AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARI NETWORK SERVICES, INC.,
NETWORK DYNAMICS INCORPORATED,
MR. R. ▇▇▇▇ ▇▇▇▇ AND MR. K. ▇▇▇▇ ▇▇▇▇▇▇
TABLE OF CONTENTS
Page
ARTICLE I - THE MERGER 1
SECTION 1.1. THE MERGER 1
SECTION 1.2. EFFECTIVE TIME OF THE MERGER 2
ARTICLE II - THE SURVIVING CORPORATION 2
SECTION 2.1. ARTICLES OF INCORPORATION 2
SECTION 2.2. BY-LAWS 2
SECTION 2.3. EFFECT OF THE MERGER 2
SECTION 2.4. DIRECTORS 2
SECTION 2.5. OFFICERS 2
ARTICLE III - CONVERSION OF SHARES 3
SECTION 3.1. DETERMINATION OF TOTAL NDI VALUE 3
SECTION 3.2. CONVERSION OF NDI SHARES IN THE MERGER 4
SECTION 3.3. CAPITAL STOCK OF THE CORPORATION 6
SECTION 3.4. NO FRACTIONAL SECURITIES 6
SECTION 3.5. ADJUSTMENTS TO STOCK CONSIDERATION 6
SECTION 3.6. DISSENTERS' RIGHTS 6
SECTION 3.7. CERTIFICATE LEGENDS 7
SECTION 3.8. SURRENDER OF CERTIFICATES. 7
SECTION 3.9. NO FURTHER OWNERSHIP RIGHTS IN NDI COMMON STOCK 9
SECTION 3.10. LOST, STOLEN OR DESTROYED CERTIFICATES 10
SECTION 3.11. CLOSING 10
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE CORPORATION 13
SECTION 4.1. ORGANIZATION AND QUALIFICATION 13
SECTION 4.2. CAPITALIZATION 13
SECTION 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS 14
SECTION 4.4. SECURITIES REPORTS AND FINANCIAL STATEMENTS 15
SECTION 4.5. ABSENCE OF LITIGATION 15
SECTION 4.6. DEFINITION OF KNOWLEDGE OF CORPORATION 15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF NDI
PRINCIPAL SHAREHOLDERS 16
SECTION 5.1. TITLE TO SHARES 16
SECTION 5.2. AUTHORITY 16
SECTION 5.3. SHAREHOLDER AGREEMENTS 17
SECTION 5.4. INVESTMENT PURPOSE 17
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF NDI 17
SECTION 6.1. ORGANIZATION AND QUALIFICATION 17
SECTION 6.2. CAPITALIZATION 18
SECTION 6.3. EQUITY INTERESTS 18
SECTION 6.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS 19
SECTION 6.5. FINANCIAL STATEMENTS 20
SECTION 6.6. ABSENCE OF UNDISCLOSED LIABILITIES 20
SECTION 6.7. ABSENCE OF CERTAIN CHANGES OR EVENTS 20
SECTION 6.8. ABSENCE OF LITIGATION 21
SECTION 6.9. NO VIOLATION OF LAW 21
SECTION 6.10. TAXES 21
SECTION 6.11. EMPLOYEE BENEFITS PLANS; ERISA 22
SECTION 6.12. EMPLOYEES 23
SECTION 6.13. LABOR CONTROVERSIES 23
SECTION 6.14. TITLE TO AND CONDITION OF ASSETS 23
SECTION 6.15. REAL ESTATE 24
SECTION 6.16. PRODUCT WARRANTIES 24
SECTION 6.17. INTELLECTUAL PROPERTY 25
SECTION 6.18. CUSTOMIZATION PROJECTS 27
SECTION 6.19. CONTRACTS AND OTHER AGREEMENTS 28
SECTION 6.20. INSURANCE 28
SECTION 6.21. CUSTOMERS; SUPPLIERS 29
SECTION 6.22. ACCOUNTS; SAFE DEPOSIT BOXES 29
SECTION 6.23. YEAR 2000 COMPLIANCE 29
SECTION 6.24. PROXY STATEMENT 29
SECTION 6.25. NDI SHAREHOLDER APPROVAL 30
SECTION 6.26. BOARD RECOMMENDATION 30
SECTION 6.27. STATE TAKEOVER STATUTES 30
SECTION 6.28. BROKERS AND FINDERS 30
SECTION 6.29. PAYMENTS 30
SECTION 6.30. TRANSACTIONS WITH AFFILIATES 30
SECTION 6.31. NO MATERIAL ADVERSE CHANGE 30
SECTION 6.32. WARRANTIES TRUE AND CORRECT 31
SECTION 6.33. DEFINITION OF KNOWLEDGE OF NDI 31
ARTICLE VII - MATTERS PENDING THE MERGER 31
SECTION 7.1. CONDUCT OF BUSINESS BY NDI PENDING THE MERGER 31
SECTION 7.2. CONTROL OF NDI'S OPERATIONS 33
SECTION 7.3. ACQUISITION TRANSACTIONS 33
SECTION 7.4. RELATED PARTY TRANSACTIONS 34
SECTION 7.5. COVENANTS OF NDI PRINCIPAL SHAREHOLDERS 34
SECTION 7.6. FORT DEARBORN PARTNERS 34
ARTICLE VIII - ADDITIONAL AGREEMENTS 35
SECTION 8.1. ACCESS TO INFORMATION 35
SECTION 8.2. SHAREHOLDERS' APPROVAL 36
SECTION 8.3. EXPENSES AND FEES 36
SECTION 8.4. AGREEMENT TO COOPERATE 37
SECTION 8.5. PUBLIC STATEMENTS 37
SECTION 8.6. NOTIFICATION OF CERTAIN MATTERS 37
SECTION 8.7. EXECUTION OF ADDITIONAL DOCUMENTS 37
SECTION 8.8. RISK OF LOSS 37
SECTION 8.9. TAX-FREE TREATMENT OF MERGER 38
SECTION 8.10. RETENTION OF EMPLOYEES OF NDI AND PSE 38
SECTION 8.11. SALE OF SHARES PURSUANT TO SECURITIES ACT 38
SECTION 8.12. PERSONAL OBLIGATIONS OF NDI OFFICERS AND
DIRECTORS 39
SECTION 8.13. ESCROW AGREEMENT 39
SECTION 8.14. COMPLIANCE WITH SECURITIES LAWS 39
ARTICLE IX - CONDITIONS 39
SECTION 9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER 39
SECTION 9.2. ADDITIONAL CONDITIONS TO OBLIGATION OF
NDI TO EFFECT THE MERGER 40
SECTION 9.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF
THE CORPORATION TO EFFECT THE MERGER 41
ARTICLE X - INDEMNITY 42
SECTION 10.1. ESCROW FUND 42
SECTION 10.2. INDEMNIFICATION 43
SECTION 10.3. ESCROW PERIOD; RELEASE FROM ESCROW 44
SECTION 10.4. CLAIMS UPON ESCROW FUND 45
SECTION 10.5. OBJECTIONS TO CLAIMS 46
SECTION 10.6. RESOLUTION OF CONFLICTS AND ARBITRATION 46
SECTION 10.7. SHAREHOLDER REPRESENTATIVE 47
SECTION 10.8. ACTIONS OF THE SHAREHOLDER REPRESENTATIVE 48
SECTION 10.9. THIRD PARTY CLAIMS RESULTING IN
INDEMNIFICATION CLAIM 48
SECTION 10.10. INDEMNIFICATION OF NDI AND THE NDI
SHAREHOLDERS 48
SECTION 10.11. PROCEDURE RELATIVE TO INDEMNIFICATION
FROM PERSONS OTHER THAN ESCROW FUND 49
SECTION 10.12. EFFECT OF INSURANCE 51
SECTION 10.13 BASKET 51
SECTION 10.14 NO OFFSET AGAINST PRINCIPALS' AGREEMENTS 51
SECTION 10.15 TREATMENT OF INDEMNITY PAYMENTS 51
SECTION 10.16 SURVIVING CORPORATION 51
ARTICLE XI - TERMINATION, AMENDMENT AND WAIVER 51
SECTION 11.1. TERMINATION 51
SECTION 11.2. EFFECT OF TERMINATION 52
SECTION 11.3. AMENDMENT 52
SECTION 11.4. WAIVER 53
ARTICLE XII - GENERAL PROVISIONS 53
SECTION 12.1. DISCLOSURE SCHEDULES 53
SECTION 12.2. NOTICES 53
SECTION 12.3. INTERPRETATION 54
SECTION 12.4. MISCELLANEOUS 54
SECTION 12.5. COUNTERPARTS 55
SECTION 12.6. PARTIES IN INTEREST 55
SECTION 12.7. DISCLOSURE SCHEDULES AND EXHIBITS 55
SECTION 12.8. SEVERABILITY 55
SECTION 12.9. REMEDIES CUMULATIVE 55
SECTION 12.10. RULES OF CONSTRUCTION 55
SECTION 12.11. SURVIVAL OF SERVICES AGREEMENT 56
LIST OF EXHIBITS
Exhibit 1.2 Articles of Merger
Exhibit 3.11(b)(vi) Opinion from NDI Counsel
Exhibit 3.11(b)(viii)(A)(B) Principals' Agreements
Exhibit 3.11(b)(x) Investor Statement
Exhibit 3.11(b)(xi) Escrow Agreement
Exhibit 3.11(c) Opinion from Corporation Counsel
Exhibit 6.5 Financial Statements
Exhibit 7.6 Necessary Creditors
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made and
entered into this 21st day of April, 1999 by and among
ARI NETWORK SERVICES, INC., a Wisconsin corporation
(the "Corporation"), NETWORK DYNAMICS INCORPORATED, a
Virginia corporation ("NDI"), MR. R. ▇▇▇▇ ▇▇▇▇ AND MR.
K. ▇▇▇▇ ▇▇▇▇▇▇ (individually, a "NDI Principal
Shareholder" and collectively, the "NDI Principal
Shareholders").
R E C I T A L S:
WHEREAS, the respective Boards of Directors of the
Corporation and NDI have each determined that the
merger of NDI with and into the Corporation (the
"Merger") is consistent with and in furtherance of the
long-term business strategy of the Corporation and NDI
and is in the best interests of the Corporation and NDI
and their respective shareholders;
WHEREAS, the respective Boards of Directors of the
Corporation and NDI have each approved the Merger, upon
the terms and subject to the conditions set forth
herein;
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a
reorganization under the provisions of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, the NDI Principal Shareholders are the
holders of seventy-six and 08/100 percent (76.08%) of
the issued and outstanding common stock, no par value,
of NDI (the "NDI Common Stock"), will financially
benefit from the consummation of the Merger and are
entering into this Agreement to set forth their
agreement to vote their shares of NDI Common Stock in
favor of the Merger and certain additional agreements,
covenants, representations and warranties.
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained herein, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and
subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.2, below), NDI
shall be merged with and into the Corporation and the
separate corporate existence of NDI shall thereupon
cease. The Corporation shall be the surviving
corporation in the Merger and is hereinafter sometimes
referred to as the "Surviving Corporation." The
Surviving Corporation shall continue its existence
under by the laws of the State of Wisconsin.
SECTION 1.2. Effective Time of the Merger. The
Merger shall become effective at such time (the
"Effective Time") as shall be stated in the Articles of
Merger, the form of which is
attached hereto as Exhibit 1.2, to be filed with
the Secretary of State of the
Commonwealth of Virginia and the Department of
Financial Institutions of the State of Wisconsin (the
"Merger Filings") in accordance with the Virginia Stock
Corporation Act (the "VSCA") and the Wisconsin Business
Corporation Law ("WBCL"). The Merger Filings shall be
made simultaneously with or as soon as practicable
after the Closing (as defined in Section 3.11, below)
of the transactions contemplated by this Agreement.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. Articles of Incorporation. The
Articles of Incorporation of the Corporation in effect
at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation unless and
until amended or repealed in accordance with the
provisions thereof and the WBCL.
SECTION 2.2. By-Laws. The By-Laws of the
Corporation in effect at the Effective Time shall be
the By-Laws of the Surviving Corporation, unless and
until amended or repealed in accordance with the
provisions thereof and the WBCL.
SECTION 2.3. Effect of the Merger. At the
Effective Time, the effect of the Merger shall be as
provided in this Agreement and the applicable
provisions of the VSCA. Without limiting the
generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided
herein, all the property, rights, privileges, powers
and franchises of NDI and the Corporation shall vest in
the Surviving Corporation, all debts, liabilities and
duties of NDI and the Corporation shall become the
debts, liabilities and duties of the Surviving
Corporation in the same manner as if the Surviving
Corporation had itself incurred them and the separate
corporate existence of the Corporation with all its
rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set
forth herein.
SECTION 2.4. Directors. From and after the
Effective Time, the directors of the Corporation
immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation
and By-Laws of the Surviving Corporation, until their
successors are duly elected or appointed.
SECTION 2.5. Officers. From and after the
Effective Time, the officers of the Corporation
immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation
and By-Laws of the Surviving Corporation, until their
successors are duly elected or appointed.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. Determination of Total NDI Value.
For purposes of this Agreement, "Total NDI Value" means
Three Million Four Hundred Thousand Dollars
($3,400,000) minus the sum of all liabilities of NDI
determined as of the Closing Date (as defined in
Section 3.1(a), below) in accordance with generally
accepted accounting principles in the United States
consistently applied ("GAAP") plus the Additional
Unearned Revenue (as defined in Section 3.1(a), below).
The Total NDI Value shall be determined as follows:
(a) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ (the "Corporation's
Accountants") shall prepare a balance sheet of NDI as
of the Closing Date (the "Closing Date Balance Sheet")
in accordance with GAAP. The Corporation shall deliver
the Closing Date Balance Sheet to the Shareholder
Representative (as defined in Section 10.7, below) and
NDI within sixty (60) days after the Closing Date. The
Closing Date Balance Sheet shall be accompanied by a
report (the "Report") of the Corporation's Accountants
(i) setting forth the Total NDI Value, (ii) setting
forth the amount of liability of NDI owed to the
Corporation as of the Closing Date attributable to the
letter agreement dated October 29, 1998 between the
Corporation and NDI (the "ARI Liability"), (iii)
setting forth the closing costs incurred by NDI that
were approved by the Corporation in connection with the
Merger to the extent such costs are not included in the
ARI Liability (the "Closing Costs"), (iv) setting forth
the amount, if any, by which the liabilities of NDI as
reflected on the Closing Date Balance Sheet exceeds the
liabilities of NDI that would be reflected on the
Closing Date Balance Sheet if the Corporation's
Accountants would apply the accounting method to record
unearned revenue that has been historically used by NDI
(the "Additional Earned Revenue"), which historical
method records as earned revenue at the time of the
sale of software seventy percent (70%) of the payments
to be made by a customer for the purchase and
maintenance of the software, and records as earned
revenue the remaining thirty percent (30%) of such
payments in equal installments over the twelve (12)
month period following the sale, and (v) certifying
that the Closing Date Balance Sheet has been prepared,
and the determination of the Total NDI Value, the ARI
Liability, the Closing Costs and the Additional
Unearned Revenue have been made, in accordance with
GAAP and this Section 3.1.
(b) Following the delivery of the Closing Date
Balance Sheet, the Shareholder Representative and NDI
may review the Closing Date Balance Sheet and the
Report. To facilitate such review of the Closing Date
Balance Sheet, the Corporation shall provide the
Shareholder Representative, NDI and their respective
representatives with copies of any work papers,
schedules and other documents prepared or utilized by
the Corporation's Accountants in connection with their
determination of Total NDI Value, the Letter Agreement,
the Closing Costs and the Additional Unearned Revenue
and the preparation of the Closing Date Balance Sheet.
Such work papers, schedules and other documents shall
be made available to the Shareholder Representative and
NDI as soon as practicable following any request
therefor.
(c) The determination by the Corporation's
Accountants of the Total NDI Value, the ARI Liability,
the Closing Costs and the Additional Unearned Revenue
shall be final and binding on
the Corporation, the Shareholder Representative, the NDI
Shareholders (as defined in Section 3.6, below) and NDI
unless, within thirty (30) days after the date the Corporation
has delivered the Closing Date Balance Sheet and such work
papers, schedules and documents as the Shareholder
Representative or NDI may request pursuant to Section
3.1(b), above, to the Shareholder Representative and
NDI, the Shareholder Representative shall have given
written notice of any disagreement or objection (a
"Notice of Objection") to the Corporation with respect
to any item on the Closing Date Balance Sheet or the
calculation of the Total NDI Value, the ARI Liability,
the Closing Costs and/or the Additional Unearned
Revenue. The Notice of Objection shall state in
reasonable detail the nature of the Shareholder
Representative's disagreement(s) and/or objection(s)
and the Shareholder Representative shall provide to the
Corporation, upon request, all of the work papers,
schedules and documents prepared or utilized by the
Shareholder Representative in connection with the
disagreements and/or objections. After the delivery of
any Notice of Objection, the Shareholder Representative
and the Corporation shall consult with each other and
their respective representatives with respect to the
disagreement(s) and/or objection(s). If the
Shareholder Representative and the Corporation are
unable to reach agreement with respect to the matter or
matters in dispute within twenty (20) days after the
Notice of Objection has been given, the dispute shall
be resolved by the Richmond, Virginia office of
Deloitte & Touche LLP (the "Resolving Accounting
Firm"). The Corporation and their representatives, and
the Shareholder Representative, the NDI Principal
Shareholders, NDI and their representatives, shall
cooperate fully with the Resolving Accounting Firm.
