the Buyer is a party, or by which the Parent or the Buyer is bound, or
constitute a default thereunder.
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6.5 Investment. The Buyer is acquiring the Stock for its own account
for investment, and not with a view to the resale or distribution thereof in
violation of any applicable securities laws. The Buyer has no present intention
of disposing of any of the Stock. The Buyer is sophisticated in making
investments of the type represented by the Stock. The Buyer has been given
access to such information concerning the Company and its business as the Buyer
has requested provided, that this statement shall in no way diminish the rights
of the Buyer to rely upon the representations and warranties of the Stockholders
herein.. The Buyer has sufficient financial resources to invest in the Stock, to
hold that investment without disposing of the same for an indefinite period of
time, and to bear the risk of loss of that investment without undue financial
hardship, provided that nothing herein shall in any way diminish the rights of
the Buyer to pursue its remedies at contract or at law.
6.6 Parent Shares. When issued and delivered pursuant to Section 2.1
above, all of the Parent Shares issued hereunder shall have been duly authorized
and validly issued, and shall be fully paid and non-assessable.
6.7 Disclosure Materials. All required filings by the Parent with
the United States Securities and Exchange Commission (collectively, the "SEC
Reports") since April 30, 1999 have been filed within the applicable required
time periods (or any extensions related thereto), complied in all material
respects with all applicable requirements of law and rules and regulations
thereunder, and at the time filed did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein and
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. The Parent has not been required or
requested to file any amendment or supplement to the SEC Reports which has not
been filed prior to the date hereof.
6.8 Litigation. Except as may be disclosed in the SEC Reports, there
are (a) no continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which the Parent or the Buyer is a party or by which
any of their properties or assets are bound, and (b) no actions, suits or
proceedings pending or, to the best of the Parent's and the Buyer's knowledge,
threatened against the Parent or the Buyer, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality, that
in any case is reasonably likely, individually or in the aggregate, to have a
material adverse effect on the consolidated financial condition or operations of
the Parent and its subsidiaries (taken as a consolidated whole).
6.9 Disclosure and Duty of Inquiry. The Stockholders are not and
will not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Parent and the Buyer in this Agreement.
7. The Company covenants and agrees that, from the date hereof until the
Closing Date:
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7.1 Access to Information. The Company shall permit the Parent, the
Buyer, and their counsel, accountants and other representatives, upon reasonable
advance notice to the Company, during normal business hours and without undue
disruption of the business of the Company, to have reasonable access to all
properties, books, accounts, records, contracts, documents and information
relating to the Company. The Parent, the Buyer and their representatives shall
also be permitted to freely consult with the Company's employees, accountants
and counsel concerning the business of the Company.
7.2 Conduct of Business in Normal Course. The Company shall carry on
its business activities in substantially the same manner as heretofore
conducted, and shall not make or institute any unusual or novel methods of
service, sale, purchase, lease, management, accounting or operation that will
vary materially from those methods used by the Company as of the date hereof,
without in each instance obtaining the prior written consent of the Parent.
7.3 Preservation of Business and Relationships. The Company shall,
without making or incurring any unusual commitments or expenditures, preserve
its business organization intact, and preserve its present relationships with
referral sources, clients, customers, suppliers and others having business
relationships with it.
7.4 Maintenance of Insurance. The Company shall continue to carry
its existing insurance, to the extent obtainable upon reasonable terms.
7.5 Corporate Matters. The Company shall not, without the
prior written consent of the Parent:
(a) amend its Articles of Incorporation or By-Laws;
(b) issue any shares of the Company's capital stock or any
other securities;
(c) issue or create any warrants, rights, obligations,
subscriptions, options, convertible securities or other commitments under which
any additional shares of the Company's capital stock or any other securities
might be directly or indirectly issued;
(d) amend, cancel or modify any Material Contract or enter
into any material new agreement, commitment or transaction except, in each
instance, in the ordinary course of business;
(e) pay, grant or authorize any salary increases or bonuses
except in the ordinary course of business and consistent with past practice, or
enter into any employment, consulting or management agreements;
(f) modify in any material respect any material agreement to
which the Company is a party or by which it may be bound, except in the ordinary
course of business;
(g) make any change in the Company's management personnel;
14
(h) except pursuant to commitments in effect on the date
hereof (to the extent disclosed in this Agreement or in any Schedule hereto),
make any capital expenditure(s) or commitment(s), whether by means of purchase,
lease or otherwise, or any operating lease commitment(s), in excess of $5,000 in
the aggregate;
(i) sell, assign or dispose of any capital asset(s) with a net
book value in excess of $2,500 as to any one item or $5,000 in the aggregate;
(j) materially change its method of collection of accounts or
notes receivable, accelerate or slow its payment of accounts payable, or prepay
any of its obligations or liabilities, other than prepayments to take advantage
of trade discounts not otherwise inconsistent with or in excess of historical
prepayment practices;
(k) declare, pay, set aside or make any dividend(s) or other
distribution(s) of cash or other property, or redeem any outstanding shares of
the Company's capital stock;
(l) incur any liability or indebtedness except, in each
instance, in the ordinary course of business;
(m) subject any of the assets or properties of the Company to
any further liens or encumbrances;
(n) forgive any liability or indebtedness owed to the Company
by any of the Stockholders or any of their respective Affiliates; or
(o) agree to do, or take any action in furtherance of, any of
the foregoing.
