EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of April 15, 1999
Among
MICROGRAFX, INC.
INTERCAP ACQUISITION, INC.
and
INTERCAP GRAPHICS SYSTEMS, INC.
and
INTERGRAPH CORPORATION
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AGREEMENT AND PLAN OF MERGER
Section Page No.
1. Transactions on or Prior to the Closing Date 1
1.1 The Merger 1
1.2 Conversion of Stock 2
1.3 Future Payment 3
1.4 Consent of the Stockholder to Merger 3
2. Closing 3
3. Representations and Warranties of the Company and the Stockholder 3
3.1 Organization and Qualification 4
3.2 Capitalization 4
3.3 Financial Condition 5
3.4 Tax Matters 7
3.5 Litigation and Claims 7
3.6 Properties and Assets 8
3.7 [Intentionally Deleted] 10
3.8 Contracts and Other Instruments 10
3.9 Labor and Employment Agreements 11
3.10 Employee Benefit Plans 11
3.11 Officers, Directors and Employees; Compensation of and Indebtedness to
and from Officers, Directors, Stockholders and Employees 12
3.12 Agreement Not in Breach of Certain Instruments 12
3.13 Accounts and Notes Receivable 12
3.14 Inventories 12
3.15 No Undisclosed Liabilities 13
3.16 Brokerage 13
3.17 Authorization of Agreement 13
3.18 Bank Accounts 14
3.19 Year 2000 Compliance 14
3.20 Environmental Matters 15
3.21 Disclosure 16
4. Representations and Warranties of the Stockholder 17
4.1 Organization 17
4.2 Authorization 17
4.3 Investment Representations 17
4.4 Agreement Not in Breach of Certain Instruments 18
5. Representations and Warranties of the Acquiror and Acquisition 18
5.1 Organization 18
5.2 Authority 19
5.3 Brokerage 19
5.4 Agreement Not in Breach of Certain Instruments 19
5.5 Capitalization 19
5.6 SEC Documents; Acquiror Financial Statements 20
5.7 No Material Adverse Change 20
5.8 Disclosure 20
5.9 Litigation and Claims 20
5.10 Investment Representations 21
5.11 Acquisition 22
6. Covenants and Agreements of the Company and the Stockholder 22
6.1 Current Information 22
6.2 Consents 22
6.3 Business Operations 22
6.4 Covenant Not to Compete 23
6.5 Exclusive Dealings 25
6.6 Lien Release 25
6.7 Discharges 25
7. Covenants and Agreements of the Acquiror 25
7.1 Current Information 25
7.2 Consent to Pledge 25
7.3 Consents 25
8. Conditions to Obligations of the Stockholder and the Company 26
8.1 Correctness of Representations and Warranties 26
8.2 Performance of Covenants and Agreements 26
8.3 Additional Closing Documents 26
8.4 No Legal Bar 26
8.5 Opinion of Counsel for Acquiror 26
9. Conditions to Obligations of Acquiror and Acquisition 27
9.1 Correctness of Representations and Warranties 27
9.2 Performance of Covenants and Agreements 27
9.3 Additional Closing Documents 27
9.4 No Legal Bar 27
9.5 Employment Agreements 28
9.6 Consents 28
9.7 Deliveries at Closing 28
9.8 Opinion of Counsel for the Company and the Stockholder 29
10. Indemnification 29
10.1 Indemnification Provisions for Benefit of Acquiror and Surviving Corporation 29
10.2 Indemnification Provisions for Benefit of the Stockholder 30
10.3 Claims and Defense by the Indemnifying Party 31
10.4 Notice 32
10.5 Setoff 32
10.6 Limitation on Damages 32
10.7 Right to Remediate 32
11. Termination 32
11.1 Termination 33
11.2 Effect of Termination; Remedies 33
12. Miscellaneous Provisions 33
12.1 Construction 33
12.2 Notices 33
12.3 Assignment 34
12.4 Amendments and Waivers 34
12.5 Survival 35
12.6 Attorneys' Fees 35
12.7 Binding Nature of Agreement 35
12.8 Expenses 35
12.9 Entire Agreement 35
12.10 Severability 36
12.11 Counterparts 36
12.12 Public Announcements 36
12.13 Section Headings 36
12.14 Best Efforts; Further Assurances; Cooperation 36
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EXHIBITS
A - Form of Convertible Debenture
B - Promissory Note
C-1 - Employment Agreement of ▇▇▇▇ ▇▇▇▇▇▇▇▇
C-2 - Employment Agreement of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
C-3 - Employment Agreement of ▇▇▇ ▇▇▇▇▇▇▇▇▇
C-4 - Employment Agreement of ▇▇▇ ▇▇▇▇▇▇ D - Opinion of Acquiror's
Counsel E - Opinion of Counsel for the Company and the Stockholder
SCHEDULES
3.1 Organization and Qualification
3.2 Capitalization and Share Ownership
3.3(a) Financial Statements
3.3(c) Assets and Liabilities
3.3(d)(i) Dividends, Distributions and Payments of Indebtedness
3.3(d)(ii) Compensation
3.6(b) Mortgages, Liens, Encumbrances, Etc., on Assets
3.6(d) Description of Leased Real Property
3.6(e) Intangible Personal Property
3.8(a) Contracts and Other Instruments
3.8(b) Defaults under Contracts; Consents
3.8(c) Proposals and Claims
3.9(a) Labor and Employment Agreements
3.9(b) Employment Agreements
3.11(a) Officers, Directors and Employees; Compensation
3.11(b) Indebtedness to and from Officers, Directors and Employees
3.14 Inventories
3.15 Liabilities not Reflected or Reserved Against on Balance Sheet
3.16 Brokerage
3.18 Bank Accounts
3.19(b) Year 2000 Assurances
3.19(d) Steps Taken Toward Year 2000 Compliance; Third Party Compliance
3.20 Environmental Matters
3.21 Disclosure
4.2(a) Lien Release
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of
April 15, 1999, by and among MICROGRAFX, INC., a Texas corporation (the
"Acquiror"), INTERCAP ACQUISITION, INC., a Delaware corporation and wholly owned
subsidiary of Acquiror ("Acquisition"), INTERCAP GRAPHICS SYSTEMS, INC., a
Delaware corporation (the "Company"), and INTERGRAPH CORPORATION, a Delaware
corporation and the sole stockholder of the Company (the "Stockholder").