The Shareholder Representative, the NDI Principal
Shareholders, NDI and the Corporation shall give, and
shall cause their respective representatives to give,
the Resolving Accounting Firm and its representatives
such assistance and access to the assets and books and
records of NDI and any applicable work papers,
schedules and other documents, as the Resolving
Accounting Firm shall reasonably request. The
resolution of the disagreement(s) and/or objection(s)
by the Resolving Accounting Firm shall be final and
binding on the Corporation, the Shareholder
Representative, NDI and the NDI Shareholders. The fees
and expenses of the Resolving Accounting Firm shall be
borne equally by the Corporation and the NDI Principal
Shareholders (with the NDI Principal Shareholders'
portion being funded from the Escrow Fund, as defined
in Section 3.8(b), below). For the purpose of funding
such fees and expenses, the Corporation Common Stock
(as defined in Section 3.2(a), below) in the Escrow
Fund shall be valued at the Corporation Stock Value,
regardless of any increase or decrease in the value of
Corporation Common Stock after the Closing, provided
that such value shall be adjusted in the event of a
change listed in Section 10.1(c), below.
SECTION 3.2. Conversion of NDI Shares in the
Merger. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of
shares of NDI Common Stock:
(a) Each share of NDI Common Stock issued and
outstanding immediately prior to the Effective Time,
other than NDI Common Stock held in treasury by NDI
(the "NDI Shares"), shall be converted into the right
to receive upon the final determination of the Total
NDI Value as set forth in Section 3.1, above, that
number of shares of common stock, $0.001 par value, of
the Corporation (the "Corporation Common Stock") equal
in value to the quotient of (i) the Total NDI Value
divided by (ii) the total number of NDI Shares, subject
to adjustment as provided in
Section 3.2(b), below, and the provisions relating
to the Escrow Fund (the "Stock Consideration").
With respect to the Stock Consideration,
the value of the Corporation Common Stock
shall be calculated based on the average closing
sale price per share of Corporation Common Stock on the
NASDAQ National Market for the 20 business days ending
on the last business day prior to the Closing Date, as
reported on the ▇▇▇▇▇▇.▇▇▇ website or, if not reported
thereby, in another authoritative source (the
"Corporation Stock Value"). No fractional shares of
Corporation Common Stock shall be issued, and, in lieu
thereof, a Fractional Share Payment (as defined in
Section 3.4, below) shall be made. The sum of (i) the
Stock Consideration multiplied by the number of NDI
Shares, plus (ii) the Fractional Share Payments shall
collectively be referred to herein as the "Merger
Consideration".
(b) Within two (2) business days after the final
determination of the Total NDI Value pursuant to
Section 3.1, above, the Corporation shall compute the
Stock Consideration, subject to the following
adjustments and limitations. If the sum of all
liabilities reflected on the Closing Date Balance Sheet
minus the ARI Liability minus the Closing Costs minus
the Additional Unearned Revenue (such difference being
defined hereunder as the "Adjusted Liabilities") is (i)
equal to or less than Two Million Seven Hundred
Thousand Dollars ($2,700,000), then at least Five
Hundred Fifty Thousand (550,000) shares of Corporation
Common Stock shall be issued as Stock Consideration in
the aggregate, and the Stock Consideration (on a per
NDI Share basis) shall be adjusted accordingly, or (ii)
greater than Two Million Seven Hundred Thousand Dollars
($2,700,000), then the minimum number of shares of
Corporation Common Stock that shall be issued as Stock
Consideration in the aggregate shall equal (A) Five
Hundred Fifty Thousand (550,000) minus (B) a quotient
(rounded down to the nearest whole number), the
numerator of which shall equal the Adjusted Liabilities
minus Two Million Seven Hundred Thousand Dollars
($2,700,000), and the denominator of which shall equal
the Corporation Stock Value, and the Stock
Consideration (on a per NDI Share basis) shall be
adjusted accordingly. Notwithstanding Sections 3.1 and
3.2, hereof, if the total number of shares of
Corporation Common Stock that would be issued as Stock
Consideration as a result of Sections 3.1 and 3.2,
hereof, (i) would exceed Eight Hundred Thousand
(800,000) shares, then the total number of shares of
Corporation Common Stock that shall be issued as Stock
Consideration shall equal Eight Hundred Thousand
(800,000) shares and the Stock Consideration (on a per
NDI Share basis) shall be adjusted accordingly, or (ii)
would be less than Four Hundred Fifty Thousand
(450,000) shares, then the total number of shares of
Corporation Common Stock that shall be issued as Stock
Consideration shall equal Four Hundred Fifty Thousand
(450,000) shares and the Stock Consideration (on a per
NDI Share basis) shall be adjusted accordingly. Within
the two (2) day period set forth above, each NDI Share
shall receive a number of shares of Corporation Common
Stock equal to the Stock Consideration.
(c) Each share of NDI Common Stock held in
treasury by NDI immediately prior to the Effective
Time, if any, shall be canceled and extinguished and no
cash or other consideration shall be delivered or
deliverable in exchange therefor.
(d) No share of NDI Common Stock shall be deemed
to be outstanding or to have any rights other than
those set forth in this Section 3.2 after the Effective
Time. From and after the Effective Time, all
outstanding shares of NDI Common Stock shall no longer
be outstanding and
shall automatically be canceled and
retired and shall cease to exist. Until surrendered to
the Corporation, each outstanding certificate which,
immediately prior to the Effective Time, represented
NDI Shares (the "NDI Certificates") shall, after the
Effective Date, be deemed for all purposes to represent
the right only to receive the Merger Consideration in
the manner set forth herein, and shall not represent
any right as a shareholder of NDI.
SECTION 3.3. Capital Stock of the Corporation.
Each share of Corporation Common Stock issued and
outstanding as of the Effective Time shall remain
outstanding and such shares shall not be changed or
converted by virtue of the Merger.
SECTION 3.4. No Fractional Securities. No
certificates representing fractional shares of
Corporation Common Stock shall be issued in the Merger.
In lieu of any such fractional shares, each holder of
NDI Common Stock, who would otherwise have been
entitled to receive a fractional share of Corporation
Common Stock upon surrender of NDI Certificates for
exchange pursuant to this Article III, shall be
entitled to receive from the Corporation one share of
Corporation Common Stock (the "Fractional Share
Payment").
SECTION 3.5. Adjustments to Stock Consideration.
The Stock Consideration shall be adjusted to reflect
fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution
of securities convertible into Corporation Common Stock
or NDI Common Stock), reorganization, recapitalization
or any like change with respect to Corporation Common
Stock or NDI Common Stock occurring after the date
hereof and prior to the Effective Time.
SECTION 3.6. Dissenters' Rights. Notwithstanding
anything to the contrary contained in this Agreement,
any shares ("Dissenting Shares") of NDI Common Stock
which are held by any holder of NDI Shares ("NDI
Shareholder") who has properly asserted his or its
dissenter's rights under the VSCA (a "Dissenting
Shareholder") prior to the Effective Time shall not be
converted in the Merger Consideration but shall instead
be converted into the right to receive such
consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to the VSCA.
NDI shall give the Corporation prompt notice of any
demand received by NDI to require NDI to purchase
shares of NDI Common Stock, and the Corporation shall
have the right to direct and participate in all
negotiations and proceedings which respect to such
demand. NDI agrees that, except with the prior written
consent of the Corporation, or as required under the
VSCA, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such
purchase demand. Each Dissenting Shareholder who,
pursuant to the VSCA, becomes entitled to payment of
the fair value for shares of NDI Common Stock shall
receive payment therefor (but only after the value
therefor shall have been agreed upon or finally
determined pursuant to such provisions). If, after the
Effective Time, any Dissenting Shares shall lose their
status as Dissenting Shares, the Corporation shall
issue and deliver, upon surrender by such NDI
Shareholder of a certificate or certificates
representing shares of NDI Common Stock, the Merger
Consideration to which such NDI Shareholder would
otherwise be entitled under this Article III, less the
Merger Consideration allocable to such NDI Shareholder
that has been deposited in the Escrow Fund (as defined
in Section 3.8(b), below) in respect of such shares of
NDI Common Stock pursuant to Section 3.8(i) and Section
10.1 hereof.
SECTION 3.7. Certificate Legends. The shares of
Corporation Common Stock to be issued pursuant to this
Article III shall not have been registered and shall be
characterized as "restricted securities" under the
Federal Securities Laws, and under such laws such
shares may be resold without registration under Rule
144 of the Securities Act of 1933, as amended (the
"Securities Act"), only in certain limited
circumstances. Each certificate evidencing shares of
Corporation Common Stock to be issued pursuant to this
Article III shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION WITHOUT AN EXEMPTION UNDER THE
SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL
REASONABLY ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED."
and any legends required by state securities laws.
SECTION 3.8. Surrender of Certificates.
(a) Exchange Agent. Firstar Trust Company shall
act as exchange agent (the "Exchange Agent") in the
Merger.
(b) Corporation to Provide Corporation Common
Stock and Certain NDI Certificates. Promptly after the
Effective Time, the Corporation shall supply or cause
to be supplied to the Exchange Agent for exchange in
accordance with this Article III through such
reasonable procedures as the Corporation may adopt, (i)
certificates evidencing the shares of Corporation
Common Stock issuable pursuant to this Article III in
exchange for NDI Shares, less the number of shares of
Corporation Common Stock to be deposited into the
Escrow Fund (the "Escrow Fund") pursuant to the
requirements of Section 3.8(i) and Section 10.1, below
(the "Exchange Fund"), and (ii) NDI Certificates
representing the NDI Shares issued pursuant to the 4:1
stock split that have not been certificated. For
purposes of Section 3.8(c), below, each NDI Certificate
delivered by the Corporation to the Escrow Agent shall
be deemed to be held by the NDI Shareholder to whom the
NDI Shares represented by such NDI Certificate were
issued pursuant to the stock split.
(c) Exchange Procedures. Promptly after the
Effective Time, the Surviving Corporation shall cause
to be mailed to each holder of record of a NDI
Certificate or Certificates, whose shares were
converted into the right to receive shares of
Corporation Common Stock pursuant to this Article III,
(i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title
to the NDI Certificates shall pass, only upon receipt
of the NDI Certificates by the Exchange Agent, and
shall be in such form and have such other provisions as
Corporation may reasonably specify), (ii) such other
customary documents as may be required pursuant to such
instructions, and (iii) instructions for use in
effecting the surrender of the NDI Certificates in
exchange for certificates representing shares of
Corporation Common Stock. Upon surrender
of a NDI Certificate for cancellation to the Exchange Agent or
to such other agent or agent as may be appointed by
Corporation, together with such letter of transmittal
and other documents, duly completed and validly
executed in accordance with the instructions thereto,
the holder of such NDI Certificate shall be entitled to
receive in exchange therefor (A) a certificate
representing the number of whole shares of Corporation
Common Stock determined in accordance with Article III,
above, less the number of shares of Corporation Common
Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to Section 3.8(i) and Section
10.1, below, and (B) any dividends or other
distributions to which such holder is entitled pursuant
to Section 3.8(d), below, and the NDI Certificate so
surrendered shall forthwith be canceled. Until so
surrendered, each outstanding NDI Certificate that,
prior to the Effective Time, represented shares of NDI
Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence the ownership of
the number of full shares of Corporation Common Stock
into which such shares of NDI Common Stock shall have
been so converted.
(d) Distributions With Respect to Unexchanged
Shares. No dividends or other distributions with
respect to Corporation Common Stock with a record date
after the Effective Time will be paid to the holder of
any unsurrendered NDI Certificate with respect to the
shares of Corporation Common Stock represented thereby
until the holder of record of such NDI Certificate
shall surrender such NDI Certificate. Subject to
applicable law, following surrender of any such NDI
Certificate, there shall be paid to the record holder
of the certificates representing whole shares of
Corporation Common Stock issued in exchange therefor,
without interest at the time of such surrender, the
amount of any such dividends or other distributions
with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 3.8(d)
with respect to such shares of Corporation Common
Stock).
(e) Transfers of Ownership. At the Effective
Time, the stock transfer books of the NDI shall be
closed and there shall be no further registration of
transfers of NDI Common Stock thereafter on the records
of NDI. If any certificate for shares of Corporation
Common Stock is to be issued in a name other than that
in which the NDI Certificate surrendered in exchange
therefor is registered, it will be a condition of the
issuance thereof that the NDI Certificate so
surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting
such exchange will have paid to the Corporation or any
agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for
shares of Corporation Common Stock in any name other
than that of the registered holder of the NDI
Certificate surrendered, or established to the
satisfaction of Corporation or any agent designated by
it that such tax has been paid or is not payable.
(f) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to the
NDI Shareholders one (1) year after the Effective Time
shall be delivered to the Corporation, upon demand, and
any NDI Shareholders who have not previously complied
with this Section 3.8 shall thereafter look only to the
Corporation for payment of their claim for the Merger
Consideration and any dividends or distributions with
respect to Corporation Common Stock.
(g) No Liability. Notwithstanding anything to
the contrary in this Section 3.8, none of the Exchange
Agent, the Surviving Corporation or any party hereto
shall be liable to any person for any amount properly
paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Dissenting Shares. The provisions of this
Section 3.8 shall also apply to Dissenting Shares that
lose their status as such, except that the obligations
of the Corporation under this Section 3.8 shall
commence on the date of loss of such status and the
holder of such shares shall be entitled to receive in
exchange for such shares the Merger Consideration to
which such holder is entitled pursuant to Sections 3.1
and 3.2 hereof.
(i) Escrow. Within five (5) days of the final
determination of the Merger Consideration pursuant to
Sections 3.1 and 3.2, above, and subject to and in
accordance with the provisions of Section 10.1 hereof,
Corporation shall cause to be distributed to the Escrow
Agent (as defined in Section 10.1 hereof) a certificate
or certificates representing shares of Corporation
Common Stock (which shall be registered in the name of
the Escrow Agent as nominee for the NDI Principal
Shareholders) having an aggregate value (calculated
based on the Corporation Stock Value) equal to Five
Hundred Thousand Dollars ($500,000) (the "Escrow
Shares"), which Escrow Shares otherwise would be
issuable in exchange for NDI Shares owned by the NDI
Principal Shareholders pursuant to Section 3.2, above.
The Escrow Shares shall be beneficially owned by the
NDI Principal Shareholders and such Escrow Shares shall
be held in escrow and shall be available to compensate
the Corporation against certain liabilities, costs and
damages as provided in Section 10.1. To the extent not
used for such purposes, such Escrow Shares shall be
released, all as provided in Section 10.1 hereof.
SECTION 3.9. No Further Ownership Rights in NDI
Common Stock. The Merger Consideration delivered upon
the surrender for exchange of shares of NDI Common
Stock in accordance with the terms hereof (including
any dividends or distributions) shall be deemed to have
been issued in full satisfaction of all rights
pertaining to such shares of NDI Common Stock, and
there shall be no further registration of transfers on
the records of the Surviving Corporation of NDI Shares.
If, after the Effective Time, NDI Certificates are
presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in
this Article III.
SECTION 3.10. Lost, Stolen or Destroyed
Certificates. In the event any NDI Certificates shall
have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or
destroyed NDI Certificates, upon the making of an
affidavit of that fact by the holder thereof such
Merger Consideration (and dividends and distributions)
as may be required pursuant to Section 3.8, above,
provided, however, that the Corporation may, in its
discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or
destroyed NDI Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against
any claim that may be made against the Corporation, the
Surviving Corporation or the Exchange Agent with
respect to the NDI Certificates alleged to have been
lost, stolen or destroyed.
SECTION 3.11. Closing.
(a) The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at
the offices of NDI in Williamsburg, Virginia, on April
30, 1999, or at such other time and place as agreeable
to the Corporation and NDI (the date on which the
Closing occurs is referred to in this Agreement as the
"Closing Date").
(b) At the Closing, NDI and/or the NDI Principal
Shareholders shall deliver, or cause to be delivered,
the following, in form and substance satisfactory to
the Corporation:
(i) A certificate of the President and the
Vice President of Sales of NDI, in form and
substance satisfactory to the Corporation, to the
effect that NDI has performed in all material
respects its agreements and covenants contained in
this Agreement required to be performed on or
prior to the Closing Date and the representations
and warranties of NDI contained in this Agreement
are true and correct in all material respects
(except for such representations and warranties
that are qualified by their terms by a reference
to materiality which representations and
warranties as so qualified shall be true in all
respects) on and as of the date made and on and as
of the Closing Date;
(ii) A certificate of each of the NDI
Principal Shareholders, in form and substance
satisfactory to the Corporation, to the effect
that such NDI Principal Shareholder has performed
in all material respects its agreements and
covenants contained in this Agreement required to
be performed on or prior to the Closing Date and
the representations and warranties of such NDI
Principal Shareholder contained in this Agreement
are true and correct in all material respects
(except for such representations and warranties
that are qualified by their terms by a reference
to materiality which representations and
warranties are so qualified shall be true in all
respects) or and as of the date made and or and as
of the Closing Date;
(iii) Constructive possession of all pass
books, keys and other data of NDI, or articles
required for access thereto, and the combinations
for all safes, vaults and other places of safe
keeping or storage of NDI;
(iv) Constructive possession of the complete
books and records relating to the business of NDI;
(v) A certificate from NDI, in a form
reasonably satisfactory to the Corporation,
setting forth true, complete and correct copies of
the Articles of Incorporation and By-Laws of NDI,
and all amendments thereto, together with a
Certificate of Good Standing from the Virginia
State Corporation Commission;
(vi) An opinion from the law firm of Le ▇▇▇▇▇
▇▇▇▇, a Professional Corporation, counsel to NDI
and the NDI Principal Shareholders, dated the
Closing Date, in substantially the form of Exhibit
3.11(b)(vi) attached hereto;
(vii) A certificate from the Secretary of
NDI, in a form reasonably satisfactory to the
Corporation, setting forth the resolutions of the
shareholders and the Board of Directors of NDI
authorizing the execution of this Agreement and
all agreements, documents and instruments to be
executed in connection herewith (including the
Ancillary Documents, as defined in Section 4.3(b),
below) and the taking of any and all actions
deemed necessary or advisable to consummate the
transactions contemplated herein and therein,
which Board of Directors resolutions shall have
been adopted prior to the date of this Agreement;
(viii) An Employment Agreement and a
Consulting Agreement, in forms attached hereto as
Exhibits 3.11(b)(viii)(A) and (B) (the
"Principals' Agreements"), executed by Messrs.