8. ADDITIONAL AGREEMENTS OF THE PARTIES.
8.1 Confidentiality. Notwithstanding anything to the contrary
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon the Parent or the Buyer under applicable state or
federal securities or antitrust laws, it is expressly understood and agreed by
the Parent and the Buyer that (i) this Agreement, the Schedules hereto, and the
conversations, negotiations and transactions relating hereto and/or contemplated
hereby, and (ii) all financial information, business records and other
non-public information concerning the Company which the Parent, the Buyer or
their representatives have received or may hereafter receive, shall be
maintained in confidence by the Parent, the Buyer and their representatives, and
shall not be disclosed to any person that is not associated or affiliated with
the Parent or the Buyer and involved in the transactions contemplated hereby,
without the prior written approval of the Company, which shall not be
unreasonably withheld, it being understood that the Parent desires to announce
the execution and deliver of this agreement on the day this Agreement is
executed, and the Company and the Principal Stockholder shall cooperate in that
connection, provided, that neither party shall announce this Agreement until the
proceeds of the $100,000 loan referred to below have been received by the
Company. The parties hereto shall use
15
their best efforts to avoid disclosure of any of the foregoing or undue
disruption of any of the business operations or personnel of the Company. In the
event that the transactions contemplated hereby shall not be consummated for any
reason, the Parent and the Buyer covenant and agree that neither they nor their
representatives shall retain any documents, lists or other writings of the
Company which they may have received or obtained in connection herewith or any
documents incorporating any of the information contained in any of the same (all
of which, and all copies thereof in the possession or control of the Parent, the
Buyer or their representatives, shall be returned to the Company).
8.2 Exclusivity. From the date hereof through any termination of
this Agreement by the Company in accordance with Section 12 below, the Company
shall not (and shall not permit any of its Stockholders, officers, directors,
affiliates or representatives to) negotiate with or enter into any other
commitments, agreements or understandings with any person, firm or corporation
(other than the Parent and its Affiliates) in respect of any sale of capital
stock or assets of the Company, any merger, consolidation or corporate
reorganization, or any other such transaction relating to the Company or any
portion of its business.
8.3 Employment Agreement. On the Closing Date, the Surviving
Corporation and Principal Stockholder, Xxxxxxx Xxxxxx and Xxxx Xxxxxxx each
shall execute an amended and restated employment agreement in substantially the
form of Exhibits X-0, X-0 and B-3, respectively, annexed hereto (the "Employment
Agreements").
8.4 Non-Competition Agreement. On the Closing Date, the Surviving
Corporation and each of the Stockholders shall execute and deliver to one
another a non-competition and non-disclosure agreement in substantially the form
of Exhibit C annexed hereto (the "Non-Competition Agreement").
8.5 Additional Agreements and Instruments. On or before the Closing
Date, the Parent, the Buyer, the Company and the Stockholders shall execute,
deliver and file the Articles of Merger and all exhibits, agreements,
certificates, instruments and other documents, not inconsistent with the
provisions of this Agreement, which, in the opinion of counsel to the parties
hereto, shall reasonably be required to be executed, delivered and filed in
order to consummate the Merger and the other transactions contemplated by this
Agreement, including, without limitation, such documents as the Parent or its
counsel may reasonably request to document that the License and the intellectual
property rights of Xxxxx Xxxxxxxxx pertaining to the subject matter thereto has
been effectively transferred to the Company, free and clear of liens
encumbrances of any type, on such terms and conditions as shall be satisfactory
to the Buyer and the Principal Stockholder in form and in substance, and that
said License has been fully paid up .
8.6 Non-Interference. Neither the Parent, the Buyer, the Company nor
any of the Stockholders shall cause to occur any act, event or condition which
would cause any of their respective representations and warranties made in this
Agreement to be or become untrue or incorrect in any material respect as of the
Closing Date, or would interfere with, frustrate or render unreasonably
expensive the satisfaction by the other party or parties of any of the
conditions precedent set forth in Sections 9 and 10 below.