R E C I T A L
Acquiror, Acquisition, the Company and the Stockholder desire to cause
Acquisition to merge with and into the Company in accordance with a certificate
of merger (the "Certificate"), pursuant to the Delaware General Corporation Law
(the "DGCL").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recital and the
covenants and agreements contained herein, the parties agree as follows:
1. Transactions on or Prior to the Closing Date.
1.1 The Merger.
(a) Subject to the terms and provisions of this Agreement, and
in accordance with the DGCL, at the Effective Time (as defined in Section
1.1(e)) Acquisition shall be merged with and into the Company (the "Merger").
The Company shall be the surviving corporation of the Merger (sometimes called
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of Delaware. At the Effective Time, the separate corporate
existence of Acquisition shall cease.
(b) At the Effective Time, the Merger shall have the effects
provided for in this Agreement and in the DGCL.
(c) In connection with the filing of the Certificate, the
Certificate of Incorporation and Bylaws of the Company as respectively existing
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until amended in the
manner provided by law. The Certificate of Incorporation of the Company is not
amended by this Agreement.
(d) The board of directors, the committees and members of the
board, and the officers of Acquisition serving immediately prior to the
Effective Time shall be the board of directors of the Surviving Corporation, and
the committees and members of the board and the officers of the Surviving
Corporation.
(e) The Merger shall become effective when the Certificate,
properly executed, together with any other documents required by law to
effectuate the Merger, shall have been filed with the Secretary of State of the
State of Delaware in accordance with the DGCL. The date and time at which the
Merger shall become effective is herein referred to as the "Effective Time."
(f) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any further assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect or confirm of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right to Acquisition or the Company, as the
case may be, acquired or to be acquired by reason of, or as a result of, the
Merger, or (ii) otherwise to carry out the purposes of this Agreement, each of
Acquisition and the Company and its respective proper officers and directors
shall be deemed to have granted hereby to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to, and the possession of such property or rights
in, the Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and the proper officers and directors of the Surviving Corporation
are hereby fully authorized in the name of Acquisition or the Company or
otherwise to take any and all such action.
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1.2 Conversion of Stock.
(a) Merger Consideration. At the Effective Time, by virtue of
the Merger and without any further action on the part of the Stockholder, the
Stockholder shall be entitled to receive (i) $3,853,000 in cash (the aggregate
amount of such cash to be paid to the Stockholder at the Closing (as defined in
Section 2(a)) is hereafter referred to as the "Closing Payment") plus (ii) the
Future Payment (as provided for in Section 1.3 hereof); plus (iii) a convertible
debenture in the original principal amount of $5,797,000 (the "Debenture") in
substantially the form of Exhibit A hereto. Such rights to receive the Closing
Payment, the Future Payment and the Debenture are referred to herein as the
"Merger Consideration". At the Effective Time, upon the surrender by the
Stockholder to the Acquiror of the certificates and other instruments
representing all of the shares of capital stock of the Company, par value $.10
per share (the "Shares") duly endorsed to Acquiror, the Acquiror shall deliver
to the Stockholder the Closing Payment, the Debenture and the promissory note
referred to in Section 1.3.
(b) Conversion of Acquisition Common Stock. At the Effective
Time, by virtue of the Merger, and without any action on the part of the holders
thereof, each share of Acquisition's common stock outstanding immediately prior
to the Effective Time shall be converted into one share of common stock of the
Surviving Corporation.
(c) Cancellation of Shares. The Merger Consideration for which
the Shares shall have been converted pursuant to this Section 1 shall be deemed
to have been paid in full satisfaction of all rights pertaining to such Shares.
At the Effective Time, the Shares shall be, by virtue of the Merger and without
any action on the part of the holders thereof, canceled.
(d) No Further Transfers. After the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the
Company of the shares of the Company that were outstanding immediately prior to
the Effective Time and that are to be converted into the Merger Consideration,
as provided in this Section 1.2.