▇▇▇▇▇▇ and King, respectively;
(ix) A signed Necessary Creditor Agreement
(as defined in Section 7.6, below) from each of
the Necessary Creditors (as defined in Section
7.6, below);
(x) A signed Investor Representation
Statement in the form attached hereto as Exhibit
3.11(b)(x), (the "Investor Statement"), from each
of the NDI Shareholders, each such Investor
Statement being in full force and effect;
(xi) An Escrow Agreement in the form attached
hereto as Exhibit 3.11(b)(xi), (the "Escrow
Agreement"), duly executed by NDI, the NDI
Principal Shareholders and the Shareholder
Representative;
(xii) Resignations of all incumbent
officers and directors of NDI and PSE from their
position as such;
(xiii) A written agreement between the NDI
Principal Shareholders to terminate the Buy-Sell
Agreement between them dated December 12, 1996
(the "NDI Buy-Sell Agreement"), which termination
shall be effective as of January 26, 1999; and
(xiv) Such other instruments or documents
as may be reasonably necessary to carry out the
transactions contemplated by this Agreement and to
comply with the terms hereof.
(c) At the Closing, the Corporation shall
deliver, or cause to be delivered, the following, in
form and substance satisfactory to NDI and the NDI
Principal Shareholders:
(i) A certificate of the Chairman of the
Board and Chief Executive Officer or the Executive
Vice President of the Corporation, in form and
substance reasonably satisfactory to NDI, to the
effect that the Corporation has performed in all
material respects its agreements and covenants
contained in this Agreement required to be
performed on or prior to the Closing Date and the
representations and warranties of the Corporation
contained in this Agreement are true and correct
in all material respects (except for such
representations and warranties that are qualified
by their terms by a
reference to materiality which
representations and warranties as so qualified
shall be true in all respects) on and as of the
date made and on and as of the Closing Date;
(ii) A certificate from the Secretary of the
Corporation, in a form reasonably satisfactory to
NDI, setting forth the resolutions of the Board of
Directors of the Corporation authorizing the
execution of this Agreement and all agreements,
documents and instruments to be executed in
connection herewith (including the Ancillary
Documents) and the taking of any and all actions
deemed necessary or advisable to consummate the
transactions contemplated herein and therein,
which Board of Directors resolutions shall have
been adopted prior to the date of this Agreement;
(iii) A legal opinion of ▇▇▇▇ ▇▇▇▇▇▇▇,
Executive Vice President of Business Development
of the Corporation, dated the Closing Date, in
substantially the form of Exhibit 3.11(c) attached
hereto;
(iv) The Principals' Agreements, duly
executed by the Corporation;
(v) The Escrow Agreement, duly executed by
the Corporation and the Escrow Agent; and
(vi) Such other instruments or documents as
may be reasonably necessary to carry out the
transactions contemplated by this Agreement and to
comply with the terms hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
Except as disclosed in a document of even date
herewith and delivered by the Corporation to NDI prior
to the execution and delivery of this Agreement and
referring to the representations and warranties in this
Agreement (the "Corporation Disclosure Schedule"), the
Corporation represents and warrants to NDI and the NDI
Shareholders as of the date hereof as follows:
SECTION 4.1. Organization and Qualification. The
Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Wisconsin, and has the requisite corporate
power and authority to own, lease and operate its
assets and properties and to carry on its business as
it is now being conducted. The Corporation is
qualified to do business and is in good standing, where
applicable, in each jurisdiction in which the
properties owned, leased or operated by it or the
nature of the business conducted by it makes such
qualification necessary, except where the failure to be
so qualified and in good standing will not, when taken
together with all other such failures, have a material
adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of
operations of the Corporation, taken as a whole (a
"Corporation Material Adverse Effect"). True, accurate
and complete copies of the Corporation's Amended and
Restated Articles of Incorporation and
Amended and Restated By-Laws, as in effect on the date hereof,
including all amendments thereto, have heretofore been
delivered to NDI. The Corporation is not in violation
of any of the provisions of its Articles of
Incorporation or By-Laws.
SECTION 4.2. Capitalization. The authorized
capital stock of the Corporation consists of 25,000,000
shares of Corporation Common Stock, of which 5,597,051
shares were issued and outstanding as of April 8, 1999,
and 1,000,000 shares of preferred stock, par value
$.001 per share, of which 20,350 shares were
outstanding as of April 8, 1999. All of the issued and
outstanding shares of Corporation Common Stock are, and
all shares of Corporation Common Stock to be issued in
connection with the Merger shall be, when issued, duly
authorized, validly issued and nonassessable (except as
provided in Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law (the "WBCL")). In addition,
the Corporation Common Stock to be issued as Stock
Consideration to the NDI Shareholders will not have
been issued in violation of, and will not be subject
to, any preemptive or subscription rights, and, except
as described in Section 3.7, above, or Article X,
below, will not be subject to any restrictions on
transfer or contain or be imprinted with any legends.
SECTION 4.3. Authority; Non-Contravention; Approvals.
(a) The Corporation has full corporate power and
authority to enter into this Agreement and, subject to
the making of the Merger Filings, to consummate the
transactions contemplated hereby. This Agreement has
been approved by the Board of Directors of the
Corporation, and no other corporate proceedings on the
part of the Corporation are necessary to authorize the
execution and delivery of this Agreement or the
consummation by the Corporation of the transactions
contemplated hereby. This Agreement has been duly
executed and delivered by the Corporation, and,
assuming the due authorization, execution and delivery
hereof by NDI and the NDI Principal Shareholders,
constitutes a valid and legally binding agreement of
the Corporation, enforceable against it in accordance
with its terms except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization and other laws generally
affecting the rights of creditors and general
principles of equity and applicable state or federal
laws which may affect the availability of equitable
remedies.
(b) The execution and delivery of this Agreement,
the Principals' Agreements, the Escrow Agreement, and
the Investor Statement (the Principals' Agreements, the
Escrow Agreement and the Investor Statement are
collectively referred to herein as the "Ancillary
Documents"), by the Corporation, as applicable, does
not, and the performance of this Agreement and the
Ancillary Documents and the transactions contemplated
hereby and thereby by the Corporation, as applicable,
will not, violate, conflict with or result in a breach
of any provision of, or constitute a default (or an
event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the
termination of, or accelerate the performance required
by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the
properties or assets of the Corporation under any of
the terms, conditions or provisions of (i) the
respective Articles of Incorporation or By-Laws of the
Corporation, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental
authority, domestic or foreign, applicable to the
Corporation or any of its properties or assets or (iii)
any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease
or other instrument, obligation or agreement of any
kind to which the Corporation is now a party or by
which the Corporation or any of its properties or
assets may be bound. Excluded from the foregoing
sentences of this clause (b) are such violations,
conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security
interests, charges or encumbrances that would not, in
the aggregate, have a Corporation Material Adverse
Effect.
(c) Except for the making of the Merger Filings
and filings with NASDAQ, no declaration, filing or
registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory
body or authority, domestic or foreign, is necessary
for the execution and delivery of this Agreement or the
Ancillary Documents by the Corporation or the
consummation by the Corporation of the transactions
contemplated hereby or thereby, other than such
declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not
made or obtained, as the case may be, would not, in the
aggregate, have a Corporation Material Adverse Effect,
or affect the Corporation's ability to consummate the
Merger.
SECTION 4.4. Securities Reports and Financial
Statements. Except for certain late Form 4 filings,
the Corporation has filed with the Securities and
Exchange Commission (the "SEC") all forms, statements
(including proxy statements), reports and documents
(including all exhibits, amendments and supplements
thereto) required to be filed by it prior to the date
hereof under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Securities Act
and the respective rules and regulations thereunder,
all of which, as amended if applicable, complied in all
material respects with all applicable requirements of
the appropriate act and the rules and regulations
thereunder (collectively, the "Corporation SEC
Reports"). As of their respective dates, the
Corporation SEC 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 Corporation's audited combined and
consolidated financial statements for each of the three
years ended July 31, 1996, 1997 and 1998 (collectively,
the "Corporation Financial Statements"), which
heretofore have been provided to NDI, have been
prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto) and fairly
present the financial position of the Corporation as of
the dates thereof and the results of their operations
and changes in financial position for the periods then
ended.
SECTION 4.5. Absence of Litigation. Except as
disclosed in the Corporation SEC Reports, there is no
claim, action, suit, inquiry, arbitration, litigation,
proceeding or investigation or other legal or
administrative proceeding pending, or, to the
Corporation's knowledge, threatened against or
affecting the Corporation or, to the Corporation's
knowledge, any of its officers, directors or other
employees, that individually or in the aggregate could
reasonably be expected to have the effect of preventing
or delaying the Corporation from performing its
obligations under this Agreement or the Ancillary
Documents or the transactions contemplated hereby or
thereby.
SECTION 4.6. Definition of Knowledge of
Corporation. For purposes of this Agreement, the
Corporation shall have "knowledge" of a matter if (i)
either the Corporation's Chief Executive Officer or
Executive Vice President of Business Development has
knowledge of the matter or (ii) such matter has come,
or should reasonably be expected to have come, to the
attention of either such individual if such individual
had conducted a reasonable due diligence review of the
Corporation's operations and business, including,
without limitation, reasonable inquiries to key
personnel of the Corporation regarding the business and
operations of the Corporation and a review of, and
discussion with, key personnel regarding pertinent
books and records of the Corporation.
The warranties and representations of the Corporation
herein contained shall be true and correct on the
Closing Date and shall survive the consummation of the
Merger for the period set forth in Section 10.10,
below.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NDI PRINCIPAL
SHAREHOLDERS
Except as disclosed in a document of even date
herewith and delivered by NDI and the NDI Principal
Shareholders to the Corporation prior to the execution
and delivery of this Agreement and referring to the
representations and warranties in this Agreement (the
"NDI Disclosure Schedule"), each of the NDI Principal
Shareholders hereby severally (and not jointly)
represents and warrants to the Corporation as of the
date hereof as follows:
SECTION 5.1. Title to Shares. Such NDI Principal
Shareholder is the record owner of and has good, valid
and marketable title to the respective number of NDI
Shares set forth opposite his name on ITEM 5.1 of the
NDI Disclosure Schedule, and will deliver to the
Corporation good, valid and marketable title to such
NDI Shares free and clear of all liens, security
interests, claims, options, charges, pledges and
encumbrances of any kind whatsoever.
SECTION 5.2. Authority.
(a) Such NDI Principal Shareholder has full
right, power, legal capacity and authority to
consummate the transactions contemplated herein.
(b) This Agreement and the Ancillary Documents to
be executed by the NDI Principal Shareholders have been
duly and validly executed and delivered by such NDI
Principal Shareholder and are the legal, valid and
binding obligation of such NDI Principal Shareholder
enforceable in accordance with its terms except as
enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, moratorium,
reorganization and other laws generally affecting the
rights of creditors and general principles of equity
and applicable federal or state laws which may affect
the availability of equitable remedies. No action,
consent or approval by or filing with any federal,
state, municipal, foreign or other court or
governmental or administrative body or agency or any
other regulatory or self-regulatory body is required in
connection with the execution and delivery by such NDI
Principal Shareholder of this Agreement or the
Ancillary Documents or the consummation by such NDI
Principal Shareholder of the
transactions contemplated
hereby or thereby. No claim, action, suit, proceeding,
arbitration, investigation or inquiry before any
federal, state, municipal, foreign or other court or
governmental or administrative body or agency, any
securities or commodities exchange or any private
arbitration tribunal is now pending or, to the
knowledge of such NDI Principal Shareholder,
threatened, against or relating to such NDI Principal
Shareholder. Neither the execution and delivery by
such NDI Principal Shareholder of this Agreement and
the Ancillary Documents, nor the consummation of the
transactions contemplated hereby and thereby, will
breach, violate or constitute an event of default (or
an event which, with the lapse of time, or the giving
of notice, or both, would constitute an event of
default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or
require any consent or the giving of any notice under,
any contract or instrument to which such NDI Principal
Shareholder is a party or by which any of such NDI
Principal Shareholder's NDI Shares may be bound.
SECTION 5.3. Shareholder Agreements. Except as
set forth in ITEM 5.3 of the NDI Disclosure Schedule,
there are no voting trust agreements, powers of
attorney, proxies or any other contracts, agreements,
arrangements, commitments, plans or understandings,
written or oral, restricting or otherwise relating to
the voting, dividend rights or disposition of that
portion of the NDI Shares owned by such NDI Principal
Shareholder or otherwise granting any person any right
in respect of that portion of the NDI Shares owned by
such NDI Principal Shareholder and no restrictions on
the transfer of such portion of the NDI Shares
presently exist.
SECTION 5.4. Investment Purpose. Such NDI
Principal Shareholder is acquiring the Corporation
Common Stock for investment only, for such NDI
Principal Shareholder's own account and not with a view
to resale or other disposition thereof. Because of
such NDI Principal Shareholder's business and financial
experience and sophistication, such NDI Principal
Shareholder is capable of evaluating the merits and
risks of an investment in the Corporation Common Stock.
Such NDI Principal Shareholder acknowledges that the
Corporation Common Stock is not registered under the
Securities Act or any state securities laws in reliance
upon one or more exemptions from the registration
requirements made available under such laws. Such NDI
Principal Shareholder covenants and agrees that he will
not offer, sell or otherwise transfer the Corporation
Common Stock unless and until the Corporation Common
Stock is registered pursuant to the securities laws of
all applicable jurisdictions, or unless the disposition
thereof is otherwise exempt from registration
thereunder; in the event the Corporation Common Stock
is proposed to be transferred pursuant to an exemption
from registration, it must be accompanied by an opinion
of counsel reasonably satisfactory to the Corporation
to the effect that such transfer complies with
applicable securities laws.
The warranties and representations of NDI Principal
Shareholders herein contained shall be true and correct
on the Closing Date and shall survive the consummation
of the Merger for the period set forth in Section
10.2(a), below.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NDI
Except as disclosed in the NDI Disclosure
Schedule, NDI hereby represents and warrants to the
Corporation as of the date hereof as follows:
SECTION 6.1. Organization and Qualification. NDI
is a corporation duly organized, validly existing and
in good standing under the laws of the State of
Virginia and has the requisite corporate power and
authority to own, lease and operate its assets and
properties and to carry on its business as it is now
being conducted. NDI is qualified to do business and
is in good standing, where applicable, in each
jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted
by it makes such qualification necessary, except where
the failure to be so qualified and in good standing
would not, when taken together with all other such
failures, have an effect or effects which, individually
or in the aggregate, (i) after taking into
consideration the relative amount, the absolute amount
and the nature of the item, would cause a reasonably
prudent buyer to conclude that such effect adversely
affects the financial condition or operations of NDI in
a manner or amount which would be material or (ii) has
or will have a direct financial consequence of Twenty-
Five Thousand Dollars ($25,000) or more (a "NDI
Material Adverse Effect"). True, accurate and complete
copies of NDI's Articles of Incorporation and By-Laws,
as in effect on the date hereof, including all
amendments thereto, have heretofore been delivered to
the Corporation. NDI is not in violation of any of the
provisions of its Articles of Incorporation or By-Laws.
SECTION 6.2. Capitalization.
(a) The authorized capital stock of NDI consists
of 25,000,000 shares of common stock, no par value, of
which 13,342,280 shares were issued and outstanding as
of April 16, 1999, and 5,000,000 shares of preferred
stock, no par value, of which no shares are issued and
outstanding on the date hereof and no shares will be
issued and outstanding as of the Effective Time. All
of the issued and outstanding shares of NDI Common
Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive
rights granted by NDI or by applicable law. None of
the shares of NDI Common Stock have been issued in
violation of any preemptive or subscription rights.
All of the issued and outstanding shares of NDI Common
Stock were offered, issued, transferred and/or sold in
full compliance with all applicable federal and state
securities laws. ITEM 5.1 of the NDI Disclosure
Schedule contains a list of all NDI Shareholders and
the number of NDI Shares owned by each.
(b) Except as set forth in ITEM 6.2(b) of the NDI
Disclosure Schedule, as of the date hereof, there are
(i) no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right
of conversion or exchange under any outstanding
security, instrument or other agreement and also
including any rights plan or other anti-takeover
agreement, obligating NDI to issue, deliver or sell, or
cause to be issued, delivered or sold, additional
shares of NDI Common Stock or obligating NDI to grant,
extend or enter into any such agreement or commitment
and (ii) no voting trusts, proxies or other agreements
or understandings to which NDI is a party or is bound
with respect to the
voting of any shares of NDI Common
Stock and, to the knowledge of NDI, there are no such
trusts, proxies, agreements or understandings by,
between or among any of the NDI Shareholders with
respect to any shares of NDI Common Stock.
SECTION 6.3. Equity Interests. Part Smart Europe
BV ("PSE") is duly organized, validly existing and in
good standing as a private limited liability company
under the laws of the Netherlands and has the requisite
power and authority to own, lease and operate its
assets and properties and to carry on its business as
it is now being conducted. PSE is qualified to do
business, and is in good standing, in each jurisdiction
in which the properties owned, leased or operated by it
or the nature of the business conducted by it makes
such qualification necessary, except where the failure
to be so qualified and in good standing would not, when
taken together with all other such failures, have a NDI
Material Adverse Effect. All of the membership,
profits and other equity interests of PSE are
beneficially owned directly by NDI, free and clear of
any liens, claims or encumbrances. True, accurate and
complete copies of the Articles of Association of PSE
have been provided to the Corporation prior to the date
hereof. PSE is not in violation of its Articles of
Association. There are no outstanding subscriptions,
options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement,
obligating PSE to issue, deliver or sell, or cause to
be issued, delivered or sold, additional membership,
profits and other equity interests of PSE or obligating
PSE to grant, extend or enter into any such agreement
or commitment. Except for PSE, NDI does not directly
or indirectly own any capital stock of, any equity
interest in, or any other ownership or investment
interest in, any corporation, partnership, limited
liability company, joint venture or other business
entity or enterprise.