16
9. CONDITIONS PRECEDENT TO THE PARENT'S AND THE BUYER'S PERFORMANCE. In
addition to the fulfillment of the parties' agreements in Section 8 above, the
obligations of the Parent and the Buyer to consummate the Merger and the other
transactions contemplated by this Agreement are further subject to the
satisfaction, at or before the Closing Date, of all the following conditions,
any one or more of which may be waived in writing by the Parent and the Buyer:
9.1 Accuracy of Representations and Warranties. All representations
and warranties made by the Stockholders in this Agreement, in any Schedule(s)
hereto, and/or in any written statement delivered to the Parent or the Buyer
under this Agreement shall be true and correct in all material respects on and
as of the Closing Date as though such representations and warranties were made
on and as of that date.
9.2 Performance. The Company and the Stockholders shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by them
on or before the Closing Date.
9.3 Certification. The Parent and the Buyer shall have received a
certificate, dated the Closing Date, signed by the Stockholders, certifying, in
such detail as the Parent and the Buyer and their counsel may reasonably
request, that the conditions specified in Sections 9.1 and 9.2 above have been
fulfilled.
9.4 Resolutions. The Parent and the Buyer shall have received
certified resolutions of the Board of Directors and the Stockholders of the
Company, in form reasonably satisfactory to counsel for the Parent and the
Buyer, authorizing the Company's execution, delivery and performance of this
Agreement and the Merger, and all actions to be taken by the Company hereunder.
9.5 Opinion of Counsel. The Parent and the Buyer shall have received
the favorable opinion of Xxxxx & Xxxxx, counsel to the Company and the
Stockholders, as to such matters incident to the transactions contemplated
hereby as may reasonably be requested by the Parent, the Buyer and their
counsel.
9.6 Absence of Litigation. No action, suit or proceeding by or
before any court or any governmental body or authority, against the Company or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall be pending or threatened on the Closing Date, which action,
suit or proceeding would, if determined adversely, have a material adverse
effect on the Company, its business or any material portion of its assets, or
impair the ability of any of the Stockholders to deliver in the Merger all of
his or her Stock free and clear of all pledges, liens, claims, charges, options,
calls, encumbrances, restrictions and assessments whatsoever (except any
restrictions which may be created by operation of state or federal securities
laws).
9.7 Consents. All necessary disclosures to and agreements and
consents of (a) any parties to any Material Contracts and/or any licensing
authorities which are material to the
17
Company's business (including, without limitation, the landlord under the
Lease), and (b) any governmental authorities or agencies to the extent required
in connection with the transactions contemplated by this Agreement, shall have
been obtained and true and complete copies thereof delivered to the Buyer.
9.8 Settlement of Accounts. All debts, liabilities and other
monetary obligations (if any) owed to the Company by any of the Stockholders
and/or any of their respective Affiliates shall have been fully paid to the
Company, such that no such debts, liabilities or obligations shall be
outstanding on the Closing Date.
9.9 Condition of Property. Between the date of this Agreement and
the Closing Date, assets of the Company having an aggregate fair market value of
$5,000 or more shall not have been lost, destroyed or irreparably damaged by
fire, flood, explosion, theft or any other cause, whether or not covered by
insurance.
9.10 Execution and Delivery of Exhibits, etc.. On or before the
Closing Date, (a) the Company shall have executed and delivered to the Buyer the
Articles of Merger, (b) Principal Stockholder, Xxxxxxx Xxxxxx, and Xxxx Xxxxxxx
shall each have executed and delivered to the Surviving Corporation the
Employment Agreements, (c) the Principal Stockholder, Xxxxxxx Xxxxxx, and Xxxx
Xxxxxxx each shall have executed and delivered to the Surviving Corporation the
Non-Competition Agreement, d) the License of intellectual property rights of
Xxxxx Xxxxxxxxx to the Company shall be in full force and effect and
satisfactory in form and in substance to the Buyer and fully paid up, and all
right, title and interest in and to the related intellectual property rights
shall have been sold and transferred to the Company effective as of the Closing
Date on terms and conditions satisfactory to the Buyer and to Xxxxx Xxxxxxxxx in
form and in substance, and (e) the parties shall have executed and delivered the
Schedules, which shall have been accepted by the other parties hereto.
9.11 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to the Parent, the Buyer and their counsel.
The Company shall have submitted to the Buyer or its representatives for
examination the originals or true and correct copies of all records and
documents relating to the business and affairs of the Company which the Buyer
may have requested in connection with said transactions.
9.12 Comfort re Financial Statements. The Parent and the Buyer shall
have received advice from their independent certified public accountants,
satisfactory to them in form and in substance, to the effect that the Financial
Statements are sufficient to satisfy any applicable SEC requirements for filing
financial statements (audited or otherwise) in connection with the acquisition
or in connection with the preparation of the Parent's own financial statements
on a consolidated basis.