1.3 Future Payment. On August 31, 1999, Acquiror hereby
covenants and agrees, as part of the Merger Consideration, to pay to the
Stockholder $2,500,000, together with interest thereon (herein referred to as
the "Future Payment"). The obligation to make such Future Payment shall be
evidenced by a promissory note of Acquiror in substantially the form of Exhibit
B hereto.
1.4 Consent of the Stockholder to Merger. The Stockholder
hereby consents to the adoption of this Agreement and the approval of the Merger
on the terms set forth herein and pursuant to the DGCL, and agrees that such
adoption shall not be repealed or modified. The Stockholder hereby waives any
dissenters' rights it may have under the DGCL. The Company acknowledges receipt
at its principal place of business of this Agreement including the foregoing
consent. This Agreement shall be binding upon the Stockholder upon its execution
and delivery.
2. Closing.
(a) Subject to the terms and provisions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place (a) at the offices of Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional
Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m.
(local time) on the first business day immediately following the date on which
the last to be fulfilled or waived of the conditions set forth in Sections 8 and
9 shall be fulfilled or waived in accordance with the terms herewith (other than
conditions with respect to actions the respective parties hereto will take at
the Closing), or (b) at such other place, date or time as the parties may agree.
The date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
(b) Immediately following the Closing, the Company and
Acquisition shall execute and deliver to the Secretary of State of Delaware the
Certificate, as required by the DGCL, and the parties shall take such other and
further action as may be required by law to make the Merger effective.
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3. Representations and Warranties of the Company and the Stockholder.
The Company and the Stockholder, jointly and severally, represent and warrant to
Acquiror and Acquisition as follows:
3.1 Organization and Qualification. The Company and each of
its Subsidiaries (as defined below) is duly organized and validly existing as a
corporation in good standing under the laws of Delaware, with the corporate
power to own, lease and operate its properties and assets and to carry on its
business in the manner in which such business is now being conducted. The
Company and each of its Subsidiaries is duly qualified to transact business,
and, except as set forth in Schedule 3.1, is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification. True and complete copies of the Certificate of Incorporation
and Bylaws, or other comparable charter documents, of the Company in effect on
the date hereof have been delivered to Acquiror and are attached to Schedule 3.1
hereto. Except as set forth on Schedule 3.1, the Company does not own or hold,
directly or indirectly, any debt or equity securities of, or have any interest
in, any corporation, partnership, joint venture or other business entity. For
purposes of this Agreement, "Subsidiary" means any corporation or other
organization whether incorporated or unincorporated of which at least a majority
of the securities or interests having by the terms thereof ordinary voting power
to elect at least a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by the Company or by any one or more
of its Subsidiaries, or by the Company and one or more of its Subsidiaries.
3.2 Capitalization.
(a) Schedule 3.2 attached hereto sets forth the authorized
capitalization of the Company and each of its Subsidiaries, the number of Shares
outstanding of the Company and the number of outstanding shares of capital stock
of each Subsidiary (the "Subsidiary Shares "), and the number of Shares and
Subsidiary Shares owned by the Stockholder as of the date hereof. No person or
entity, other than Stockholder, owns of record or beneficially any of the
outstanding shares of capital stock of the Company or its Subsidiaries. At the
Effective Time, all of the outstanding Shares of the Company will be owned of
record and beneficially by the Stockholder, as set forth in Schedule 3.2 hereto,
which will comprise all of the issued and outstanding capital stock of the
Company. All of the Shares and Subsidiary Shares are and will be validly issued
and outstanding, fully paid and nonassessable. Neither the outstanding Shares
nor the Subsidiary Shares are subject to or were issued in violation of any
preemptive rights. Each Share and each Subsidiary Share was issued in conformity
with applicable law and no party to whom such Shares and Subsidiary Shares were
issued nor any person claiming through any such party has any claim against the
Company in respect of any such issuance. There are no voting trusts or other
agreements or understandings to which the Company or the Stockholder is a party
with respect to the voting or disposition of the capital stock of the Company or
the Subsidiaries.
(b) Except as set forth in Schedule 3.2, there are no
outstanding subscriptions, options, rights, warrants, convertible securities or
other agreements or commitments ("Stock Rights") obligating the Company or any
Subsidiary to issue any authorized but unissued shares of capital stock of the
Company or any Subsidiary or to transfer from the treasury any additional shares
of capital stock or any securities convertible into, or exchangeable or
exercisable for, or otherwise evidencing a right to acquire, any shares of
capital stock of the Company or any Subsidiary, and no unissued shares of stock
are subject to any preemptive rights. No Stock Rights will be outstanding on the
Closing Date. There are no outstanding contractual obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock of or other ownership interest in the Company or any
Subsidiary.
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3.3 Financial Condition.