SECTION 6.4. Authority; Non-Contravention;
Approvals.
(a) NDI has full corporate power and authority to
enter into this Agreement and the Ancillary Documents
and, subject to the NDI Shareholder Approval (as
defined in Section 8.2, below) and the making of the
Merger Filing, to consummate the transactions
contemplated hereby and thereby. This Agreement has
been approved by the Board of Directors of NDI, and no
other corporate proceedings on the part of NDI are
necessary to authorize the execution and delivery of
this Agreement and the Ancillary Documents or, except
for the NDI Shareholder Approval, the consummation by
NDI of the transactions contemplated hereby and
thereby. This Agreement has been duly executed and
delivered by NDI, and, assuming the due authorization,
execution and delivery hereof by the Corporation,
constitutes a valid and legally binding agreement of
NDI, enforceable against NDI in accordance with its
terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization and other laws generally
affecting the rights of creditors and general
principles of equity and applicable state or federal
laws which may affect the availability of equitable
remedies. The affirmative vote of a majority of the
outstanding shares of NDI Common Stock is the only vote
of the holders of the NDI Common Stock necessary to
approve the Merger.
(b) The execution and delivery of this Agreement
and the Ancillary Documents by NDI does not, and the
performance of this Agreement and the Ancillary
Documents and the
transactions contemplated hereby and
thereby by NDI will not, violate, conflict with or
result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or
result in the termination of, or accelerate the
performance required by, or result in a right of
termination or acceleration under, or result in the
creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of NDI
or PSE under any of the terms, conditions or provisions
of (i) the Articles of Incorporation, Articles of
Association or By-Laws of NDI or PSE, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court
or governmental authority, domestic or foreign,
applicable to NDI or PSE or any of their properties or
assets or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or
agreement of any kind to which NDI or PSE is now a
party or by which NDI or PSE or any of their properties
or assets may be bound.
(c) Except for the making of the Merger Filings,
no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any
governmental or regulatory body or authority is
necessary for the execution and delivery of this
Agreement or the Ancillary Documents by NDI or the
consummation by NDI of the transactions contemplated
hereby or thereby.
SECTION 6.5. Financial Statements. To NDI's
knowledge, the financial statements of NDI attached
hereto as Exhibit 6.5 (the "NDI Financial Statements")
for the year ended December 31, 1998 (the "Balance
Sheet Date") have been prepared in accordance with GAAP
(except as may be indicated therein or in the notes
thereto). The NDI Financial Statements fairly present
the financial position of NDI as of the Balance Sheet
Date and the results of operations and changes in
financial position for the period then ended, except to
the extent that the accounting convention regarding
recognition of revenue reflected on the NDI Financial
Statements differs from the accounting convention
regarding recognition of revenue historically used by
NDI. ITEM 6.5 of the NDI Disclosure Schedule shall
include a list of the assets of NDI as of the Balance
Sheet Date. ITEM 6.5 of the NDI Disclosure Schedule
also shall include a true and correct description of
the amount and character of all indebtedness owed by
NDI or PSE to banks, equipment leasing companies or
taxing authorities as of the date hereof (excluding
interest or penalties that have accrued since the dates
indicated in ITEM 6.5 of the NDI Disclosure Schedule,
which dates shall not be more than thirty (30) days
prior to the date hereof).
SECTION 6.6. Absence of Undisclosed Liabilities.
There are no commitments, liabilities or obligations
relating to NDI, whether accrued, absolute, contingent
or otherwise including, without limitation, guaranties
by NDI of the liabilities of third parties, for which
specific and adequate provisions have not been made on
the NDI Financial Statements, except where all such
undisclosed commitments, liabilities and obligations
would not have a NDI Material Adverse Effect.
SECTION 6.7. Absence of Certain Changes or
Events. Since the Balance Sheet Date, NDI and PSE have
conducted their businesses only in the ordinary course
and in a manner consistent with past practice and there
has not been (a) any change in the financial condition,
results of operations or business of NDI or PSE, (b)
any damage, destruction or loss (whether or not covered
by insurance) with respect to any assets of NDI or PSE,
(c) any change by NDI or PSE in any of their accounting
methods, principles or practices, (d) any revaluation
by NDI or PSE of any of their material assets in any
material respect, (e) any entry by NDI or PSE into any
commitment or transactions material to NDI or PSE or
(f) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of NDI
Common Stock or any redemption, purchase or other
acquisition of any of its securities. Furthermore,
since the Balance Sheet Date, neither NDI nor PSE has
not taken any action or omitted to take any action
which, if suffered, taken or omitted after the date
hereof but before the Closing, would have resulted in a
violation of the provisions of Section 7.1 hereof.
SECTION 6.8. Absence of Litigation.
(a) There is no claim, action, suit, inquiry,
arbitration, litigation, proceeding or investigation or
other legal or administrative proceeding pending or, to
NDI's knowledge, threatened against or affecting NDI or
PSE or, to NDI's knowledge, any of their officers,
directors or other employees, before any federal,
state, municipal or other court or governmental or
administrative body or agency, any securities or
commodities exchange, other regulatory body or any
private arbitration tribunal which could have an NDI
Material Adverse Effect.
(b) Neither NDI nor PSE is subject to, and, to
NDI's knowledge, none of their officers, directors or
other employees is subject to, any continuing order of,
or written agreement or memorandum of understanding
with, or continuing material investigation by, any
governmental entity or authority, or any judgment,
decree, injunction, rule or order of any court,
governmental department, commission, agency,
instrumentality or authority, or any arbitrator which
could have an NDI Material Adverse Effect.
SECTION 6.9. No Violation of Law. To NDI's
knowledge, neither NDI nor any of their directors,
officers, employees or agents is in violation of, or
has been given notice or been charged with any
violation of, any federal, state, local or foreign
statute, law, ordinance, rule or regulation (each, a
"Law" and collectively, the "Laws"). To NDI's
knowledge, NDI, PSE and their operations conform, and
have at all times in the past conformed, in all
respects with all applicable Laws, with the exception
of any deviation which would not have a NDI Material
Adverse Effect. To NDI's knowledge, NDI and PSE have
all permits, licenses, franchises, variances,
exemptions, orders and other governmental
authorizations, consents and approvals necessary to
conduct their businesses as presently conducted
(collectively, the "NDI Permits"). To NDI's knowledge,
neither NDI nor PSE is in violation of the terms of any
NDI Permit, with the exception of any violation which
would not have a NDI Material Adverse Effect.
SECTION 6.10. Taxes. NDI and PSE have (a) duly
filed with the appropriate governmental authorities all
tax returns required to be filed by NDI and/or PSE for
all periods ending on or prior to the date hereof, and
such tax returns are true, correct and complete in all
respects and (b) duly paid in full all Taxes (as
defined below) due in connection with or with respect
to the filing of such tax returns and has paid all
other Taxes as are due. For purposes hereof, "Taxes"
shall mean all federal, state, county, local, foreign
and other taxes or
assessments, including, without
limitation, income, estimated income, business,
occupation, franchise, property (real and personal),
sales, employment, gross receipts, use, transfer, ad
valorem, profits, license, capital, payroll, employee
withholding, unemployment, excise, goods and services,
severance and stamp taxes, and include interest,
penalties and additions in connection therewith for
which NDI or PSE is or may be liable. No deficiencies
for any Taxes have been asserted, assessed or proposed
with respect to NDI or PSE which remain unpaid. NDI
and PSE have properly withheld and paid over to the
appropriate taxing authorities all Taxes required by
them to be withheld. Neither the Internal Revenue
Service (the "IRS") nor any other governmental entity
or taxing authority or agency is now asserting, either
through audits, administrative proceedings, court
proceedings or otherwise, or, to the NDI's knowledge,
threatening to assert against NDI or PSE any deficiency
or claim for additional Taxes. Neither NDI nor PSE has
been granted any waiver of any statute of limitations
with respect to, or any extension of a period for the
assessment of, any Tax. There are no tax liens on any
assets of NDI or PSE. Neither NDI nor PSE has received
a ruling or entered into an agreement with the IRS or
any other governmental entity or taxing authority or
agency. To NDI's knowledge, the accruals and reserves
for Taxes reflected in NDI's balance sheet included
with the NDI Financial Statements are and will be
adequate to cover all Taxes accruable through the date
thereof and through May 31, 1999 (including Taxes being
contested) in accordance with GAAP.
SECTION 6.11. Employee Benefits Plans; ERISA.
(a) Neither NDI nor PSE maintains or contributes,
has any obligation or liability to or under, or has
previously maintained, contributed to, or had an
obligation or liability under, any employee benefit
plans, programs, arrangements or practices, including
employee benefit plans within the meaning set forth in
Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"), or other
similar material arrangements for the provision of
benefits (collectively "Employee Benefit Plans").
Neither NDI nor PSE has any obligation to create any
additional such plan or to amend any such plan so as to
increase benefits thereunder, except as required under
the terms of the Employee Benefit Plans or to comply
with applicable law.
(b) NDI has furnished to the Corporation a
complete and accurate copy of each Employee Benefit
Plan and a complete and accurate copy of each material
document prepared in connection with each such Employee
Benefit Plan, including, without limitation and where
applicable, a copy (i) each summary plan description
and summary of material modifications, and (ii) the
most recently issued IRS determination letter for each
such Employee Benefit Plan.
(c) To NDI's knowledge, each Employee Benefit
Plan has been operated in all respects in accordance
with the requirements of all applicable laws and all
persons who participate in the operation of such
Employee Benefit Plans and all Employee Benefit Plan
"fiduciaries" (within the meaning of Section 3(21) of
ERISA) have acted in accordance with the provisions of
all applicable laws. NDI and PSE has performed all
obligations required to be performed by them under, are
not in any respect in default under or in violation of,
and NDI does not have any knowledge of any default or
violation by any party to, any Employee Benefit Plan.
No legal action, suit or claim is pending or, to the
knowledge of NDI, threatened with respect to
any Employee Benefit Plan (other than claims for benefits
in the ordinary course) and no fact or event exists
that could give rise to any such action, suit or claim.
(d) No contributions, premiums or payments are
required to be made by NDI with respect to any Employee
Benefit Plan.
(e) Neither NDI nor PSE is a party to any
employment, severance, consulting or other similar
contracts with any employees, consultants, officers or
directors of NDI or PSE other than the contracts that
are listed in ITEM 6.11 of the NDI Disclosure Schedule.
SECTION 6.12. Employees. ITEM 6.12 of the NDI
Disclosure Schedule contains:
(a) A list of all employee handbooks and/or
manuals relating to the employees of NDI, true and
correct copies of which have been delivered to the
Corporation; and
(b) A list of all employees of NDI, together with
their job descriptions, rates of salary or wages,
vacation benefits, and each bonus, deferred
compensation, stock option, incentive compensation,
severance or termination pay agreement or employment
benefit applicable to each such employee, whether
formal or informal and whether legally binding or not.
(c) A list of all amounts of deferred
compensation owed to the employees of NDI, all accrued
vacation time for each such employee, and all accrued
compensation time for each such employee.
SECTION 6.13. Labor Controversies. With respect
to their respective employees:
(a) To NDI's knowledge, NDI and PSE are in
compliance with the Federal Fair Labor Standards Act
and all applicable Laws relating to employment
discrimination, employee welfare and labor standards.
To NDI's knowledge, there is no basis for any claim by
any past or present employee of NDI or PSE that such
employee was subject to a wrongful discharge or any
employment discrimination by NDI or PSE or their
management arising out of or relating to such
employee's race, sex, age, religion, national origin,
ethnicity, handicap or any other protected
characteristic under applicable Law.
(b) To NDI's knowledge, NDI and PSE have made all
required payments to its unemployment compensation
reserve accounts with the appropriate governmental
departments and all such unemployment compensation
accounts have positive balances.
SECTION 6.14. Title to and Condition of Assets.
NDI and/or PSE own, lease or license all of the
property and assets, personal and real, tangible or
intangible, used by NDI and PSE, respectively,
in connection with the conduct of their businesses.
NDI and PSE have good and marketable title to all of
the owned personal property included among their
respective assets, tangible and intangible, including,
without limitation, in the case of NDI, those assets
reflected on the NDI Financial Statements or thereafter
acquired (except inventory sold since the Balance Sheet
Date, for fair value in the ordinary course of business
consistent with past practices), in each case free and
clear of all liens, claims, encumbrances and security
interests whatsoever. To
NDI's knowledge, NDI's and
PSE's assets are sufficient for the operation of NDI's
business in the ordinary course and are suitable for
the purpose for which they are being used. All
accounts receivable of NDI, and all accounts receivable
of PSE, have arisen from bona fide transactions in the
ordinary course of business and to NDI's knowledge, are
good and collectible at the aggregate recorded amounts
thereof, net of any applicable reserves for doubtful
accounts, within six (6) months after the Closing Date.
To NDI's knowledge, there are no arrangements, written
or oral, between NDI and any third party, or between
PSE and any third party, with respect to volume
discounts, rebates or any other discount in connection
with NDI's or PSE's accounts receivable. To NDI's
knowledge, all property leased by NDI or PSE is in the
condition required of such property by the terms of the
lease applicable thereto during the term of the lease
and upon the expiration thereof. ITEM 6.14 of the NDI
Disclosure Schedule includes a list of all of the
equipment of NDI or PSE that is leased, the name of the
applicable lessor, the date and term of the applicable
lease and the payments owed by NDI and/or PSE under the
terms of the applicable lease.
SECTION 6.15. Real Estate.
(a) ITEM 6.15 of the NDI Disclosure Schedule
includes a true and accurate description of all real
property (the "Real Estate") which is leased by NDI or
PSE, including a description of each lease entered into
by NDI or PSE. No default by NDI or PSE, or to the
knowledge of NDI, any landlord, has occurred under the
terms of any such lease. To NDI's knowledge, all of
the Real Estate leased by NDI or PSE is in the
condition required by the terms of such leases.
(b) Neither NDI or PSE owns, or ever have owned,
any real property.
(c) To NDI's knowledge, neither the Real Estate
nor NDI's or PSE's use thereof is in violation of any
applicable Laws.
(d) To NDI's knowledge, none of the Real Estate
is subject to any lease, option to purchase or rights
of first refusal, except any such in favor of NDI or
PSE.
(e) To NDI's knowledge, the buildings, fixtures
and other improvements located on the Real Estate have
been approved by all necessary governmental authorities
and are in good condition, working order and repair,
ordinary wear and tear excepted, and suitable for the
purpose for which they are being used by NDI or PSE.
SECTION 6.16. Product Warranties. All software
and other products and services manufactured, sold
and/or licensed by NDI or PSE (and the delivery
thereof) have been in conformity with all applicable
contractual commitments, all express or implied
warranties, if any, and all specifications,
documentation, performance standards, representations
or statements provided with respect thereto by or on
behalf of NDI or PSE. To the knowledge of NDI, no
liability for any warranty claims exist for the
replacement of such software and/or other products. To
the knowledge of NDI, all product labeling of NDI and
PSE is in conformity with all applicable Laws. To
NDI's knowledge, there are no pending claims by any of
NDI's customers
for the correction of any material so-called
computer software "bug" and NDI does not know of
any material so-called "bugs" which may form the basis
for any such claim.
SECTION 6.17. Intellectual Property.
(a) For purposes hereof, "Intellectual Property"
means inventions, designs, models, processes,
formulations, know-how and schematics, whether or not
patented and/or patentable, patents and patent
applications, trade names, trademarks, service marks
and Internet domain names, and copyrights and
registrations thereof and/or registration applications
therefor, algorithms, authoring tools, computer
software programs or applications (in both source code
and object code form), including, without limitation,
the Software (as defined in Section 6.17(k), below) and
web-sites, that are used or currently proposed to be
used in the business of NDI and PSE as currently
conducted or as proposed to be conducted by NDI and
PSE, and documentation relating thereto and/or
explaining the use thereof, and the goodwill related to
any of the foregoing.
(b) ITEM 6.17 of the NDI Disclosure Schedule
identifies the following Intellectual Property: (i)
all patents owned and patent applications made by NDI
or PSE, and the jurisdictions by which each such patent
has been issued or in which each such application has
been filed, (ii) all trade names, trademarks, service
marks and Internet domain names used by NDI or PSE,
whether or not owned by NDI or PSE, (iii) all
registrations made and all registration applications
filed by NDI or PSE for trade names, trademarks,
service marks and Internet domain names owned by NDI or
PSE, and the jurisdictions by which each such
registration has been issued or in which each such
application has been filed, (iv) all registrations made
and registration applications filed by NDI or PSE for
copyrights owned by NDI or PSE, and each jurisdiction
by which each such registration has been issued or in
which each such application has been filed, and (v) all
Software.
(c) ITEM 6.17 of the NDI Disclosure Schedule
includes a list of all licenses, sublicenses and other
agreements under which NDI or PSE is authorized to use
any Intellectual Property owned by any third party (the
"Third Party Intellectual Property") and the royalty
payments payable by NDI or PSE in connection therewith.
(d) Except for the rights existing under the
agreements referred to in ITEM 6.5 of the NDI
Disclosure Schedule and Section 6.17(f), below, NDI and
PSE are the sole and exclusive owners of, with all
right, title and interest in and to, free of all liens
and encumbrances, all Intellectual Property, other than
Third Party Intellectual Property. No claims with
respect to NDI's Intellectual Property, PSE's
Intellectual Property or the Third Party Intellectual
Property (to the extent arising out of any use,
reproduction or distribution of such Third Party
Intellectual Property by NDI or PSE) are pending or, to
NDI's knowledge, threatened by any person, nor does NDI
know of any valid ground for any claim (i) to the
effect that the development, marketing, licensing or
use of any product or Intellectual Property as now
marketed, licensed or used by NDI or PSE infringes upon
any Intellectual Property belonging to another person,
(ii) against the use and/or distribution of any
Intellectual Property by NDI or PSE, (iii) challenging
the ownership, validity or effectiveness of any of
NDI's Intellectual Property or PSE's
Intellectual Property, (iv) challenging NDI's or PSE's license or
legally enforceable right to use any Third Party
Intellectual Property, or (v) to the effect that NDI or
PSE is obligated to pay any compensation with respect
to ownership, sale, use or disposition of the
Intellectual Property. To NDI's knowledge, there is no
unauthorized use, infringement or misappropriation of
any of NDI's Intellectual Property or PSE's
Intellectual Property by any third party, including any
employee or former employee of NDI or PSE.