10. CONDITIONS PRECEDENT TO THE COMPANY'S AND THE STOCKHOLDERS'
PERFORMANCE. In addition to the fulfillment of the parties' agreements
18
in Section 8 above, the obligations of the Company and the Stockholders to
consummate the Merger and the other transactions contemplated by this Agreement
are further subject to the satisfaction, at or before the Closing Date, of all
of the following conditions, any one or more of which may be waived in writing
by the Company and the Stockholder Representative:
10.1 Accuracy of Representations and Warranties. All representations
and warranties made by the Parent and the Buyer in this Agreement and/or in any
written statement delivered by the Parent or the Buyer under this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as though such representations and warranties were made on and as of that date.
10.2 Performance. The Parent and the Buyer shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Parent or the
Buyer on or before the Closing Date.
10.3 Certification. The Stockholders shall have received a
certificate, dated the Closing Date, signed by the Parent and the Buyer,
certifying, in such detail as the Stockholders and their counsel may reasonably
request, that the conditions specified in Sections 10.1 and 10.2 above have been
fulfilled.
10.4 Resolutions. The Stockholders shall have received certified
resolutions of the Board of Directors and sole stockholder of the Buyer and of
the Board of Directors of the Parent, in form reasonably satisfactory to counsel
for the Stockholders, authorizing the Merger and the Parent's and the Buyer's
execution, delivery and performance of this Agreement and all actions to be
taken by the Parent and the Buyer hereunder.
10.5 Opinion of Counsel. The Stockholders shall have received the
favorable opinion of Messrs. Xxxxxxxxx Traurig, counsel to the Parent and the
Buyer, as to such matters incident to the transactions contemplated hereby as
may reasonably be requested by the Stockholders and their counsel.
10.6 Working Capital Facility. Upon the execution of this Agreement,
the Parent shall loan to the Company $100,000, as a partial advance of funds
needed in accordance with the budget set forth on Schedule 10.6 annexed hereto
and made a part hereof. The loan will be evidenced by a Note bearing interest at
Bank of America prime and shall be payable on demand one year following the date
of its execution. The Company shall be solely liable for the repayment of the
loan. At closing, Parent shall further advance to the Company $350,000 which
shall be used by the Company to pay the balance of the indebtedness of the
Company, calculated to be $450,000 as of September 15, 1999, as set forth in
Schedule 10.6. It is also acknowledged by the parties that the Company will need
an additional $132,000 on or about September 15, 1999 to cover immediate ongoing
operational expenses, and further funds from time to time as set forth in
Schedule 10.6.
10.7 Execution and Delivery of Exhibits. The Buyer shall have
executed and delivered to the Company the Articles of Merger, and the Surviving
Corporation shall have
19
executed and delivered (a) to Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxx, and Xxxx Xxxxxxx,
the Employment Agreements, (c) to the Stockholders, the Non-Competition
Agreement, and (c) the parties shall have executed and delivered the Schedules,
which shall have been accepted by the other parties hereto.
10.8 Stock Options and Company IPO.
(a) On the Closing Date, the Stockholders and management shall
receive, in the aggregate, stock options to acquire 55,000 shares of the
ordinary shares of the Parent, exercisable at $10.00 per share for five (5)
years and on such other terms and conditions as the parties to this Agreement
shall otherwise agree, such options to be allocated among the Stockholders and
management in a manner mutually acceptable to the parties to this Agreement.
(b) In addition to (and not in lieu of) the provisions of
Section 10.8(a) above, in the event that the Parent shall effect an initial
public offering pursuant to a registration statement declared effective by the
SEC of shares of capital stock of the Company (a "Company IPO"), the
Stockholders shall be entitled to receive as additional consideration shares of
common stock of the Surviving Corporation as shall be equal to ten (10%) percent
of the number of shares of capital stock as shall be owned by the Parent
immediately prior to the Company IPO.
(c) In the event that there shall not be a Company IPO within
three (3) years of Closing, commencing with the fourth year after the Closing
and continuing thereafter until such time as the Surviving Corporation is sold
or otherwise disposed of or the Company IPO shall occur, (i) the Company shall
pay to the Stockholders ten percent (10%) of the gross sales price of the
Surviving Corporation should it be sold at any time commencing with that fourth
year and (ii) the Company shall pay to the Stockholders, in the proportions set
forth in Schedule 10.8(c), the aggregate sum of ten percent (10%) of the net
operating income after taxes of the Surviving Corporation for each year
commencing with the fourth year after the Closing, such amounts to be payable
within thirty (30) days after the end of each calendar quarter.
10.9 Proceedings and Instruments Satisfactory. All proceedings to be
taken in connection with the transactions contemplated by this Agreement, and
all documents incidental thereto, shall be reasonably satisfactory in form and
substance to the Stockholders and their counsel.