(a) The Company has furnished to the Acquiror the following
financial statements: (a) its unaudited consolidated financial statements for
the fiscal years ended 1996, 1997 and 1998, consisting of balance sheets as of
December 31, 1996, 1997 and 1998, and the related statements of operations,
statements of cash flows and statements of stockholders' equity (collectively
the "Annual Financial Statements"); and (b) its consolidated unaudited financial
statements for the two-month periods ending February 28, 1999, consisting of
unaudited balance sheets as of February 28, 1999 and the related statements of
operations, statements of cash flows and statements of stockholder equity for
such two-month period (the "Interim Financial Statements"). The Annual Financial
Statements and Interim Financial Statements are referred to collectively as the
"Financial Statements."
(b) The Financial Statements: (i) have been prepared in
accordance with the books and records of the Company; (ii) have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") throughout the periods covered, subject to (A) normal and recurring
year-end audit adjustments in the case of the Interim Financial Statements, and
(B) the absence of detailed notes customary for GAAP financial statements; (iii)
reflect and provide adequate reserves and disclosures with respect to all
liabilities of the Company, including all contingent liabilities, as of their
respective dates to the extent required by GAAP; and (iv) present fairly the
financial position and results of operations of the Company at and for the
fiscal periods ended on such dates.
(c) As of February 28, 1999, the Company has included in its
balance sheet as of February 28, 1999 certain assets, including (i) $560,234 in
cash and (ii) $514,119 of accounts receivable (such cash and accounts receivable
collectively referred to as the "Specified Assets"). As of February 28, 1999,
the Company has included in its balance sheet as of February 28, 1999 certain
liabilities, including (x) $114,021 in accounts payable and (y) accrued
compensation of $163,177 (such accounts payable and accrued compensation
collectively referred to herein as the "Specified Liabilities"). On the Closing
Date, the amount of the Specified Assets less the Specified Liabilities shall be
at least $797,155. It is understood by the parties hereto that this
representation is as to the total amount of Specified Assets and Specified
Liabilities and that the amounts specified in clauses (i), (ii), (x) and (y) of
this Section 3.3(c) may vary upward or downward between February 28, 1999 and
the Closing Date, provided that on the Closing Date, the Company and the
Stockholder jointly and severally represent that the Specified Assets shall
exceed the amount of Specified Liabilities by at least $797,155.
(d) Except for the transactions at the Closing specifically
provided for in this Agreement or as disclosed herein, since December 31, 1998,
there has not been:
(i) any declaration, setting aside for, or payment of, a dividend or any
distribution of assets of any kind whatsoever by the Company or any Subsidiary,
including any distribution in redemption of, or as the purchase price for, any
capital stock, or in discharge or cancellation, in whole or in part, of any
indebtedness, whether in payment of principal, interest or otherwise, owing to
the Stockholder, other than as set forth on Schedule 3.3(d)(i);
(ii) except as set forth on Schedule 3.3(d)(ii), any increase in the salary
or other compensation payable or to become payable to any officer, director or
employee of the Company or any Subsidiary, or the declaration, payment,
commitment or obligation of any kind for the payment of a bonus or other
additional salary compensation or benefit, other than normal cost-of-living and
normal merit increases totaling not more than 5% per annum in the ordinary
course of business consistent with past practice to employees and other than as
previously disclosed to the Acquiror in writing;
(iii) any entry into any agreement, commitment or transaction by the
Company or any Subsidiary not in the ordinary and usual course of business;
(iv) any Material Adverse Effect (as hereinafter defined);
(v) any damage, destruction or loss, whether or not covered by insurance,
having a Material Adverse Effect;
(vi) any material alteration in the manner in which the Company or any
Subsidiary keeps its books, accounts or records or in the accounting methods,
principles or practices therein reflected;
(vii) except for borrowings in the ordinary and usual course of business
consistent with past practices, the incurrence or issuance of any indebtedness
for borrowed money or any commitment to borrow money or any guaranty, direct or
indirect, of indebtedness of others, or any prepayment of long-term debt by the
Company or any Subsidiary;
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(viii) a termination or, to the best knowledge of the Company or the
Stockholder, a threatened termination, or a substantial modification of the
relationship of the Company or any Subsidiary with a customer or supplier or the
occurrence of any event affecting any product or process used by the Company or
any Subsidiary having, in any such case or in the aggregate, a Material Adverse
Effect;
(ix) any acquisition or lease of or commitment to acquire or lease any
realty by the Company or any Subsidiary, or any item of personal property in
excess of $50,000, other thaninventory in the ordinary course of business; or
(x) any change in the Certificate of Incorporation or other charter
document or in the Bylaws or other governing documents of the Company or any
Subsidiary, or in the authorized, issued or outstanding capital stock of the
Company or any Subsidiary.
As used in this Agreement, "Material Adverse Effect" means any change in or
effect that is or is reasonably likely to be materially adverse to the business,
operations, properties, financial condition, assets or liabilities of the
Company, its Subsidiaries or the Surviving Corporation.