(e) Copies of all algorithms, tools and other
software and all source and object programs and codes
and related documentation incorporated in, used in
and/or related to NDI's or PSE's products are located
either at NDI's principal executive offices, at PSE's
principal executive offices or at an off-premise site
under NDI's control as identified in the NDI Disclosure
Schedule. Such algorithms, tools, software, programs,
codes and documentation are fully usable and
understandable by persons ordinarily skilled in
computer programming and are sufficient to permit the
maintenance and further development of all software
products and rights currently marketed and licensed by
NDI or PSE. Without limitation, NDI's source code and
PSE's source code include a full source language
statement of the programs comprising all of the
software developed by NDI or PSE, including any support
utilities which are not commercially available and
which are required to build the object code from the
source code.
(f) ITEM 6.17 of the NDI Disclosure Schedule
includes a list of all licenses, sublicenses and other
agreements under which any person is authorized to use
any Intellectual Property owned by NDI or PSE.
(g) ITEM 6.17 of the NDI Disclosure Schedule also
includes a list of (i) each person who has authored any
portion of the programs developed and/or marketed by
NDI (not including Third Party Intellectual Property
incorporated therein), (ii) the nature of each such
person's relationship with NDI, and (iii) all contracts
executed by such persons for the benefit of NDI with
respect to code authored by such persons.
(h) Neither NDI nor PSE has entered into any
agreement to indemnify any other person against any
charge of infringement of any Intellectual Property,
other than indemnification provisions contained in
sales agreements arising in the ordinary course of
business.
(i) Neither NDI nor PSE is, nor will they be as a
result of the execution and delivery of this Agreement
or the performance of obligations under this Agreement,
in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party
Intellectual Property, the breach of which would have a
NDI Material Adverse Effect.
(j) NDI has taken commercially reasonable and
customary measures and precautions necessary to protect
and maintain the confidentiality of all Intellectual
Property (except such Intellectual Property whose value
would be unimpaired by public disclosure) and otherwise
to maintain and protect the full value of all
proprietary assets. All use, disclosure or
appropriation of Intellectual Property not otherwise
protected by patents, patent applications or copyrights
("Confidential Information") owned by NDI by or to a
third party has been pursuant to the terms of a written
agreement between NDI and such third party. All use,
disclosure or appropriation of
Confidential Information
not owned by NDI has been pursuant to the terms of a
written agreement between NDI and the owner of such
Confidential Information, or is otherwise lawful.
(k) For purposes of this Agreement, "Software"
shall mean all software programs that are sold by NDI
or PSE or used in the business of NDI or PSE as
currently conducted or as proposed to be conducted, or
are currently proposed to be sold or used in such
manner, including the source and object code thereof
and any and all existing documentation (regardless of
whether such documentation is provided on a commercial
basis) including flow charts, program descriptions,
program listings, layouts, schematics, engineering and
design drawings, technical support documentation,
diagrams and other documentation depicting or
specifying the designs and components of such software
programs, libraries, logs, reports, drafts, models,
prototypes, technical and other data, test and other
data and programs, any and all preceding versions,
works in process, fixes, enhancements, future releases
or other developments by NDI or PSE which may be
combined or embodied in any medium or format
whatsoever, and for all language versions and hardware
platforms, software platforms and operating
environments and whether sold separately or bundled
with other applications, consisting of a set of logical
instructions and information which guide the
functioning of a processor, and which shall include all
information, electronic form content, so-called "look
and feel", graphic design, electronic form user
methodologies, user interface design, software tools,
know-how, systems, and processes concerning such
computer programs, but excluding the Third Party
Intellectual Property.
(l) With respect to the Software:
(i) The Software performs substantially in
accordance with its functional specifications and
related documentation. NDI has provided the
Corporation with all fault logs and other logs and
other records relating to the Software and any
defects or deficiencies in the possession of NDI
or PSE.
(ii) Neither NDI nor PSE has disclosed the
source code for any of the Software or other
confidential or proprietary information
constituting, embodied in or pertaining to the
Software to any person or entity other than
employees or contractors of NDI or PSE or other
third parties who are bound by confidentiality
agreements in substantially the form disclosed to
the Corporation. Except as described in the
previous sentence, none of the Software has been
placed in escrow or is subject to other
arrangements pursuant to which the source code has
been or could be delivered or disclosed to any
third party except for the Corporation.
SECTION 6.18. Customization Projects . ITEM 6.18
of the NDI Disclosure Schedule contains a true and
correct listing of all material customization or
software or catalog development projects of NDI or PSE
in process, or pending proposals regarding such
material customization or software or catalog
development projects, including a description of the
project, estimated costs of completion, pricing
arrangements, payment terms, expected revenues (which
revenues disclosed in the NDI Disclosure Schedule shall
not include expected revenues from dealers that NDI
expects to service as a result of the projects),
▇▇▇▇▇▇▇▇ to date, ▇▇▇▇▇▇▇▇ received, work completed and
work still to be performed. NDI has delivered true,
correct and complete
copies of documentation relating
to each of the foregoing material projects or proposals
to the Corporation. NDI makes no representation or
warranty that the actual costs of completion will not
exceed the estimated costs of completion, but does
represent that such estimates represent NDI's good
faith estimate of such costs, considering the nature of
the customer requirements and the work performed to
date.
SECTION 6.19. Contracts and Other Agreements.
The NDI Disclosure Schedule sets forth a description of
all of the following to which either NDI or PSE is a
party or by which either of them are bound, whether the
following are written or oral (collectively, the
"Contracts"):
(a) All contracts with the suppliers of NDI or
PSE that could charge to NDI or PSE supplier's fees
exceeding Five Thousand Dollars ($5,000) for any twelve
(12) month period;
(b) All agreements or arrangements between NDI
and any NDI Shareholder;
(c) All covenants not to compete and
confidentiality agreements;
(d) All sales representative, distributorship or
marketing agreements;
(e) All other contracts or agreements made in the
ordinary course of business and involving an amount
greater than Ten Thousand Dollars ($10,000) over the
term of such Contract;
(f) All stand-by letters of credit, guarantees or
performance bonds; and
(g) All other contracts or agreements not made in
the ordinary course of NDI's or PSE's business.
True and correct copies of each of the Contracts, and
all amendments and modifications thereof, have been
delivered to the Corporation. To NDI's knowledge, each
Contract is valid, binding and in full force and effect
in accordance with its terms. Neither NDI, PSE nor, to
the knowledge of NDI, any other party to any Contract
is in breach or default under any Contract (with or
without the lapse of time, or the giving of notice, or
both).
SECTION 6.20. Insurance. NDI and PSE maintain
policies of fire and casualty, liability and other
forms of insurance and bonds in such amounts, with such
deductibles and against such risks and losses, as are
reasonable for the business and assets of NDI and PSE.
A true and complete list of all such insurance and
bonds is included in ITEM 6.20 of the NDI Disclosure
Schedule. Each such insurance policy and bond is in
full force and effect and NDI has not received notice
of and is not otherwise aware of any cancellation or
threat of cancellation of such insurance or bond. ITEM
6.20 of the NDI Disclosure Schedule also identifies all
property damage, personal injury, products liability or
other claims that have been made against NDI or PSE in
the last five (5) years or which are pending against
NDI or PSE or, to the knowledge of NDI, threatened
against NDI or PSE.
SECTION 6.21. Customers; Suppliers. ITEM 6.21 of
the NDI Disclosure Schedule sets forth, with respect to
the last two (2) fiscal years of NDI, (a) the ten (10)
largest (based on dollar amounts purchased or licensed
from NDI, which amounts shall be disclosed in ITEM 6.21
of the NDI Disclosure Schedule) customers of NDI and
(b) the ten (10) largest (based on dollar amounts
purchased or licensed by NDI, which amounts shall be
disclosed in ITEM 6.21 of the NDI Disclosure Schedule)
suppliers of NDI. NDI has no reason to believe and has
not received any notice or indication of the intention
of any of the customers, suppliers or third parties to
material Contracts of NDI to (i) cease doing business
or reduce in any material respect the business
transacted with NDI, (ii) terminate or modify any
agreements with NDI (whether as a result of
consummation of the transactions contemplated hereby or
otherwise), or (iii) demand a refund from NDI.
SECTION 6.22. Accounts; Safe Deposit Boxes. ITEM
6.22 of the NDI Disclosure Schedule contains a true and
correct list of the bank and savings accounts,
certificates of deposit and safe deposit boxes of NDI
and PSE and those persons authorized to sign thereon.
SECTION 6.23. Year 2000 Compliance.
(a) To NDI's knowledge, all data processing
systems, other computer systems, chips, firmware and
software owned, used, affecting or relied upon by NDI
or PSE ("Computer Systems") will be usable prior to,
during and after the calendar year 2000 A.D., and will
operate during each such time period without error
relating to date data, specifically including any error
relating to, or the product of, date data which
represents or references different centuries or more
than one century. To NDI's knowledge, the Computer
Systems will not abnormally end or provide invalid or
incorrect results as a result of date data,
specifically including date data which represents or
references different centuries or more than one
century. To NDI's knowledge, the Computer Systems will
manage and manipulate data involving dates, including
but not limited to single century formulas and multi-
century formulas, and will not cause an abnormally
ending scenario within the application or generate
incorrect values or invalid results involving such
date(s).
(b) To NDI's knowledge, there is no deficiency or
inadequacy in the manufacture, design or formulation of
any of NDI's or PSE's products (including, without
limitation, the Software) which may hereafter give rise
to any such failure or result in any product liability
claim arising out of deficiencies or inadequacies
relating to the year 2000.
SECTION 6.24. Proxy Statement. The proxy
statement to be mailed to NDI Shareholders in
connection with the special meeting of NDI Shareholders
convened to vote on this Agreement and the transactions
contemplated hereby (the "Proxy Statement") will not,
at the time of its mailing to NDI Shareholders, contain
any untrue statement of a material fact or omit to
state any material fact required to be stated therein
or necessary in order to make the statements therein,
in light of the circumstances under which they were
made, not misleading.
SECTION 6.25. NDI Shareholder Approval. The
affirmative vote of the holders of a majority of the
NDI Shares is necessary to approve the transactions
contemplated by this Agreement.
SECTION 6.26. Board Recommendation. The Board of
Directors of NDI, at a meeting duly called and held,
has (a) determined that this Agreement and the
transactions contemplated hereby, taken together, are
advisable and in the best interests of NDI and NDI
Shareholders, and (b) subject to the other provisions
hereof, resolved to recommend that NDI Shareholders
approve this Agreement and the transactions
contemplated hereby, including the Merger.
SECTION 6.27. State Takeover Statutes. NDI's
Board of Directors has taken all necessary action so
that no state takeover statute or similar statute or
regulation of the Commonwealth of Virginia (and, to the
knowledge of NDI after due inquiry, of any other state
or jurisdiction) applies to this Agreement, the Merger,
or any of the other transactions contemplated hereby.
NDI does not have any rights plan or similar
arrangement which has any of the aforementioned
consequences in respect of the transactions
contemplated hereby.
SECTION 6.28. Brokers and Finders. Except for
Fort Dearborn Partners, neither NDI, the NDI
Shareholders nor any of NDI's officers, directors or
employees has employed any investment banker, broker or
finder or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees,
commissions or finder's fees.
SECTION 6.29. Payments. Neither NDI or PSE, nor
any of their officers, directors, employees or agents
has, directly or indirectly, given or made, or agreed
to give or make, any illegal political contributions or
any illegal commission, payment, gratuity, gift or
similar benefit, in each case on behalf of NDI or PSE,
to any candidate, government official, customer,
supplier or other person (foreign or domestic) who is
or may be in a position to help or hinder the business
of NDI or PSE or to assist NDI or PSE with any actual
or proposed transaction.
SECTION 6.30. Transactions with Affiliates. No
NDI Shareholder, nor any sibling, descendant or spouse
of any such person, nor any trust, partnership or
corporation in which any of the foregoing have a
material interest (each, a "NDI Affiliate"), has (a)
owned of record or beneficially more than ten percent
(10%) of the outstanding equity of any entity which has
purchased, sold or furnished to NDI or PSE any goods or
services, (b) had a beneficial interest in any
contract, lease, commitment or understanding to which
NDI or PSE is a party or by which it is bound or
affected, (c) had any claim against NDI or PSE or any
of their assets or (d) had any ownership interest in
any assets used by NDI or PSE in either of their
businesses.
SECTION 6.31. No Material Adverse Change. Since
the Balance Sheet Date, no material adverse change has
occurred in the capitalization, assets, liabilities,
business prospects, gross margin, profitability or
methods of doing business of NDI or PSE (a "Material
Adverse Change").
SECTION 6.32. Warranties True and Correct. No
warranty or representation by NDI contained in this
Agreement or the Disclosure Schedules (as defined in
Section 12.1, below) or in any writing to be furnished
pursuant hereto contains or will contain any untrue
statement of material fact or omits or will omit to
state any material fact required to make the warranties
or representations herein or therein contained not
misleading. NDI has disclosed to the Corporation all
material adverse facts known to NDI relating to NDI,
PSE, their assets or business, not otherwise known to
the Corporation.
SECTION 6.33. Definition of Knowledge of NDI.
For purposes of this Agreement, NDI shall have
"knowledge" of a matter if (i) either NDI Principal
Shareholder, or both, has knowledge of the matter or
(ii) such matter has come, or should reasonably be
expected to have come, to the attention of any such
individual if such individual had conducted a
reasonable due diligence review of NDI's operations and
business, including, without limitation, reasonable
inquiries to key personnel of NDI regarding the
business and operations of NDI and a review of, and
discussion with, key personnel regarding pertinent
books and records of NDI.
The warranties and representations of NDI herein
contained shall be true and correct on the Closing Date
and shall survive the consummation of the Merger for
the period set forth in Section 10.2(a), below.
ARTICLE VII
MATTERS PENDING THE MERGER
SECTION 7.1. Conduct of Business by NDI Pending
the Merger. Except as otherwise contemplated by this
Agreement, after the date hereof and prior to the
Effective Time, unless the Corporation shall otherwise
agree in writing, NDI shall, and shall cause PSE to:
(a) Conduct its business in the ordinary and
usual course of business and consistent with past
practice, except as expressly set forth in Section 7.6,
below;
(b) Not (i) amend or propose to amend its
Articles of Incorporation, Articles of Association or
By-Laws, (ii) split, combine or reclassify its
outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash,
stock, property or otherwise;
(c) Not issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of or otherwise
cause to become outstanding, any additional shares of,
or any options, warrants or rights of any kind to
acquire any shares of, its capital stock or any debt or
equity securities convertible into or exchangeable for
such capital stock; provided, that NDI may issue NDI
Common Stock to its creditors as payment for debts owed
by NDI in the ordinary course of business to such
creditors if such issuance is approved by Dearborn
Partners prior to the issuance and the Corporation is
notified in writing of such issuance and approval
within two (2) business days after such issuance;
(d) Not (i) incur or become contingently liable
with respect to any indebtedness other than
indebtedness for accounts payable to trade creditors
incurred in the ordinary course of business in
connection with obtaining materials or services, (ii)
redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock
or any security convertible into or exchangeable for
its capital stock except with the prior written
approval of the Corporation, (iii) make any acquisition
of any assets or businesses and expenditures for fixed
or capital assets, other than purchases of capital
assets in the ordinary course of business in an
aggregate amount not to exceed Ten Thousand Dollars
($10,000), (iv) sell, pledge, dispose of or encumber
any assets, other than sales of
inventory in the ordinary course of business or (v) enter into any
contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) Use its commercially reasonable best efforts
to preserve intact its business organization and
goodwill, keep available the services of its respective
present officers and key employees, and preserve the
goodwill and business relationships with customers,
suppliers, and others that have business relationships
with it, and not engage in any action, directly or
indirectly, with the intent to adversely impact the
transactions contemplated by this Agreement;
(f) Not enter into or amend any employment,
severance, special pay arrangement with respect to
termination of employment or other similar arrangements
or agreements with any directors, officers or key
employees or make any payment to any director, officer
or key employee not in the ordinary course of business;
(g) Not adopt, enter into or amend any bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, health care,
employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare
of any employee or retiree except as required to comply
with changes in applicable law and salary adjustments
made in the ordinary course of business which are
reasonable in light of adjustments historically made;
(h) Maintain in full force and effect the
insurance policies listed on ITEM 6.20 of the NDI
Disclosure Schedule;
(i) Use, preserve and maintain NDI's and PSE's
properties and assets on a basis consistent with past
practices;
(j) Maintain its books, accounts and records in a
manner consistent with past practices;
(k) Not cancel or compromise, or agree to cancel
or compromise, any debt or claim that NDI or PSE may
have against any third party, or waive or release, or
agree to waive or release, any right of substantial
value possessed by NDI or PSE or relating to any of
their assets;
(l) Not (i) commit any act or omit to do any act,
or permit any act or omission to act, which will or may
cause a breach of any Contract, (ii) make or agree to
make any modification or amendment to any Contract,
(iii) terminate or agree to terminate any Contract, or
(iv) renegotiate or restructure any contract or other
business arrangement with a customer of NDI or PSE
involving revenues to NDI in excess of Ten Thousand
Dollars ($10,000.00);
(m) Not mortgage, pledge or subject to, or agree
to mortgage, pledge or subject to, any lien, charge,
security interest or any other encumbrance or
restriction on any of the assets of NDI or PSE;
(n) Not transfer or grant, or agree to transfer
or grant, any rights under, or enter into or agree to
enter into, any settlement regarding the breach or
infringement of any Intellectual
Property of NDI or PSE
or similar rights relating to NDI or PSE or their
assets or modify or agree to modify any existing rights
with respect thereto;
(o) Confer on a regular and frequent basis with
one or more representatives of the Corporation to
report operational matters of materiality and the
general status of ongoing operations; and
(p) Not enter into any transaction with a NDI
Affiliate or transfer any assets to a NDI Affiliate,
other than as payment of base salary (it being
expressly understood by the parties that PSE shall not
be deemed to be an "NDI Affiliate" for purposes of this
Section 7.1(p)).