11. CLOSING.
11.1 Place and Date of Closing. Unless this Agreement shall be
terminated pursuant to Section 12 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxxxxx Xxxxxxx, counsel to the Parent and the Buyer, located at 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other location as is agreed to between
the parties, at 9:00 A.M. local time on or before September 15, 1999, or such
later date (not later than September 30, 1999) as may be reasonably agreeable to
all parties (the date of the Closing being referred to in this Agreement as the
"Closing Date").
20
11.2 Actions at Closing. On the Closing Date, simultaneous with the
Closing, the Buyer and the Company shall file or cause to be filed the Articles
of Merger with the Secretary of State of Washington. At the Closing, there shall
be made, by all necessary and appropriate persons, all payments and deliveries
stated in this Agreement to be made at the Closing and/or on or prior to the
Closing Date.
12. TERMINATION OF AGREEMENT.
12.1 General. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing: (a) by
the mutual written consent of the Company, the Stockholders or Stockholder
Representative, the Buyer and the Parent; (b) by the Buyer and the Parent, or by
the Company and the Stockholders or Stockholder Representative, if: (i) a
material breach shall exist with respect to the written representations and
warranties made by the other party or parties, as the case may be, (ii) the
other party or parties, as the case may be, shall take any action prohibited by
this Agreement, if such actions shall or may have a material adverse effect on
the Company and/or the transactions contemplated hereby, (iii) the other party
or parties, as the case may be, shall not have furnished, upon reasonable notice
therefor, such certificates and documents required in connection with the
transactions contemplated hereby and matters incidental thereto as it or they
shall have agreed to furnish, and it is reasonably unlikely that the other party
or parties will be able to furnish such item(s) prior to the Outside Closing
Date specified below, or (iv) any consent of any third party to the transactions
contemplated hereby (whether or not the necessity of which is disclosed herein
or in any Schedule hereto) is reasonably necessary to prevent a default under
any outstanding material obligation of the Parent, the Buyer, the Stockholders
or the Company, and such consent is not obtainable without material cost or
penalty (unless the party or parties not seeking to terminate this Agreement
agrees or agree to pay such cost or penalty); or (c) by the Buyer and the
Parent, or by the Company and the Stockholder Representative (as defined below),
at any time on or after September 30, 1999 (the "Outside Closing Date"), if the
transactions contemplated hereby shall not have been consummated prior thereto,
and the party directing termination shall not then be in breach or default of
any obligations imposed upon such party by this Agreement.
12.2 Effect of Termination. In the event of termination of this
Agreement pursuant to this Section 12, no party to this Agreement shall have any
further liability to the other, except as provided in Section 8.1 above. In the
event of termination by either party as above provided in this Section 12,
prompt written notice shall be given to the other party.
13. INDEMNIFICATION.
13.1 General.
(a) Without prejudice to any rights of contribution as among
any or all of the Stockholders, from and after the Closing Date, the
Stockholders shall jointly and severally defend, indemnify and hold harmless the
Parent and the Buyer from, against and in respect of any and all claims, losses,
costs, expenses, obligations, liabilities, damages, recoveries and
21
deficiencies (but in no event special or consequential damages), including
interest, penalties and reasonable attorneys' fees, that the Parent or the Buyer
may incur, sustain or suffer ("Losses") as a result of any breach of, or failure
by any of the Stockholders to perform, any of the representations, warranties,
covenants or agreements of the Stockholders contained in this Agreement or in
any Schedule(s) furnished by or on behalf of the Stockholders under this
Agreement, except that the Stockholders other than the Principal Stockholder
shall only be liable with respect to breach of representations or warranties in
Section 4 of this Agreement or for any breach by any such Stockholder of any
covenant or agreement of such Stockholder in this Agreement.
(b) From and after the Closing Date, the Parent and the Buyer
shall jointly and severally defend, indemnify and hold harmless the Stockholders
from, against and in respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies (but in no event
special or consequential damages), including interest, penalties and reasonable
attorneys' fees, that any of the Stockholders may incur, sustain or suffer as a
result of any breach of, or failure by the Parent or the Buyer to perform, any
of the representations, warranties, covenants or agreements of the Parent or the
Buyer contained in this Agreement.
13.2 Limitations on Certain Indemnity.
(a) Notwithstanding any other provision of this Agreement to
the contrary, except with respect to any Losses involving proven fraud by any
Stockholder, none of the Stockholders shall be liable to the Parent or the Buyer
with respect to Losses unless and then only to the extent that the aggregate
amount of all Losses incurred by the Parent and/or the Buyer and not paid for by
applicable insurance shall exceed the sum of $10,000 (the "Basket").