3.4 Tax Matters. Within the times (including extensions) and
in the manner prescribed by law, the Company and its Subsidiaries have filed all
federal, state, local and foreign returns for Taxes (as defined below)
("Returns") required to be filed in any jurisdiction (including, without
limitation, informational returns) and such Returns are complete, true and
correct in all respects; all Returns filed by the Company and its Subsidiaries
complied in all respects with the tax laws, rules and regulations, as presently
interpreted, applicable to such Returns; neither the Company nor any Subsidiary
has waived or extended any statute of limitations relating to the assessment of
any federal, state, county, local or foreign income, franchise or other taxes
("Taxes"); and no audit or examination of any of the Company's or the
Subsidiaries' Returns is currently in progress or, to the best of the knowledge
of the Company or the Stockholder, threatened or has occurred in the past. All
Taxes required to be paid by the Company and its Subsidiaries have been paid on
or before their respective due dates.
3.5 Litigation and Claims.
(a) Litigation Pending or Threatened. There is no action, suit, arbitration
proceeding, including any grievance proceeding, or investigation pending or, to
the best knowledge of the Company and the Stockholder, threatened, before any
court, tribunal, panel, master or governmental agency, authority or body in
which the Company or any Subsidiary is a party or to which their businesses or
properties are subject, nor is the Company or any Subsidiary bound by any valid
injunction or order of any court or tribunal.
(b) Violation of Law. Neither the Company nor any Subsidiary is in
violation of any provision of any law, decree, order or regulation applicable to
the Company or any Subsidiary or businesses or properties and the Company and
its Subsidiaries have all federal, state, local and foreign licenses, permits
and other governmental authorizations required in the conduct of their
businesses and the operation of their properties. Other than the filing of the
Certificate, no consent of any governmental agency or body issuing any of such
permits, licenses or other governmental authorizations, or otherwise having
jurisdiction over the Company, the Subsidiaries, their businesses, properties
and operations, is required in order to permit the execution, delivery or
performance of this Agreement by the Company or the Stockholder, the
consummation of the transactions contemplated hereby or the sale, transfer and
delivery of the Shares or the continuation of the Company's or its Subsidiaries'
businesses and operations after the Closing. Neither the Stockholder nor the
Company is a party to any consent decree issued by any governmental agency,
authority or body relating to the Company's business.
(c) Unlawful Practices. Neither the Company nor the Stockholder or, to the
best knowledge of the Company and the Stockholder, any stockholder, officer,
employee or agent of the Company or its Subsidiaries or any person acting on
their behalf has, directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, competitor or governmental employee
or official or has engaged in any other practice or received or retained any
such gift or similar benefit, that in any case would subject the Company or its
Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or that would be grounds for termination or
modification of any material contract, license or other instrument to which the
Company or any Subsidiary is a party.
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3.6 Properties and Assets.
(a) The Company and its Subsidiaries own or otherwise have the right to use
all of the properties and assets, tangible and intangible, now used in and
material to the operation of their businesses. Neither the Company nor any
Subsidiary owns any real property.
(b) The Company and each of its Subsidiaries has good and marketable title
to, and at the Effective Time will have good and marketable title to, all of the
assets reflected in the Interim Financial Statements, including tangible
personal property, except the assets and inventory disposed of since the date of
such Interim Financial Statements in the ordinary course of business consistent
with past practice, free and clear of all mortgages, liens, encumbrances,
leases, equities, claims, charges, easements, rights-of-way, covenants,
conditions and restrictions, except as set forth in Schedule 3.6(b), and except
for:
(i) liens, if any, for personal property taxes not delinquent; and
(ii) mechanics' and other statutory liens securing payment of not more
than $50,000 incurred in the ordinary and usual course of business for
services rendered or goods furnished to the Company.
(c) All items of tangible personal property of the Company and its
Subsidiaries that are material to the operation of the business of the Company
and its Subsidiaries are in good operating condition and repair (normal wear and
tear excepted), and the Company's and its Subsidiaries' maintenance practices
conform in general to those customary in its industry.
(d) Schedule 3.6(d) attached hereto contains a description of all real
property leased to, in the possession of, or used in the businesses of, the
Company and its Subsidiaries. True and complete copies of all real property
leases have been delivered to the Acquiror by the Company. The Company and its
Subsidiaries are in compliance with the terms and conditions of such leases and
have the right to peaceful enjoyment of the leased premises.
(e)(i) The Company and each of its Subsidiaries owns, or is licensed or
otherwise possesses legally sufficient rights to use, all patents, trademarks,
trade names, service marks, copyrights, maskworks and any applications therefor,
technology, know-how, computer software programs or applications (in both source
code and object code form) and tangible or intangible proprietary information or
material that (x) are used in any of the Company's or Subsidiaries' products, or
(y) are otherwise used in and material to the businesses of the Company and its
Subsidiaries as currently conducted. Schedule 3.6(e) lists all current patents,
registered and unregistered copyrights, maskworks, trade names and any
applications therefor owned by the Company and its Subsidiaries (the
"Intellectual Property Rights"), and specifies the jurisdictions in which each
such Intellectual Property Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners. Schedule 3.6(e) includes and specifically identifies all third-party
patents, trademarks, copyrights (including software) and maskworks (the "Third
Party Intellectual Property Rights") which are incorporated in, are, or form a
part of, any Company or Subsidiary product. Schedule 3.6(e) lists (i) all
licenses, sublicenses and other agreements as to which the Company or any
Subsidiary is a party and pursuant to which any person is authorized to use any
of the Company's or any Subsidiaries' Intellectual Property Rights, or any trade
secret to the Company or its Subsidiaries; and (ii) all licenses, sublicenses
and other agreements as to which the Company or any Subsidiary is a party and
pursuant to which the Company or any Subsidiary is authorized to use any Third
Party Intellectual Property Rights, or other trade secret of a third party in or
as any product, and includes the identity of all parties thereto, a description
of the nature and subject matter thereof and the term thereof. There are, at the
date hereof, no known defects in any of the Company's or any Subsidiaries'
products that would impact the ability of any such product to operate in
accordance with its intended purpose, other than "bugs" typical of computer
software products that can be fixed without any material expenditures.