SECTION 7.2. Control of NDI's Operations.
Nothing contained in this Agreement shall give to the
Corporation, directly or indirectly, rights to control
or direct NDI's operations prior to the Effective Time.
Prior to the Effective Time, NDI shall exercise,
consistent with and subject to the terms and conditions
of this Agreement, complete control and supervision of
its operations.
SECTION 7.3. Acquisition Transactions. After the
date hereof and prior to the Closing or earlier
termination of this Agreement, NDI and PSE shall not,
nor shall they permit any of their officers, directors,
employees, agents, representatives, contractors,
attorneys, accountants, brokers, shareholders or
affiliates to, directly or indirectly, solicit,
initiate or enter into discussions or negotiations
with, or provide any assistance or information to, or
enter into any agreement with, any person or group of
persons or company or other entity (other than the
Corporation and its agents) concerning any acquisition,
directly or indirectly, of any equity interest in, or a
merger, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving NDI or
PSE, or any purchase, license, pledge, lease or other
transfer of all or substantially all of the assets or
of NDI or PSE or any of the outstanding shares of
common stock of NDI (collectively, an "Acquisition
Discussion"). NDI and PSE shall immediately cease, and
shall cause all of their officers, directors,
employees, agents, representatives, contractors,
attorneys, accountants, brokers, shareholders or
affiliates to immediately cease, any existing
Acquisition Discussion, conducted heretofore and shall
take the necessary steps to inform the relevant persons
of the obligations undertaken in this Section 7.3. In
addition to any other rights and remedies available to
the Corporation, NDI shall be required to pay the
Corporation a fee of $100,000 in the event of any
breach of the covenants and agreements set forth in
this Section 7.3. If NDI is unable to pay the $100,000
fee, the Corporation shall have the unrestricted right
to remove the NDI source code from the Escrow Tech
escrow established between the parties under their
October 29, 1998 letter agreement.
SECTION 7.4. Related Party Transactions. Prior
to the Closing Date, NDI shall require each
shareholder, director, officer, employee or other
person or entity related to or associated with NDI who
has, prior to the date hereof, been lent or otherwise
advanced money by NDI or PSE, to repay (with interest
thereon, if applicable) the entire amount of such loan
or advance to NDI or PSE, other than reasonable travel
advances made to employees of NDI in the ordinary
course of business consistent with past practices.
SECTION 7.5. Covenants of NDI Principal Shareholders.
(a) Each NDI Principal Shareholder agrees to vote
all of such NDI Principal Shareholder's shares of NDI
Common Stock in favor of the Merger at all regular and
special meetings of the shareholders of NDI, and in all
consent resolutions.
(b) Each NDI Principal Shareholder agrees not to
offer, sell or otherwise transfer such person's NDI
Common Stock prior to the Closing or earlier
termination of this Agreement, except any such transfer
resulting by operation of law. Any transferee
receiving NDI Common Stock by operation of law as
aforesaid shall be subject to the covenants in Section
7.5(a), above, and all certificates representing such
shares of NDI Common Stock shall have marked thereon a
legend indicating that such shares are subject to such
covenants.
SECTION 7.6. Fort Dearborn Partners. NDI shall
retain Fort Dearborn Partners to advise NDI regarding
the restructuring of its debt and PSE's debt to their
creditors. Within two (2) days after entering into an
agreement or debt modification arrangement with a
creditor listed on Exhibit 7.6 attached hereto (the
"Necessary Creditors"), NDI shall send a copy of such
agreement or arrangement to the Corporation. A copy of
such agreement or arrangement with each of the
Necessary Creditors (the "Necessary Creditor
Agreements") shall be included in ITEM 7.6 of the NDI
Disclosure Schedule and shall be delivered to the
Corporation within ten (10) days prior to the Closing.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. Access to Information.
(a) Prior to the Closing, NDI will (i) give the
Corporation and its representatives, employees, counsel
and accountants access to the properties, books and
records of NDI and PSE and (ii) cause its officers and
advisors (including, without limitation, its
accountants, attorneys and financial advisors) to
furnish the Corporation and its designated
representatives with financial and operating data and
other information with respect to NDI and PSE for the
purpose of permitting the Corporation, among other
things, to (A) conduct its due diligence review, (B)
review the financial statements of NDI, (C) prepare, or
cause to be prepared, audited financial statements of
NDI as of and for the year ended December 31, 1998 and
for such other earlier time periods as the Corporation
may, in consultation with its accountants and legal
advisers, deem necessary, (D) verify the accuracy of
the representations and warranties of NDI contained in
this Agreement, (E) confirm compliance by NDI with the
terms of this Agreement and (F) prepare for the
consummation of the transactions contemplated by this
Agreement. Without limiting the foregoing, NDI will
permit the Corporation and its accountants to have
access during normal business hours to examine and make
copies of all work papers and schedules of NDI and its
accountants. In addition, immediately prior to the
Closing, the Corporation shall be permitted to conduct
a physical count of NDI's inventory and such other
audit procedures as the Corporation deems necessary to
verify the existence and condition of NDI's inventory,
the other assets of NDI and the liabilities,
obligations and reserves of NDI.
(b) Prior to the Closing, the Corporation will
(i) give NDI, the NDI Shareholders and their respective
representatives access to the properties, books and
records of the Corporation and (ii) cause its officers
and advisors (including, without limitation, its
accountants, attorneys and financial advisors) to
furnish NDI, the NDI Principal Shareholders and their
designated representatives with financial and operating
data and other information with respect to the
Corporation for the purpose of permitting NDI and the
NDI Principal Shareholders, among other things, to (A)
conduct their due diligence review, (B) review the
financial statements of the Corporation, (C) verify the
accuracy of the representations and warranties of the
Corporation contained in this Agreement, (D) confirm
compliance by the Corporation with the terms of this
Agreement and (E) prepare for the consummation of the
transactions contemplated by this Agreement.
(c) In addition to the foregoing, from and after
the date hereof, each party shall furnish promptly to
one another a copy of each report and other document
filed or received by any of them pursuant to the
requirements of federal or state securities laws or
which may have a material effect on their respective
businesses, properties or personnel, and work papers of
their respective accountants and other information or
copies of such documentation and access to senior
management personnel as reasonably deemed necessary by
the requesting party's respective accountants, legal
counsel or financial advisors.
(d) The Corporation shall hold and shall use its
commercially reasonable efforts to cause the
Corporation's representatives to hold, and NDI shall
hold and shall use its commercially reasonable efforts
to cause NDI's representatives to hold, in strict
confidence all non-public documents and information
furnished to the Corporation or to NDI, as the case may
be, in connection with the transactions contemplated by
this Agreement. Notwithstanding the foregoing (i) the
Corporation and NDI may disclose such information as
may be necessary in connection with making the Merger
Filings and seeking the NDI Shareholder Approval (ii)
Dearborn Partners may disclose the existence of this
Agreement and certain of the terms herein to creditors
of NDI that have in advance signed a non-disclosure,
non-trade agreement mutually acceptable to the
Corporation and NDI, (iii) NDI may disclose the
existence of this Agreement, but may not disclose any
of the provisions of this Agreement except for the
identity of the Corporation as buyer, to the Kramp
Groep if the Kramp Groep in advance signs a non-
disclosure, non-trade agreement in a form satisfactory
to the Corporation, and (iv) the Corporation and NDI
each may disclose any information that it is required
by law or judicial or administrative order to disclose.
In addition, the parties acknowledge that the
Corporation and NDI have previously executed a
Confidentiality Agreement dated October 27, 1998, which
Confidentiality Agreement is hereby incorporated herein
by reference and shall continue in full force and
effect in accordance with its terms.
(e) No information or knowledge obtained in any
investigation pursuant to this Section 8.1 shall affect
or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations
of the parties to consummate the Merger.
SECTION 8.2. Shareholders' Approval. NDI shall,
as promptly as practicable, submit the transactions
contemplated hereby for the approval of its
shareholders at a meeting of
shareholders and shall use
its commercially reasonable efforts to obtain
shareholder approval and adoption of this Agreement and
the transactions contemplated hereby (the "NDI
Shareholder Approval"). Such meeting of the
shareholders shall be held as soon as practicable
following the execution of this Agreement (the "NDI
Shareholders' Meeting"). NDI shall, through its Board
of Directors, recommend to its shareholders approval of
the transactions contemplated by this Agreement. NDI
(a) acknowledges that a breach of its covenant
contained in this Section 8.2 to convene a meeting of
its shareholders and call for a vote with respect to
the approval of this Agreement and the Merger will
result in irreparable harm to the Corporation which
will not be compensable in money damages and (b) agrees
that such covenant shall be specifically enforceable
and that specific performance and injunctive relief
shall be a remedy properly available to the Corporation
for a breach of such covenant.
SECTION 8.3. Expenses and Fees. If the Merger is
not consummated, the parties shall be responsible for
all of their own fees and expenses incurred in
connection with the transactions contemplated by this
Agreement.
SECTION 8.4. Agreement to Cooperate. Subject to
the terms and conditions herein provided, each of the
parties hereto shall use all commercially reasonable
efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary,
proper or advisable pursuant to all agreements,
contracts, indentures or other instruments to which the
parties hereto are a party, or under any applicable
laws and regulations to consummate and make effective
the transactions contemplated by this Agreement,
including using its commercially reasonable efforts to
(a) obtain all necessary or appropriate waivers,
consents and approvals from lenders, landlords,
security holders or other parties whose waiver, consent
or approval is required to consummate the Merger, (b)
effect all necessary registrations, filings and
submissions, (c) lift any injunction or other legal bar
to the Merger (and, in such case, to proceed with the
Merger as expeditiously as possible) and (d) make
timely requests for all necessary information.
SECTION 8.5. Public Statements. The parties (a)
shall consult with each other prior to issuing any
press release or any written public statement with
respect to this Agreement or the transactions
contemplated hereby, whether or not required by law,
and (b) shall not issue any such press release or
written public statement prior to such consultation,
except as may be required by law, by obligations
pursuant to any listing agreement with NASDAQ, or as
approved by the Corporation and NDI.
SECTION 8.6. Notification of Certain Matters.
The Corporation and NDI each agree to give prompt
notice to each other of, and to use their respective
commercially reasonable efforts to prevent or promptly
remedy (a) the occurrence or failure to occur or the
impending or threatened occurrence or failure to occur,
of any event which occurrence or failure to occur would
be likely to cause any of its representations or
warranties in this Agreement to be untrue or inaccurate
in any material respect at any time from the date
hereof to the Effective Time and (b) any material
failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 8.6
shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 8.7. Execution of Additional Documents.
From time to time, as and when requested by a party
hereto, each party hereto shall execute and deliver, or
cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken,
all such further or other actions as such other party
may reasonably deem necessary or desirable to
consummate the transactions contemplated by this
Agreement.
SECTION 8.8. Risk of Loss. Risk of loss, damage
or destruction to any of the assets of NDI shall be
upon NDI and the NDI Shareholders until the Closing
Date. In the event of any loss or damage to the assets
of NDI between the date hereof and the Closing, NDI
shall notify the Corporation of such event at the
earlier of one day after such loss or at the Closing.
The proceeds of any claim for loss or damage under
insurance policies or otherwise shall be used to fully
repair, replace or restore the assets prior to the
Closing to a condition at least equivalent to their
condition prior to such loss or shall, at the
Corporation's option, be paid to the Corporation at the
Closing. In the event the damage or loss causes NDI to
cease all or any material portion of its operations for
any period, the Corporation may, at its option,
terminate or defer this Agreement without liability.
If such proceeds are not sufficient for such repair,
replacement or restoration, the Corporation may, at or
before the Closing, at its option (a) terminate this
Agreement without liability or (b) consummate the
Merger and waive any claim against NDI Shareholders
relating to such damage or loss.
SECTION 8.9. Tax-Free Treatment of Merger. The
Corporation and NDI shall each use its commercially
reasonable efforts to cause the Merger to be treated as
a tax-free reorganization for federal, state and
foreign income tax purposes and agree that this
Agreement shall serve as the Plan of Reorganization
therefor. Prior to the Merger, the NDI Principal
Shareholders shall not dispose, and have not disposed,
of any NDI Shares, or receive any distribution from
NDI, in a manner that would cause the Merger to violate
the continuity of shareholder interest requirement set
forth in Treasury Regulation Section 1.368-1(e).
SECTION 8.10. Retention of Employees of NDI and
PSE. The Surviving Corporation in its sole discretion,
may decide to terminate the employment of some of the
employees of NDI and PSE on or after the Closing Date;
provided, that the NDI Principal Shareholders shall
continue to render services to the Surviving
Corporation pursuant to the Principals' Agreements.
The Surviving Corporation shall provide the employees
of NDI whose employment with the Surviving Corporation
is continued after the Closing Date (in the sole
discretion of the Surviving Corporation) (the "Retained
Employees") with stock options under the Corporation's
Incentive Stock Option Plan in an amount that is
comparable to those received by similarly situated
employees of the Surviving Corporation. The Surviving
Corporation also shall provide the Retained Employees,
during their term of employment with the Surviving
Corporation, with employee benefits comparable to those
provided by the Surviving Corporation generally to its
employees, including medical and dental benefits, life
insurance, accidental death and dismemberment
insurance, long and short term disability insurance,
paid vacation and holidays, personal and sick leave,
and participation in a 401(k) Plan, the Corporation's
Employee Stock Purchase Plan and the Corporation's
Incentive Stock Option Plan. All Retained Employees
shall sign prior to the Closing the Corporation's
standard form of confidentiality agreement, and NDI
shall use its best efforts to cause the Retained
Employees to sign such agreements and to accept
employment with the Surviving Corporation.
Notwithstanding the provisions of this Section 8.10,
the employees of the Surviving Corporation, PSE and NDI
shall remain employees "at will" unless otherwise
expressly provided in the Principals' Agreements.
SECTION 8.11. Sale of Shares Pursuant to
Securities Act. The parties hereto acknowledge and
agree that the shares of Corporation Common Stock
issuable to the NDI Shareholders pursuant to Article
III, hereof, shall constitute "restricted securities"
within the Securities Act. The certificates of
Corporation Common Stock shall bear the legends as set
forth in Section 3.7, above. It is acknowledged and
understood that the Corporation is relying on certain
written representations made by each NDI Shareholder.
NDI will use its reasonable best efforts to cause each
NDI Shareholder to execute and deliver to the
Corporation an Investor Statement.
SECTION 8.12. Personal Obligations of NDI Officers
and Directors. The Corporation shall use its
commercially reasonable best efforts to obtain the
release of the NDI Principal Shareholders and any
current or former directors or employees of NDI from
obligations with respect to any liabilities of NDI as
of the Closing Date that are not liabilities described
by Section 10.2(b)(ii)-(iv), below, and that are owed
to any bank, equipment leasing company or taxing
authority.
SECTION 8.13. Escrow Agreement. On or before
the Effective Time, the Corporation, the Escrow Agent,
NDI, the NDI Principal Shareholders and the Shareholder
Representative will execute the Escrow Agreement.
SECTION 8.14. Compliance with Securities Laws.
The Corporation shall use its best efforts to comply
with federal and state laws in connection with the
offer or sale of Corporation Common Stock issued under
this Agreement, including, without limitation, Rule
10b-5 under the Exchange Act.
ARTICLE IX
CONDITIONS
SECTION 9.1. Conditions to Each Party's
Obligation to Effect the Merger. Unless waived by the
parties (provided that disclosure in the Disclosure
Schedules shall not be deemed to be a waiver by any
party), the respective obligations of each party to
effect the Merger shall be subject to the fulfillment
at or prior to the Closing of the following conditions:
(a) This Agreement and the transactions
contemplated hereby, as appropriate, shall have been
approved and adopted by the requisite vote of the NDI
Shareholders under applicable law;
(b) No preliminary or permanent injunction or
other order or decree by any federal or state court
which prevents the consummation of the Merger shall
have been issued and remain in effect (each party
agreeing to use its commercially reasonable efforts to
have any such injunction, order or decree lifted);
(c) No action shall have been taken, and no
statute, rule or regulation shall have been enacted, by
any state or federal government or governmental agency
in the United States which would prevent the
consummation of the Merger or make the consummation of
the Merger illegal; and
(d) All material governmental waivers, consents,
orders and approvals, domestic or foreign, legally
required for the consummation of the Merger and the
transactions contemplated hereby shall have been
obtained and be in effect at the Effective Time.
SECTION 9.2. Additional Conditions to Obligation
of NDI to Effect the Merger. Unless waived by NDI
(provided that disclosure in the Corporation Disclosure
Schedule shall not be deemed to be a waiver by NDI),
the obligation of NDI to effect the Merger shall be
subject to the fulfillment at or prior to the Closing
of the following additional conditions:
(a) The Corporation shall have performed in all
material respects its agreements and covenants
contained in this Agreement required to be performed on
or prior to the Closing Date and the representations
and warranties of the Corporation contained in this
Agreement shall be true and correct in all material
respects (except for such representations and
warranties that are qualified by their terms by a
reference to materiality which representations and
warranties shall be true and in all respects) on and as
of the date made and on and as of the Closing Date;
(b) Since the date hereof, there shall have been
no changes that constitute, and no event or events
shall have occurred which have resulted in or
constitute, a Corporation Material Adverse Effect,
taken as a whole;
(c) All waivers, consents, orders, authorizations
and approvals required to be obtained by, and all
filings required to be made by, the Corporation for the
authorization, execution and delivery of this Agreement
and the consummation by the Corporation of the
transactions contemplated hereby shall have been
obtained and made by the Corporation;
(d) The Corporation shall have delivered to NDI
at the Closing the items specified in Section 3.11(c);
and
(e) No governmental authority, foreign or
domestic, shall have promulgated any statute, rule or
regulation which, when taken together with all such
promulgations, would materially impair the value to NDI
Shareholders of the Merger.