(b) Notwithstanding any other provision of this Agreement to
the contrary, except with respect to any Losses involving proven fraud by any
Stockholder, none of the Stockholders shall be liable to the Parent or the Buyer
with respect to Losses (i) unless the condition set forth in Section 13.2(a) is
satisfied, and in all cases subject to the limitation with respect to
Stockholders other than the Principal Stockholder set forth in Section 13.1(a)
above and the limitations with respect to all Stockholders set forth in Sections
13.2(c) and 13.2(d) below.
(c) Except with respect to any Losses involving proven fraud
by any Stockholder, no Stockholder shall be required to pay indemnification
hereunder in excess of that Stockholder's proportionate share of the
consideration paid by the Buyer for the Stock, calculated as the sum of
$4,500,000 multiplied by that Stockholder's percentage of the ordinary shares of
the Parent issued by the Parent to the Stockholders, in the aggregate, on the
Xxxxxxx.Xxxx. Each Stockholder shall have the right to satisfy that
Stockholder's indemnification obligations, if any, under this Agreement by
delivering to the Parent certificates evidencing ordinary shares of the Parent,
with stock powers duly completed provided, that for purposes thereof, the Parent
Shares shall be valued at the same value per share utilized for purposes of
Section 2.1 above (subject to arithmetic adjustment in the event of any stock
split, stock
22
dividend, recapitalization or other such event which may occur at any time or
from time to time after the Closing Date with respect to such common stock).
(d) The Parent and the Buyer shall be entitled to
indemnification (i) by the Principal Stockholder for Losses only in respect of
claims for which notice of claim shall have been given to the Stockholder on or
before December 31, 2001, or, with respect to Losses relating to a breach of any
warranties under Section 5.6 above, the expiration of the final statute of
limitations for those tax returns and/or tax reports covered by the warranties
under Section 5.6 above, (ii) by each of the Stockholders with respect to claims
of breach of any agreement or covenant in this Agreement only through the later
of December 31, 2001 or sixty (60) days after the expiration of the applicable
agreement or covenant, and (iii) by each of the Stockholders in respect of
breach of any representation or warranty set forth in Section 4; indefinitely;
provided, however, that the Buyer shall not be entitled to indemnification
hereunder in the event that the subject claim for indemnification relates to a
third-party claim and the Buyer delayed giving notice thereof to the Principal
Stockholder to such an extent as to cause material prejudice to the defense of
such third-party claim.
13.3 Claims for Indemnity. Whenever a claim shall arise for which
any party shall be entitled to indemnification hereunder, the indemnified party
shall notify the indemnifying party in writing within thirty (30) days of the
indemnified party's first receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim, and in any event within such shorter
period as may be necessary for the indemnifying party or parties to take
appropriate action to resist such claim. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to the extent reasonably possible) the amount of potential liability
arising therefrom. If the indemnifying party shall be duly notified of such
dispute, the parties shall attempt to settle and compromise the same or may
agree to submit the same to arbitration or, if unable or unwilling to do any of
the foregoing, such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such settlement, compromise,
arbitration or litigation shall promptly thereafter be paid and satisfied by
those indemnifying parties obligated to make indemnification hereunder.
13.4 Right to Defend. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through a single counsel of their own
choosing, to defend or prosecute such claim in the name of the indemnifying
party or parties, or any of them, or if necessary, in the name of the
indemnified party. In any event, the indemnified party shall give the
indemnifying party advance written notice of any proposed compromise or
settlement of any such claim. If the remedy sought in any such action or demand
is solely money damages, the indemnifying party shall have fifteen (15) days
after receipt of such notice of settlement to object to the proposed compromise
or settlement, and if it does so object, the indemnifying party shall be
required to undertake, conduct and control, though counsel of its
23
own choosing and at its sole expense, the settlement or defense thereof, and the
indemnified party shall cooperate with the indemnifying party in connection
therewith.
14. POST-CLOSING EVENTS.
14.1 Bank Accounts. Upon the consummation of the transactions
pursuant to this Agreement, the Stockholders shall cooperate with the Buyer to
promptly modify to the Buyer's satisfaction the signatory and access
arrangements for all bank accounts and safe deposit boxes maintained by or in
the name of the Company.
14.2 Guaranteed Obligations. To the extent that the Buyer does not,
at the time of Closing, pay or discharge those Company obligations guaranteed by
any of the Stockholders and/or any of their respective Affiliates (as disclosed
in part (iv) of Schedule 5.4(b)), or obtain written releases of the Stockholders
and their Affiliates in respect of such guarantees, then (a) the Buyer shall
defend, indemnify and hold harmless the Stockholders and their Affiliates from
and against any claims or liabilities thereunder with respect to obligations
thereunder for periods from and after the Closing Date, and (b) the Buyer shall
use its best efforts to promptly obtain written releases of the Stockholders and
their Affiliates in respect of their guarantees of such leases or other
obligations (provided that, to obtain such releases, the Buyer will not be
required to incur any material expense or additional obligations other than
providing its and/or the Parent's guarantee of the subject leases or other
obligations ); provided, however, that nothing contained in this Section 14.2
shall be deemed to abrogate the requirement for the Buyer to cause the
repayment, on or prior to the Closing Date, of that indebtedness of the Company
described in Section 10.6 above.