13
(ii) Neither the Company nor any Subsidiary is, nor will they be as a
result of the execution and delivery of this Agreement or the performance
of the Company's obligations hereunder, in violation of any license,
sublicense or agreement described in Schedule 3.6(e). Except as set forth
in Schdule 3.6(e), claims with respect to the Company's or any
Subsidiaries' Intellectual Property Rights, any trade secret material to
the Company or its Subsidiaries or Third Party Intellectual Property Rights
to the extent arising out of any use, reproduction or distribution of such
Third Party Intellectual Property Rights by or through the Company or its
Subsidiaries, are currently pending or, to the knowledge of the Company,
are threatened by any person, nor does the Company know of any valid
grounds for any bona fide claims (i) to the effect that the manufacture,
sale, licensing or use of any product as now used, sold or licensed or
proposed, as of the date hereof, for use, sale or license by the Company
infringes on any copyright, maskwork, patent, trademark, service ▇▇▇▇ or
trade secret; (ii) against the use by the Company or its Subsidiaries of
any trademarks, trade names, trade secrets, copyrights, maskworks, patents,
technology, know-how, or computer software programs and applications used
in the Company's or its Subsidiaries' businesses as currently conducted or
as proposed, as of the date hereof, to be conducted by the Company or its
Subsidiaries; (iii) challenging the ownership, validity or effectiveness of
any of the Company's or the Subsidiaries' Intellectual Property Rights or
other trade secret material to the Company or its Subsidiaries; or (iv)
challenging the Company's or the Subsidiaries' license or legally
enforceable right to use of the Third Party Intellectual Rights. All
material patents, registered trademarks, maskworks and copyrights held by
the Company and its Subsidiaries are valid and subsisting. To the Company's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Company's or the Subsidiaries' Intellectual
Property by any third party, including any employee or former employee of
the Company or any of its Subsidiaries. Except as set forth in Schedule
3.6(e), neither the Company nor any Subsidiary (i) has been sued or charged
in writing as a defendant in any claim, suit, action or proceeding which
involves a claim or infringement of trade secrets, any patents, trademarks,
service marks, maskworks or copyrights and which has not been finally
terminated prior to the date hereof or been informed or notified by any
third party that the Company or its Subsidiaries may be engaged in such
infringement or (ii) has no knowledge of any infringement liability with
respect to, or infringement by, the Company or any of its Subsidiaries of
any trade secret, patent, trademark, service ▇▇▇▇, maskwork or copyright of
another.
(iii) Each employee of the Company and each Subsidiary has executed or
is bound by a confidentiality, invention and copyright agreement with the
Company or the Subsidiary in the forms previously delivered to Acquiror.
3.7 [Intentionally Deleted]
3.8 Contracts and Other Instruments.
(a) Schedule 3.8(a) sets forth a list of each contract, lease, license
agreement, distributor agreement, purchase order, lease, license, indenture or
commitment, written or oral, including all amendments or modifications thereof,
to which the Company or any Subsidiary is a party or by which any of their
assets are bound, which requires future expenditures by the Company or any
Subsidiary in excess of $25,000 or which provides future revenues to the Company
in excess of $25,000. The contracts, license agreements, distributor agreements,
purchase orders, leases, licenses, indentures or commitments that are required
to be identified in Schedule 3.8(a) are referred to as the "Contracts." True and
complete copies of each of the Contracts, or where they are oral, true and
complete written summaries thereof, have been delivered or made available to the
Acquiror by the Company. All licenses that the Company and its Subsidiaries has
granted to third parties are in the forms of the license agreements furnished by
the Company to Acquiror.
14
(b) Except as set forth in Schedule 3.8(b) attached hereto, there has not
been any breach of, nor has there occurred any default under any, Contract on
the part of the Company, any Subsidiary or, to the best knowledge of the Company
and the Stockholder, on the part of the other parties thereto, and to the
knowledge of the Company no event has occurred which with the giving of notice
or the lapse of time, or both would constitute a default under any Contract of
the Company or any Subsidiary or under which the Company or any Subsidiary is or
may be bound. Except as set forth in Schedule 3.8(b), no consent of any party to
any Contract is required in order to permit the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated hereby, nor will the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby, including
the Merger, result in a breach of any of the terms and provisions of, or
constitute a default under, or conflict with, or result in a modification of, or
give any third party the right to terminate, cancel, accelerate or increase the
rate of interest payable under, any liabilities, obligations, rights or benefits
under, any Contract of the Company or any Subsidiary.