In the event that any of the foregoing conditions to
Closing shall not have been satisfied, NDI may elect to
(i) terminate this Agreement without liability to NDI
or (ii) consummate the transactions contemplated herein
despite such failure and waive any claim against the
Corporation relating to the failure to satisfy such
conditions, except as provided in the following
sentence. Regardless of whether NDI elects to
terminate this Agreement or consummate the transactions
described herein, if such failure shall be as a result
of a breach of any provision of this Agreement by the
Corporation, including, without limitation, the
Corporation's failure to execute and/or deliver any
item described pursuant to Section 9.2(d), above, NDI
(or the NDI Shareholders) may seek appropriate remedies
for any and all damages, costs and expenses
incurred by NDI (or the NDI Shareholders) by reason of such breach
including, without limitation, indemnification pursuant
to Article X, below.
SECTION 9.3. Additional Conditions to Obligations
of the Corporation to Effect the Merger. Unless waived
by the Corporation (provided that disclosure in the NDI
Disclosure Schedule shall not be deemed to be a waiver
by the Corporation), the obligations of the Corporation
to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following
additional conditions:
(a) NDI shall have performed in all material
respects its agreements and covenants contained in this
Agreement required to be performed on or prior to the
Closing Date and the representations and warranties of
NDI contained in this Agreement shall be true and
correct in all material respects (except for such
representations and warranties that are qualified by
their terms by a reference to materiality which
representations and warranties shall be true in all
respects) on and as of the date made and on and as of
the Closing Date;
(b) Since the date hereof, there shall have been
no changes that constitute, and no event or events
shall have occurred which have resulted in or
constitute, a NDI Material Adverse Effect, taken as a
whole;
(c) All waivers, consents, orders, authorizations
and approvals required to be obtained by, and all
filings required to be made by, NDI for the
authorization, execution and delivery of this Agreement
and the consummation by NDI of the transactions
contemplated hereby shall have been obtained and made
by NDI;
(d) No governmental authority, foreign or
domestic, shall have promulgated any statute, rule or
regulation which, when taken together with all such
promulgations, would materially impair the value to the
Corporation of the Merger;
(e) NDI and/or the NDI Shareholders shall have
delivered to the Corporation at the Closing the items
specified in Section 3.11(b), above;
(f) The Corporation's Accountants shall have
prepared audited financial statements of NDI as of and
for the year ended December 31, 1998, and delivered
such financial statements to the Corporation;
(g) The Corporation must be satisfied, in its
reasonable discretion, that the issuance of Corporation
Common Stock hereunder is exempt from registration
under federal and state securities laws;
(h) The Corporation must be satisfied, in its
reasonable discretion, that the Surviving Corporation
will have on and after the Closing all right, title and
interest in and to, free of all liens, claims and
encumbrances, all Intellectual Property other than
Third Party Intellectual Property;
(i) There shall be a Purchaser Representative, as
defined in Regulation D under the Securities Act,
reasonably satisfactory to the Corporation,
representing each NDI Shareholder who is a U.S. person
and not an "accredited investor" as defined in Rule 501
under the Securities Act, and such Purchaser
Representative shall have executed and delivered
documentation reasonably satisfactory to the
Corporation;
(j) The Corporation must approve, in its
reasonable discretion, the Necessary Creditor
Agreements (including, without limitation, any
agreements with the IRS); and
(k) The Corporation must be satisfied, in its
reasonable discretion, that no Material Adverse Change
has occurred since the Balance Sheet Date.
In the event that any of the foregoing conditions to
Closing shall not have been satisfied, the Corporation
may elect to (i) terminate this Agreement without
liability to the Corporation or (ii) consummate the
transactions contemplated herein despite such failure
and waive any claim against NDI, PSE, the NDI Principal
Shareholders or the Shareholder Representative relating
to the failure to satisfy such conditions, except as
provided in the following sentence. Regardless of
whether the Corporation elects to terminate this
Agreement or consummate the transactions described
herein, if such failure shall be as a result of a
breach of any provision of this Agreement by NDI or the
NDI Principal Shareholders, including, without
limitation, the failure of NDI to execute and/or
deliver any item described pursuant to Section 9.3(f),
above, the Corporation may seek appropriate remedies
for any and all damages, costs and expenses incurred by
it by reason of such breach, including, without
limitation, indemnification pursuant to Article X,
below.
ARTICLE X
INDEMNITY
SECTION 10.1. Escrow Fund.
(a) Within five (5) days of the final
determination of the Total NDI Value, the Escrow Shares
shall be deposited with ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Trust Company
in Milwaukee, Wisconsin, (or other institution selected
by the Corporation with the reasonable consent of NDI)
as escrow agent (the "Escrow Agent"), such deposit to
constitute the Escrow Fund and to be governed by the
terms set forth herein and in the Escrow Agreement. At
such time, each NDI Principal Shareholder also shall
deposit with the Escrow Agent blank stock powers, duly
endorsed in blank, relating to the Escrow Shares. The
Escrow Fund shall be available to compensate
Corporation pursuant to the indemnification obligations
of the NDI Principal Shareholders. In the event
Corporation issues any Additional Escrow Shares (as
defined in Section 10.1(b), below), such shares and
blank stock powers therefor will be delivered to the
Escrow Agent in the same manner as the Escrow Shares
and stock powers delivered within five (5) days of the
final determination of the Total NDI Value.
(b) Except for dividends paid in stock declared
with respect to the Escrow Shares ("Additional Escrow
Shares"), which shall be treated pursuant to Section
10.1(a) hereof, and
cash dividends, dividends payable
in securities or other distributions of any kind made
in respect of the Escrow Shares will be delivered to
the NDI Principal Shareholders on a pro rata basis.
Each NDI Principal Shareholder will have voting rights
with respect to the Escrow Shares deposited in the
Escrow Fund with respect to such NDI Principal
Shareholder so long as such Escrow Shares are held in
escrow, and the Corporation will take all reasonable
steps necessary to allow the exercise of such rights.
While the Escrow Shares remain in the Escrow Agent's
possession pursuant to this Agreement, the NDI
Principal Shareholders will retain and will be able to
exercise all other incidents of ownership of said
Escrow Shares which are not inconsistent with the terms
and conditions of this Agreement.
(c) The Escrow Shares shall be adjusted to
reflect fully the effect of any stock split, reverse
stock split, reorganization, recapitalization or any
like change with respect to Corporation Common Stock.
SECTION 10.2. Indemnification.
(a) All representations and warranties made by
NDI or the NDI Principal Shareholders herein, or in any
certificate, NDI Disclosure Schedule or Exhibit
delivered pursuant hereto, shall survive the Closing
and continue in full force and effect until the second
anniversary of the Closing Date (sometimes referred to
herein as the "Termination Date"). No claim for
indemnification made by the Corporation shall be
payable from the Escrow Fund unless an Officer's
Certificate is delivered to the Escrow Agent with
respect to such claim on or before the Release Date (as
defined in Section 10.3(b), below) in accordance with
Section 10.4, hereof. No claim for indemnification
made by the Corporation shall be payable after the
Release Date unless the Shareholder Representative
shall have received notice of such claim from the
Corporation on or before the Termination Date.
(b) Subject to the limitations set forth in this
Article X, the NDI Principal Shareholders will jointly
and severally indemnify and hold harmless the
Corporation and the Surviving Corporation and their
respective officers, directors, agents, attorneys and
employees, and each person, if any, who controls or may
control the Corporation within the meaning of the
Securities Act (hereinafter referred to individually as
an "Indemnified Person" and collectively as
"Indemnified Persons") from and against any and all
losses, costs, damages, liabilities, expenses
(including, without limitation, legal fees), claims,
demands, actions or causes of action, (collectively,
"Damages") arising out of:
(i) any misrepresentation or breach of or
default in connection with any of the
representations, warranties, covenants and
agreements given or made by NDI or the NDI
Principal Shareholders in this Agreement, or any
Exhibit to this Agreement or the NDI Disclosure
Schedule; provided, that with respect to a breach
of a representation or warranty contained in
Article V, above, each NDI Principal Shareholder
shall only be obligated to indemnify the
Indemnified Persons from and against Damages
arising out of such breach if such NDI Principal
Shareholder breached such representation or
warranty,
(ii) liabilities of NDI as of the Closing
Date that are incurred without the prior written
consent of the Corporation, are not reflected on
the audited balance sheet of NDI
as of December
31, 1998, and have not been incurred by NDI in the
ordinary course of business since December 31,
1998, to the extent that such liabilities did not
cause a decrease in the Stock Consideration
computed in accordance with Sections 3.2(a) and
(c), above,
(iii) damages arising out of any claims
against NDI, the Corporation and/or the Surviving
Corporation brought by any NDI Shareholder or
former shareholder of NDI in connection with this
Agreement, the Merger or such shareholder's
ownership prior to the Effective Time of NDI
Shares, and
(iv) any damages owed to third parties
arising out of the misrepresentations, gross
negligence or other misconduct of NDI, PSE and/or
any of their present or former employees prior to
the Effective Time.
The Corporation shall act in good faith and in a
commercially reasonable manner to mitigate any
Damages it may suffer.
(c) Nothing in this Agreement shall limit the
liability in amount or otherwise (i) of any NDI
Shareholder in connection with any breach by such
shareholder of any representation or covenant in the
Investor Statement, or (ii) of NDI Principal
Shareholders with respect to fraud, criminal activity
or intentional breach of any covenant contained in this
Agreement.
(d) Nothing in this Agreement shall limit the
liability for Damages in amount or otherwise to the
Escrow Fund and/or Escrow Shares, and nothing in this
Agreement shall limit the Corporation's remedy for
Damages to the Escrow Fund and/or Escrow Shares, to the
extent that the aggregate indemnification obligations
of the NDI Principal Shareholders under Section 10.2
exceed the value of the Escrow Shares and Additional
Escrow Shares in the Escrow Fund (calculated with
reference to the Corporation Stock Value), and the
Corporation may recover such excess amount from any or
all (in the Corporation's discretion) of NDI and the
NDI Principal Shareholders. In addition, after the
Release Date, nothing in this Agreement shall limit the
liability for Damages in amount or otherwise to the
Escrow Fund and/or Escrow Shares. The sole and
exclusive remedy of the Corporation for any Damages
shall be the indemnification remedy set forth in this
Article X.
SECTION 10.3. Escrow Period; Release From Escrow.
(a) The Escrow Period shall terminate upon the
expiration of twelve (12) months after the Effective
Time; provided, however, that a portion of the Escrow
Fund, which, in the reasonable judgment of the
Corporation, subject to the objection of the
Shareholder Representative and the subsequent
arbitration of the matter in the manner provided in
Section 10.6 hereof, is necessary to satisfy any
unsatisfied claims specified in any Officer's
Certificate (as defined in Section 10.4, below)
theretofore delivered to the Escrow Agent prior to
termination of the Escrow Period, shall remain in the
Escrow Fund until such claims have been resolved.
(b) Within three (3) business days after the
first anniversary of the Closing Date (the "Release
Date"), the Escrow Agent shall release from escrow to
the NDI Principal Shareholders their pro rata portion
of the Escrow Shares and Additional Escrow Shares, less
with respect to each such shareholder the number of
Escrow Shares and Additional Escrow Shares with a value
(as determined pursuant to Section 10.4) equal to (A)
such shareholder's pro rata portion of any liability
delivered to the Corporation in accordance with Section
10.4 in satisfaction of indemnification claims by
Indemnified Persons and (B) such shareholder's pro rata
portion of any liability subject to delivery to
Indemnified Persons in accordance with Section 10.3(a)
with respect to any pending but unresolved
indemnification claims of Indemnified Persons. Any
Escrow Shares and Additional Escrow Shares held as a
result of clause (B) shall be released to the NDI
Principal Shareholders or released to the Corporation
(as appropriate) promptly upon resolution of each
specified indemnification claim involved. Escrow
Shares and Additional Escrow Shares shall be released
to the respective NDI Principal Shareholders in
proportion to their respective ownership interest in
NDI immediately prior to the Effective Time. The
Corporation will take such action as may be necessary
to cause such certificates to be issued in the names of
the appropriate persons. Certificates representing
Escrow Shares and Additional Escrow Shares so issued
that are subject to resale restrictions under
applicable securities laws will bear a legend to that
effect. No fractional shares shall be released and
delivered from the Escrow Fund to the NDI Principal
Shareholders (provided that fractional shares may be
released and delivered from the Escrow Fund to the
Corporation). In lieu of any fraction of an Escrow
Share to which a NDI Principal Shareholder would
otherwise be entitled, such holder will receive from
the Corporation one (1) share of Corporation Common
Stock.
(c) No Escrow Shares or Additional Escrow Shares
or any beneficial interest therein may be pledged,
sold, assigned or transferred, including by operation
of law, by a NDI Principal Shareholder or be taken or
reached by any legal or equitable process in
satisfaction of any debt or other liability of any such
NDI Principal Shareholder, prior to the delivery to
such NDI Principal Shareholder of his pro rata portion
of the Escrow Fund by the Escrow Agent as provided
herein.
(d) The Escrow Agent is hereby granted to power
to effect any transfer of Escrow Shares contemplated by
this Agreement. The Corporation will cooperate with
the Escrow Agent in promptly issuing stock certificates
to effect such transfers.
SECTION 10.4. Claims Upon Escrow Fund. Upon
receipt by the Escrow Agent on or before the Release
Date of a certificate signed by any officer of the
Corporation (an "Officer's Certificate") stating (in
accordance with the requirements in the Escrow
Agreement) that with respect to the indemnification
obligations of the NDI Principal Shareholders set forth
in Section 10.2, Damages exist and specifying in
reasonable detail the individual items of such Damages
included in the amount so stated, that date each such
item was paid, or properly accrued or arose, and the
nature of the misrepresentation, breach of warranty or
claim to which such item is related, the Escrow Agent
shall, subject to the provisions of this Article X,
deliver to the Corporation out of the Escrow Fund, as
promptly as practicable, Corporation Common Stock or
other assets held in the Escrow Fund having a value
equal to such damages. For the purpose of compensating
the Corporation for its Damages pursuant to this
Agreement, the Corporation Common Stock in the Escrow
Fund shall be valued at the Corporation Stock Value,
regardless of
any increase or decrease in the value of
Corporation Common Stock after the Closing, provided
that such value shall be adjusted in the event of a
change listed in Section 10.1(c), above. In
determining the amount of any Damage attributable to a
breach, any materiality standard contained in a
representation, warranty or covenant of the Corporation
shall be disregarded.
SECTION 10.5. Objections to Claims. At the
time of delivery of any Officer's Certificate to the
Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholder
Representative and for a period of thirty (30) days
after such delivery, the Escrow Agent shall make no
delivery of Corporation Common Stock or other property
pursuant to Section 10.4 hereof unless the Escrow Agent
shall have received joint written authorization from
the Shareholder Representative and the Corporation to
make such delivery. After the expiration of such
thirty (30) day period the Escrow Agent shall make
delivery of the Corporation Common Stock or other
property in the Escrow Fund in accordance with Section
10.4 hereof, provided that no such payment or delivery
may be made if the Shareholder Representative shall
object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have
been delivered to the Escrow Agent and to the
Corporation prior to the expiration of such thirty (30)
day period.
SECTION 10.6. Resolution of Conflicts and Arbitration.
(a) In case the Shareholder Representative shall
so object in writing to any claim or claims by the
Corporation made in any Officer's Certificate, the
Corporation shall have thirty (30) days to respond in a
written statement to the objection of the Shareholder
Representative. If after such thirty (30) day period
there remains a dispute as to any claims, the
Shareholder Representative and the Corporation shall
attempt in good faith for sixty (60) days to agree upon
the rights of the respective parties with respect to
each of such claims. If the Shareholder Representative
and the Corporation should so agree, a memorandum
setting forth such agreement shall be prepared and
signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and shall distribute the
Corporation Common Stock or other property from the
Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after
good faith negotiation, either the Corporation or the
Shareholder Representative may, by written notice to
the other, demand arbitration of the matter unless the
amount of the damage or loss is at issue in pending
litigation with a third party, in which event
arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and
in either such event the matter shall be settled by
arbitration conducted by one arbitrator. The
Corporation and the Shareholder Representative shall
agree on the arbitrator, provided that if the
Corporation and the Shareholder Representative cannot
agree on such arbitrator, either the Corporation or
Shareholder Representative can request that Resolute
Systems Inc. ("RSI") select the arbitrator. The
arbitrator shall set a limited time period and
establish procedures designed to reduce the cost and
time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the
arbitrator, to discover relevant information from the
opposing parties about the subject matter of the
dispute. The arbitrator shall rule upon motions to
compel or limit discovery and shall have the authority to
impose sanctions, including attorneys' fees and
costs, to the same extent as a court of competent law
or equity, should the arbitrator determine that
discovery was sought without substantial justification
or that discovery was refused or objected to without
substantial justification. The decision of the
arbitrator shall be written, shall be in accordance
with applicable law and with this Agreement, and shall
be supported by written findings of fact and conclusion
of law which shall set forth the basis for the decision
of the arbitrator. The decision of the arbitrator as
to the validity and amount of any claim in such
Officer's Certificate shall be binding and conclusive
upon the parties to this Agreement (except in the event
that the arbitrator has a conflict of interest with
respect to the arbitration), and notwithstanding
anything in Section 10.5 hereof, the Escrow Agent shall
be entitled to act in accordance with such decision and
make or withhold payments out of the Escrow Fund in
accordance therewith.
(c) Judgment upon any award rendered by the
arbitrator may be entered in any court having
jurisdiction. Any such arbitration shall be held in
Milwaukee County, Wisconsin under the commercial rules
then in effect of the American Arbitration Association.