14.3 1999 Tax Payments. The income of the Company for 1999 shall,
for tax reporting purposes, be prorated between the Stockholders (on the one
hand) and the Buyer (on the other hand) based on the number of days elapsed
through the Closing Date. The Stockholders shall be responsible for reporting
their applicable shares of the Company's 1999 income as aforesaid, and for the
payment of all income taxes thereon.
14.4 Further Assurances. From time to time from and after the date
hereof, the parties will execute and deliver to one another any and all further
agreements, instruments, certificates and other documents as may reasonably be
requested by any other party in order more fully to consummate the transactions
contemplated hereby, and to effect an orderly transition of the business being
acquired by the Buyer hereunder.
14.5 Registration Rights, etc. Notwithstanding anything to the
contrary contained in this Agreement, at the Principal Stockholder's request,
such request to be made no earlier than thirty (30) days after the Closing, the
Parent shall use its commercially reasonable best efforts to cause a
registration statement on Form F-1 or such other Form as may then be available
to the Parent, to be filed with, and declared effective by, the U.S. Securities
Exchange Commission, to permit the sale by the Principal Stockholder of American
Depositary Shares representing 91,884 ordinary shares of Parent stock acquired
in this transaction, provided that the Principal Stockholder shall enter into
customary agreements in connection with any such
24
registration (including customary indemnifications, etc.). The parties
acknowledge and agree that, unless otherwise agreed by the Parent, the Parent
shall be obligated to seek to register or permit the sale or transfer of no more
than 30,628 of the Principal Stockholder's ADSs acquired through this Agreement
during the period from the Closing Date through the first anniversary of the
Closing, no more than an additional 30,628 ADSs so acquired for sale during the
period from the first anniversary of the Closing through the second anniversary
of the Closing, and no more than an additional 30,628 ADSs so acquired for sale
during the period commencing after the second anniversary of the Closing.
15.. COSTS.
15.1 Finder's or Broker's Fees. Each of the Buyer and the
Stockholders represents and warrants that neither they nor any of their
respective Affiliates have dealt with any broker or finder in connection with
any of the transactions contemplated by this Agreement, except for Security
Capital Trading, Inc. ("Security") and no broker or other person is entitled to
any commission or finder's fee in connection with any of these transactions
except for Security, which shall be entitled to be paid at Closing a commission
equal to 5% of the stock of the Parent being issued at the Closing, one-half of
which commission shall be paid by the Parent and one-half of which commission
shall be paid, jointly and severally, by the Stockholders.
15.2 Expenses. The Parent, the Buyer and the Stockholders shall each
pay all costs and expenses incurred or to be incurred by them, respectively, in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement. Without limitation of the
foregoing, no expenses attributable to any of the Stockholders shall be charged
to or paid by the Company.
16. FORM OF AGREEMENT.
16.1 Effect of Headings. The Section headings used in this Agreement
and the titles of the Schedules hereto are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of the
provisions hereof or of the information set forth in such Schedules.
16.2 Entire Agreement; Waivers. This Agreement and the other
agreements and instruments referred to herein constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party hereto
has made any representation or warranty or given any covenant to the other
except as set forth in this Agreement, the Schedules hereto, and the other
agreements and instruments referred to herein. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
25
16.3 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
17. PARTIES.
17.1 Stockholder Representative. Each of the Stockholders hereby
irrevocably appoints the Principal Stockholder as his or her authorized
representative (the "Stockholder Representative") to execute and deliver any and
all waivers, amendments, modifications, consents or other writings and actions
under or in respect of this Agreement from time to time, provided that such
Stockholder Representative shall not have authority, absent the written consent
of all of the Stockholders, (a) to modify the amount of Merger Consideration
payable to the Stockholders pursuant to Section 2.1 above, or (b) to increase
any Stockholder's liability for indemnification under Section 13 above. The
Principal Stockholder hereby irrevocably accepts such appointment. Subject to
such limitation, any amendment, modification, waiver, consent or other writing
executed by the Stockholder Representative shall be fully binding upon all of
the Stockholders in accordance with its terms.
17.2 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
17.3 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service or telecopy if served personally on
the party to whom notice is to be given or telecopied to such party at its
telecopier number indicated below, on the day after the delivery thereof to a
recognized overnight courier service for next-day delivery with all charges
prepaid or billed to the account of the sender, or on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows:
(a) If to the Company or the Stockholders:
c/o Xxxxx Xxxxxxxxx Research Sales, Inc.
d/b/a Xxxxxxxxx Research
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier No.: (000) 000.0000
26
with a copy sent concurrently to:
Xxxxx & Xxxxx
00-X Xxxxxxxxx Xxxxx
Post Office Drawer 23439
Hilton Head Island, South Carolina 29925-3439
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
(b) If to the Buyer or Parent:
XxxxXxxxxXxx.xxx plc.