3.9 Labor and Employment Agreements.
(a) Schedule 3.9(a) attached hereto contains a description of each plan,
contract or arrangement under which fringe benefits (including, but not limited
to, vacation plans or programs, sick leave plans or programs and related
benefits) are afforded to employees of the Company and its Subsidiaries. Neither
the Company nor any Subsidiary is a party to any collective bargaining agreement
or other labor agreement.
(b) Schedule 3.9(b) attached hereto contains descriptions of each
employment agreement, including any severance arrangements, between the Company
or its Subsidiaries and any of their employees.
(c) Each of the Company and each Subsidiary has withheld and paid to the
appropriate governmental authorities or is withholding for payment not yet due
to such authorities all amounts required to be withheld from its employees and
is not liable for any arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing.
(d) All accrued obligations of the Company and its Subsidiaries (whether
arising by operation of law, by contract or past custom) for payments by the
Company and its Subsidiaries to trusts or other funds or to any governmental
agency with respect to unemployment compensation benefits, social security
benefits or any other benefits for employees of the Company and its Subsidiaries
with respect to employment of those employees have been paid or adequate
accruals therefor have been made in the Financial Statements for obligations
accrued through the date of such Financial Statements, and in the books and
records of the Company and its Subsidiaries for obligations accruing after that
date.
(e) All reasonably anticipated material obligations of the Company and its
Subsidiaries (whether arising by operation of law by contract, by past custom or
otherwise) for salaries, vacation and holiday pay, sick pay, bonuses and other
forms of compensation payable to the officers, directors or other employees of
the Company and its Subsidiaries in respect of the services rendered by any of
them have been paid or adequate accruals therefor have been made in the
Financial Statements for obligations accrued through the date of such Financial
Statements, and in the books and records of the Company and its Subsidiaries for
obligations accruing thereafter.
15
3.10 Employee Benefit Plans. Neither the Company nor its
Subsidiaries maintain or contribute (other than for payments made to Stockholder
relating to Stockholder plans in which employees of the Company and its
Subsidiaries participate) to any "employee benefit plan" (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended).
Neither the Company nor its Subsidiaries maintain or contribute (other than for
payments made to Stockholder relating to Stockholder plans in which employees of
the Company and its Subsidiaries participate) to any retirement, termination,
severance, benefit or other similar plans or agreements for employees and former
employees of the Company or its Subsidiaries .
3.11 Officers, Directors and Employees; Compensation of and Indebtedness to
and from Officers, Directors, Stockholders and Employees.
(a) Schedule 3.11(a) attached hereto sets forth a true and complete list of
the names of, the offices held by the officers, directors and employees of the
Company and its Subsidiaries, and the compensation paid to the officers and
directors of the Company and its Subsidiaries.
(b) Except as set forth on Schedule 3.11(b), neither the Company nor any
Subsidiary has any financial obligation or is otherwise indebted to the
Stockholder or to any person who is an officer, director, or employee of the
Company or any Subsidiary, or to any spouse, child or relative of any such
person or to any entity controlled directly or indirectly by such person, in any
amount whatsoever other than, in the case of officers if employees, for
compensation for services rendered since the start of the current pay period of
the Company or its Subsidiaries generally utilized by their employees and for
business expenses, nor is the Stockholder or any director of the Company or its
Subsidiaries, or any spouse, child or other relative of such person, indebted to
the Company or any Subsidiary except for reimbursement of advances made in the
ordinary course of business.
3.12 Agreement Not in Breach of Certain Instruments. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate or conflict with any provision of
the Certificate of Incorporation or Bylaws, or other comparable charter
documents of the Company or its Subsidiaries or result in a breach of any of the
terms and provisions of, or constitute a violation or default (or an event that
with notice or lapse of time, or both, would constitute a default) under, or
conflict with, (a) any Contract, mortgage, indenture, license, permit, trust or
other instrument to which the Company is or may be bound, (b) any judgment,
decree, order or award of any court, governmental body or arbitrator to which
the Company or its Subsidiaries is a party, or (c) any law, rule or regulation
applicable to the Company or its Subsidiaries.
3.13 Accounts and Notes Receivable. Except for the Note
Receivable from the Stockholder in the Financial Statements (in the amounts of
$1,600,000), the accounts and notes receivable of the Company and its
Subsidiaries existing on the date of the Financial Statements arose, and those
existing on the Closing Date will have arisen, out of sales in the ordinary
course of business and represent bona fide indebtedness of the applicable
account debtor and, to the extent constituting part of the Specified Assets on
the Closing Date, will be collectible in full. The accounting reserves reflected
on the books of the Company are adequate and were calculated consistent with
past practice applied consistently with the most recent Interim Financial
Statements.