For purposes of this Section 10.6(c), in any
arbitration hereunder in which any claim or the amount
thereof stated in the Officer's Certificate is at
issue, the Corporation shall be deemed to be the non-
prevailing party unless the arbitrator awards the
Corporation more than one-half (1/2) of the amount in
dispute; otherwise, the NDI Principal Shareholders
shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall (jointly
and severally, if applicable) pay its own expenses, the
fees of the arbitrator, any administrative fee of RSI,
and the expenses, including attorneys' fees and costs,
reasonably incurred by the other party to the
arbitration.
SECTION 10.7. Shareholder Representative.
(a) R. ▇▇▇▇ ▇▇▇▇ shall be constituted and
appointed as agent ("Shareholder Representative") for
and on behalf of the NDI Shareholders to give and
receive notices and communications, to represent the
NDI Shareholders with respect to the determination of
the Closing Date Balance Sheet and Total NDI Value, to
authorize delivery to the Corporation of the
Corporation Common Stock or other property from the
Escrow Fund in satisfaction of claims by the
Corporation, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts
and awards of arbitrators with respect to such claims,
and to take all actions necessary or appropriate in the
judgment of the Shareholder Representative for the
accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in interest of the
Escrow Fund from time to time upon not less than ten
(10) days' prior written notice to the Corporation. No
bond shall be required of the Shareholder
Representative, and the Shareholder Representative
shall receive no compensation for his services.
Notices or communications to or from the Shareholder
Representative shall constitute notice to or from each
of the NDI Shareholders.
(b) The Shareholder Representative shall not be
liable for any act done or omitted hereunder as
Shareholder Representative while acting in good faith
and in the exercise of reasonable judgment and any act
done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith. The NDI
Principal Shareholders shall jointly and severally
indemnify the Shareholder Representative and hold him
harmless against any loss,
liability or expense
incurred without gross negligence or bad faith on the
part of the Shareholder Representative and arising out
of or in connection with the acceptance or
administration of his duties hereunder.
(c) The Shareholder Representative shall have
reasonable access to information about NDI and the
reasonable assistance of NDI's officers and employees
for purposes of performing his duties and exercising
his rights hereunder, provided that the Shareholder
Representative shall treat confidentially and not
disclose any nonpublic information from or about NDI to
anyone (except on a need to know basis to individuals
who agree in writing to treat such information
confidentially).
(d) The Corporation acknowledges that the NDI
Principal Shareholders may have a conflict of interest
with respect to duties as Shareholder Representative,
and in such regard each NDI Principal Shareholder has
informed the Corporation that he will act in the best
interests of the NDI Shareholders.
SECTION 10.8. Actions of the Shareholder
Representative. A decision, act, consent or
instruction of the Shareholder Representative shall
constitute a decision of all NDI Shareholders and shall
be final, binding and conclusive upon each such NDI
Shareholder, and the Escrow Agent and the Corporation
may rely upon any such decision, act, consent or
instruction and are hereby relieved from any liability
to any person for any acts done by them in accordance
with such decision, act, consent or instruction.
SECTION 10.9. Third Party Claims Resulting in
Indemnification Claim. In the event the Corporation
becomes aware of a third-party claim which the
Corporation believes may result in a claim for
indemnification pursuant to this Article X against NDI
or the NDI Principal Shareholders, the Corporation
shall notify the Shareholder Representative of such
claim, and the Shareholder Representative and the NDI
Principal Shareholders shall be entitled, at their
expense, to participate in any defense of such claim.
The Corporation shall have the right in its sole
discretion to participate in the defense of any such
claim and to settle any such claim. In the event that
the Shareholder Representative has consented to any
such settlement, the Shareholder Representative shall
have no power or authority to object under Section
10.5, Section 10.11 or any other provision of this
Article X to the amount of any claim by the Corporation
against the Escrow Fund and/or the NDI Principal
Shareholders for indemnity with respect to such
settlement.
SECTION 10.10. Indemnification of NDI and the NDI Shareholders.
(a) In General. The Corporation agrees to
indemnify and hold harmless NDI and the NDI
Shareholders and their respective (if applicable)
officers, directors, agents, attorneys and employees,
and each person, if any, who controls or may control
NDI within the meaning of the Securities Act from and
against any and all Damages of or against them
resulting from or arising out of (i) any
misrepresentation or breach of warranty made by the
Corporation in Article IV, (ii) any breach or
nonfulfillment of any covenant or agreement which is to
be performed by the Corporation under this Agreement or
the Ancillary Documents prior to the Closing, or (iii)
the Corporation's failure to pay the liabilities
reflected on the Closing Date Balance Sheet that
caused a decrease in the Stock Consideration computed in
accordance with Sections 3.2(a) and (c), above. The
sole and exclusive remedy of NDI and the NDI
Shareholders for any such misrepresentation, breach,
nonfulfillment or failure shall be, the indemnification
remedy set forth in this Section 10.10.
(b) Survival. All representations and warranties
made by the Corporation herein or in any certificate,
Corporation Disclosure Schedule or Exhibit delivered
pursuant hereto, shall survive the Closing and continue
in full force and effect until the Termination Date.
No claim for indemnification made by NDI or the NDI
Shareholders shall be payable unless the Corporation
shall have received written notice of such claim from
the Shareholder Representative on or before the
Termination Date.
(c) Indemnification of NDI and the NDI
Shareholders with Respect to Third-Party Claims.
Claims for indemnification under this Section 10.10
with respect to third-party claims shall be handled as
follows:
(i) The Corporation shall, upon receipt of
written notice of the commencement of a legal
proceeding and at its expense, actively and in
good faith defend any such legal proceeding in its
own name or, if necessary, in the name of NDI
and/or the NDI Shareholders, as the case may
be; provided, however, that if the legal
proceeding involves a matter solely of concern to
NDI and/or the NDI Shareholders, as the case may
be, in addition to the legal proceeding, such
matter shall be within the sole responsibility of
NDI and/or the NDI Shareholders, as the case may
be, and its or their counsel. NDI and/or the NDI
Shareholders, as the case may be, will cooperate
with and make available to the Corporation such
assistance and materials as may be reasonably
requested of it or them, and NDI and/or the NDI
Shareholders, as the case may be, shall have the
right, at its and their expense, to participate in
the defense.
(ii) In the event the Corporation shall
notify NDI and/or the NDI Shareholders, as the
case may be, that it disputes any legal proceeding
and/or the Corporation shall fail to defend such
claim actively and in good faith, then NDI and/or
the NDI Shareholders, as the case may be, shall
have the right to conduct a defense against such
legal proceeding and shall have the right to
settle and compromise such legal proceeding only
with the consent of the Corporation.
SECTION 10.11 Procedure Relative to Indemnification from
other than Escrow Fund.
(a) In General. In the event that any party
hereto shall have a claim for indemnification pursuant
to the terms of this Article X (other than claims upon
the Escrow Fund), such party (the "Claiming Party")
shall notify the party or parties against which the
claim is made (the "Indemnifying Party") in writing of
such claim prior to the Termination Date and within
sixty (60) days after the Claiming Party first receives
knowledge of any claim that it may have pursuant to
this Article X; provided, however, that failure to give
such notification shall not affect the indemnification
provided hereunder except to the extent the
Indemnifying Party is actually prejudiced as a result
of such failure or unless such notification is given
after the
Termination Date. Such notice shall specify
(i) the nature of the claim, (ii) the basis upon which
the claim is made by the Claiming Party and (iii) the
Damages incurred by or imposed upon the Claiming Party
on account thereof. If such Damages are liquidated in
amount, the notice shall so state and such amount shall
be deemed the amount of the claim of the Claiming
Party. If the amount is not liquidated, the notice
shall so state and, in such event, a claim shall be
deemed asserted against the Indemnifying Party on
behalf of the Claiming Party, but no payment shall be
made on account thereof until the amount of such claim
is liquidated and the claim is finally determined. In
determining the amount of any Damage attributable to a
breach, any materiality standard contained in a
representation, warranty or covenant of the Corporation
shall be disregarded.
(b) Arbitration. Any controversy or dispute
arising out of or relating to claims for
indemnification under this Section 10.11 shall be
settled by a single arbitrator selected by the
Corporation and the Shareholder Representative or, if
the Corporation and the Shareholder Representative
cannot agree on one arbitrator, either the Corporation
or the Shareholder Representative can request that RSI
select the arbitrator; provided, that if the amount of
the damage or loss is at issue in pending litigation
with a third party, the arbitration shall not be
commenced until such amount is ascertained or both
parties agree to arbitration. The arbitrator shall set
a limited time period and establish procedures designed
to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the
sole judgment of the arbitrator, to discover relevant
information from the opposing parties about the subject
matter of the dispute. The arbitrator shall rule upon
motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys'
fees and costs, to the same extent as a court of
competent law or equity, should the arbitrator
determine that discovery was sought without substantial
justification or that discovery was refused or objected
to without substantial justification. The decision of
the arbitrator shall be written, shall be in accordance
with applicable law and with this Agreement, and shall
be supported by written findings of fact and conclusion
of law which shall set forth the basis for the decision
of the arbitrator. The decision of the arbitrator as
to the validity and amount of any claim for
indemnification shall be binding and conclusive upon
the parties to this Agreement (except in the event that
the arbitrator has a conflict of interest with respect
to the arbitration). Judgment upon any award rendered
by the arbitrator may be entered in any court having
jurisdiction. Any such arbitration shall be held in
Milwaukee County, Wisconsin under the commercial rules
then in effect of the American Arbitration Association.
The arbitrator shall also make a decision regarding
which party's legal position in any such controversy or
dispute is the more substantially correct (the
"Prevailing Party"), and the arbitrator may require the
other party to pay the reasonable legal and other
professional fees and costs incurred by the Prevailing
Party in connection with such arbitration proceeding
and any necessary court action.
SECTION 10.12 Effect of Insurance. The
determination of any Damages for which indemnification
may be claimed under this Article X shall be net of
insurance proceeds, if any, received (but also net of
recovery costs and adjusted for any tax incurred as a
result of the receipt of such insurance proceeds,
reimbursement, funding and indemnification payments) by
the Corporation as a result of such Damages; provided,
however, that nothing herein shall require the
Corporation to maintain any types of insurance coverage
after the Closing Date.
SECTION 10.13 Basket. The NDI Shareholders shall
not be required to indemnify the Corporation under this
Article X, unless the Corporation's Damages exceed in
the aggregate Twenty-Five Thousand Dollars ($25,000)
(the "Basket Amount"); provided, however, that if the
Corporation's Damages exceed the Basket Amount, then
the Corporation shall have the right to be indemnified
for the full amount of such Damages without reference
to the Basket Amount.
SECTION 10.14 No Offset Against Principals'
Agreements. The Corporation shall not have the right
to withhold payments due under the Principals'
Agreements in order to offset the Corporation's
Damages.
SECTION 10.15 Treatment of Indemnity Payments.
Any indemnity payments made pursuant to this Article X
shall, to the extent permitted by applicable law, be
treated for tax reporting purposes as an adjustment to
the Merger Consideration.
SECTION 10.16 Surviving Corporation. The use of
the term "Corporation" in this Article X is intended to
refer to the Corporation prior to the Effective Time
and to the Surviving Corporation on and after the
Effective Time.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1. Termination. This Agreement may be
terminated by the mutual consent of the parties, or at
any time prior to the Closing Date, whether before or
after approval of the matters presented in connection
with the Merger by the NDI Shareholders, as follows:
(a) NDI shall have the right to terminate this Agreement;
(i) If the Merger does not occur by July 31,
1999, other than on account of delay or default on
the part of NDI or any NDI Shareholder;
(ii) If the Merger is enjoined by a final,
nonappealable order of a U.S. court having
jurisdiction not entered at the request or with
the support of NDI or any of its affiliates or
associates; or
(iii) If the Corporation (A) has breached
any representation, warranty or covenant in any
material respect and (B) does not cure such
default in all material respects within thirty
(30) days after written notice of such default is
given to the Corporation by NDI.
(b) The Corporation shall have the right to terminate this Agreement;
(i) If the Merger does not occur by July 31,
1999, other than on account of delay or default on
the part of the Corporation;
(ii) If the Merger is enjoined by a final,
nonappealable order of a U.S. court having
jurisdiction not entered at the request or with
the support of the Corporation or any of its
affiliates or associates;
(iii) If NDI (A) has breached any
representation, warranty or covenant in any
material respect and (B) does not cure such
default in all material respects within thirty
(30) days after written notice of such default is
given to NDI by the Corporation;
(iv) If any NDI Principal Shareholder (A) has
breached any representation, warranty or covenant
of such NDI Principal Shareholder in any material
respect and (B) such NDI Principal Shareholder
does not cure such default in all material
respects within thirty (30) days after written
notice of such default is given to such NDI
Principal Shareholder by the Corporation;
(v) The NDI Shareholders do not approve the Merger; or
(vi) Copies of all of the Necessary Creditor Agreements
are not received by the Corporation on or before May 1, 1999.
SECTION 11.2. Effect of Termination. In the
event of termination of this Agreement by either the
Corporation or NDI as provided in Section 11.1, this
Agreement shall forthwith become void and there shall
be no further obligation on the part of the
Corporation, NDI, the NDI Shareholders, or their
respective officers or directors (except as set forth
in this Section 11.2 and in Sections 8.1(d), 8.3 and
8.5, all of which shall survive the termination);
provided, however, that nothing in this Section 11.2
shall relieve any party from liability for any breach
of this Agreement.
SECTION 11.3. Amendment. This Agreement may not
be amended except by action taken by the parties
thereof and then only by an instrument in writing
signed on behalf of each of the parties hereto and in
compliance with applicable law.
SECTION 11.4. Waiver. At any time prior to the
Effective Time, any party hereto may (a) extend the
time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant
thereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such
extension or waiver shall not be deemed to be
continuing or to apply to any future obligation or
requirement of any part hereto provided herein. Any
agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. Disclosure Schedules. The
schedules, Items and information set forth in the
Corporation Disclosure Schedule and the NDI Disclosure
Schedule (collectively, the
"Disclosure Schedules") in
most cases specifically refer to the Section of this
Agreement to which such schedule, Item and information
is responsive. Each such schedule, Item and
information shall be deemed to have been disclosed with
respect to any other Section of this Agreement to which
disclosure is applicable if such Section does not
reference a specific Item of the Disclosure Schedules.
All capitalized terms used in the Disclosure Schedules
and not otherwise defined therein shall have the same
meanings as are ascribed to such terms in this
Agreement. The Disclosure Schedules shall not vary,
change or alter the literal meaning of the
representations and warranties of the applicable party
contained in this Agreement (and any attempt to do so
shall be null and void and without any effect
whatsoever), other than creating exceptions thereto
which are responsive to the language of the warranties
and representations contained in this Agreement. Any
documents attached to the Disclosure Schedules are
incorporated in their entirety into the Disclosure
Schedules.
SECTION 12.2. Notices. All notices and other
communications hereunder shall be in writing and shall
be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested)
or sent via facsimile to the parties at the following
addresses (or at such other address or facsimile number
for a party as shall be specified by like notice):
(a) If to the Corporation to:
ARI Network Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Executive Vice President
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇, S.C.
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to NDI or the NDI Shareholders to:
Network Dynamics Incorporated
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Attention: K. ▇▇▇▇ ▇▇▇▇▇▇, President
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇, a Professional
Corporation
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
and:
R. ▇▇▇▇ ▇▇▇▇, Shareholder
Representative
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 12.3. Interpretation. The headings
contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement,
unless a contrary intention appears (a) the words
"herein," "hereof" and "hereunder" and other words of
similar impact refer to this Agreement as a whole and
not to any particular Article, Section or other
subdivision and (b) reference to any Article or Section
means such Article or Section hereof.
SECTION 12.4. Miscellaneous. This Agreement
(including the documents and instruments referred to
herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings,
both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, (b) is
not intended to confer upon any other person any rights
or remedies hereunder except for rights of indemnified
parties under Article X and (c) shall not be assigned
or delegated by operation of law or otherwise. THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING
VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF WISCONSIN APPLICABLE TO CONTRACTS EXECUTED AND
TO BE PERFORMED WHOLLY WITHIN SUCH STATE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 12.5. Counterparts. This Agreement may
be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which
shall constitute one and the same agreement. Each of
the parties agrees to accept and be bound by facsimile
signatures hereto.
SECTION 12.6. Parties In Interest. This
Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any
nature whatsoever under or by reason of this Agreement.
SECTION 12.7. Disclosure Schedules and Exhibits.
All Disclosure Schedules and Exhibits referred to in
this Agreement are incorporated by reference herein.
SECTION 12.8. Severability. If any term or other
provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such
determination that any term or other provision is
invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby
are fulfilled to the extent possible.
SECTION 12.9. Remedies Cumulative. Except as
otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party,
and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
SECTION 12.10. Rules of Construction. The
parties hereto agree that they have been represented by
counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of
construction that ambiguities in an agreement or other
document will be construed against the party drafting
such agreement or document.
SECTION 12.11. Survival of Services Agreement.
Notwithstanding Section 12.4(a), above, the Agreement
between NDI and the Corporation dated October 29, 1998,
pursuant to which NDI is obligated to provide services
with a value of One Hundred Thousand Dollars ($100,000)
to the Corporation, shall survive execution of this
Agreement by the parties hereto and shall remain in
full force and effect.
IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto as of the date first
written above.
CORPORATION:
ARI NETWORK SERVICES, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Executive Vice President of Business
Development
NDI:
NETWORK DYNAMICS INCORPORATED
By: /s/K. ▇▇▇▇ ▇▇▇▇▇▇
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K. ▇▇▇▇ ▇▇▇▇▇▇
Its: President
NDI PRINCIPAL SHAREHOLDERS:
/s/ R. ▇▇▇▇ ▇▇▇▇
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R. ▇▇▇▇ ▇▇▇▇
/s/K. ▇▇▇▇ ▇▇▇▇▇▇
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K. ▇▇▇▇ ▇▇▇▇▇▇