00 Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxxx
XX00 0 XX, Xxxxxxx
Attention: Xxxxxx Xxxxxx-Xxxxxx
Telecopier No.: 011-44-1420-541-322
with a copy sent concurrently to:
Xxxxxxxxx Xxxxxxx, P.A.
000 Xxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
or to such other address or telecopier number as either party
shall have specified by notice in writing given to the other party.
18. MISCELLANEOUS.
18.1 Amendments and Modifications. No amendment or modification of
this Agreement or any Schedule hereto shall be valid unless made in writing and
signed by or on behalf of the party to be charged therewith.
18.2 Non-Assignability; Binding Effect. Neither this Agreement, no
any of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto, provided that the Buyer may, at any time and from time to time, without
requirement of any consent from any of the Stockholders, assign any and all of
its rights and remedies for indemnification hereunder to any financial
institution(s) providing financing to the Buyer from time to time. Otherwise,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
27
18.3 Governing Law; Jurisdiction. This Agreement shall be construed
and interpreted and the rights granted herein governed in accordance with the
laws of the State of Washington applicable to contracts made and to be performed
wholly within such State. Except as otherwise provided in Section 13.3 above,
and/or in respect of any claim for specific performance or other equitable
relief, any claim, dispute or controversy arising under or in connection with
this Agreement or any actual or alleged breach hereof shall be settled
exclusively by arbitration to be held before a single arbitrator in King County,
Washington, or in any other locale or venue as legal jurisdiction may otherwise
be had over the party against whom the proceeding is commenced, in accordance
with the commercial arbitration rules of the American Arbitration Association
then obtaining. As part of his or her award, the arbitrator shall make a fair
allocation of the fee of the American Arbitration Association, the cost of any
transcript, and the parties' reasonable attorneys' fees, taking into account the
merits and good faith of the parties' claims and defenses. Judgment may be
entered on the award so rendered in any court having jurisdiction. Any process
or other papers hereunder may be served by registered or certified mail, return
receipt requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
18.4 Condition Precedent to Closing. (a) The parties acknowledge
that the Exhibits and Schedules as well as certain provisions of this Agreement
need to be completed or resolved prior toClosing. The parties are executing and
delivering this Agreement without attaching the forms of Exhibits and Schedules,
but undertake to use their respective best efforts to complete the same
promptly. In the event the parties are unable to complete or resolve these
issues and deliver Exhibits and Schedules which are accepted by all parties
hereto prior to the Closing Date, either party may terminate this Agreement and
this Agreement shall be deemed to be void ab initio.
(a) Further, the parties acknowledge that the Principal
Stockholder is the sole signatory to this Agreement at this time but that it is
a condition to Closing that all Stockholders execute this Agreement. Should any
Stockholder refuse to execute this Agreement and/or deliver his stock in the
Company at Closing, the written Agreement shall terminate.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this
Agreement on and as of the date first set forth above.
Parent: XxxxXxxxxXxx.xxx plc
By: ____________________________________________
Xxxxxxx Xxxx, Chief Operating Officer
Buyer: Xxxxxxxxx Acquisition Corp.
By: ____________________________________________
Xxxxxxx Xxxx, Chief Operating Officer
Company: Research Sales, Inc. d/b/a
Xxxxxxxxx Research
By: ____________________________________________
Xxxxx Xxxxxxxxx, President
Stockholders:
________________________________________________
Xxxxx Xxxxxxxxx
________________________________________________
Xxxxxxx X. Xxxxxxxxx
________________________________________________
Xxxxx X. and Xxxx X. Xxx Xxxxxxxxx
INFOMATE SYSTEMS, INC.
By:_____________________________________________
Xxxxxxx X. Mate
________________________________________________
Xxxx X. Xxxxxxx
________________________________________________
Xxxx X. Xxxxxx
________________________________________________
Xxxxx X. Xxxxxx and Xxxxx X. Xxxxxx
________________________________________________
Xxxxx Xxxxx
________________________________________________
Xxxxxxxxxxx and Xxxxxxxxx Xxx Xxxxxxxxx
________________________________________________
Xxxxxx X. Xxx Xxxxxxxxx
________________________________________________
Xxxxxxx X. and Xxxxxxx X. Xxxx
________________________________________________
Xxxxxx Xxxxxxx
________________________________________________
Xxxxxxx X. Xxxxxx
________________________________________________
Xxxxx X. Xxxxx
________________________________________________
Xxx Xxxxxx
________________________________________________
Xxx Xxxxx