3.14 Inventories. The inventories set forth in the Interim
Financial Statements have been valued in accordance with GAAP applied
consistently with the most recent Annual Financial Statements. Physical
adjustments since the date of the Interim Financial Statements have been
correctly recorded in the ordinary course of business. The inventories of the
Company and its Subsidiaries are usable in the ordinary course of business of
the Company and its Subsidiaries at a value that is no less than the value at
which such inventories are carried by the Company and its Subsidiaries. Except
as set forth in Schedule 3.14, the inventory is adequate for the conduct of the
business of the Company and its Subsidiaries and inventory levels are not in
excess of normal operating requirements of the Company and its Subsidiaries.
16
3.15 No Undisclosed Liabilities. Except as and to the extent
disclosed in Schedule 3.15 and except as and to the extent specifically
reflected or reserved against in the February 28, 1999 Financial Statements,
neither the Company nor any Subsidiary has any Liabilities, except for such
Liabilities that would not in the aggregate have a Material Adverse Effect.
"Liabilities" means any liability or obligation of any nature, whether direct,
indirect, absolute, accrued or contingent and whether due or to become due
(including, without limitation, any liability for Taxes and interest, penalties
and other charges payable with respect to any such liability or obligation).
3.16 Brokerage. Neither the Company, its Subsidiaries, the
Stockholder nor any affiliate, director, officer or employee of the Company or
its Subsidiaries has dealt with any finder, broker, investment banker or
financial advisor in connection with any of the transactions contemplated by
this Agreement or the negotiations looking toward the consummation of such
transactions which might as a result reasonably give rise to the obligation to
pay a fee therefor except with respect to amounts due to ▇▇▇▇ Advisors, Inc.,
which shall be paid by Stockholder and not the Company.
3.17 Authorization of Agreement.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
the board of directors and stockholders of the Company, and no other proceedings
on the part of the Company or the Stockholder are necessary in order to
authorize or effectuate the transactions contemplated hereby.
(b) This Agreement and all other agreements herein contemplated to be
executed in connection herewith by the Company have been (or upon execution will
have been) duly executed and delivered by the Company, and constitute binding
obligations, enforceable against the Company in accordance with their respective
terms. The Company and its Subsidiaries are not, and immediately prior to the
Effective Time neither the Company nor any Subsidiary will be a party to,
subject to or bound by any provision of its Certificate of Incorporation or
Bylaws, or other comparable charter document, or any agreement or judgment,
order, writ, prohibition, injunction or decree of any court or other
governmental body that would prevent the execution and delivery of, or the
consummation of the transactions contemplated by, this Agreement and the Merger.
3.18 Bank Accounts. Schedule 3.18 attached hereto contains an
accurate and complete list of: (a) the names and addresses of each bank in which
the Company and each of its Subsidiaries has an account; (b) the account number
of such accounts; and (c) the authorized signatories and balances for such
accounts as of a recent date.
17
3.19 Year 2000 Compliance.
(a) All products and services offered or performed by the Company and its
Subsidiaries or any predecessor-in-interest of the Company and its Subsidiaries
are Year 2000 Compliant (as defined below).
(b) Schedule 3.19(b) attached hereto lists all customer agreements and
other forms of correspondence in which the Company or any Subsidiary has
furnished (or could be deemed to have furnished) written assurances as to the
performance or functionality, or both, of the Company's or the Subsidiaries'
products, services or systems on or after any specific date, including September
9, 1999 and January 1, 2000. The Company has previously provided Acquiror with
true, correct and complete copies of any such agreements or forms of
correspondence.
(c) All of the Company's and Subsidiaries' products, computer, information
technology or other systems owned, licensed, distributed, used or relied upon by
the Company and its Subsidiaries, including hardware, software and firmware, and
any interfaces among the elements of such systems are Year 2000 Compliant.
(d) Schedule 3.19(d) sets forth an accurate summary of all steps taken by
the Company and its Subsidiaries to verify that all: (i) vendors of products or
services to the Company and its Subsidiaries, and its products, services and
operations, (ii) customers of the Company and its Subsidiaries identified on
Schedule 3.19(d), and (iii) other third parties with which the Company or any
Subsidiary has business relations are Year 2000 Compliant. To the knowledge of
the Company and the Stockholder, except as set forth on Schedule 3.19(d), all of
the Company's and its Subsidiaries' vendors and customers and their respective
products, services and operations used by the Company or any of its Subsidiaries
are Year 2000 Compliant, except for any noncompliances that will not have a
Material Adverse Effect on the Company or its Subsidiaries, any acquired asset
or the Acquiror's conduct of the Company's business at any time after the
Closing.
(e) The Company has furnished Acquiror, or made available to Acquiror, with
a true, correct and complete copy of all internal investigations, test result
memoranda, budget plans, forecasts or reports concerning the Year 2000
Compliance of the products, services, operations, systems, supplies, and
facilities of the Company and the Company's vendors or customers.
(f) As used in this Agreement, the term "Year 2000 Compliant" means that
(1) the products, services, or other item(s) at issue accurately process,
provide and/or receive all date/time data (including calculating, comparing,
sequencing, processing, and outputting) within, from, into, and between
centuries (including the twentieth and twenty-first centuries and the years 1999
and 2000), including leap year calculations, and (2) neither the performance nor
the functionality of, nor the provision of the products, services, and other
item(s) at issue will be affected by any dates/times prior to, on, after, or
spanning January 1, 2000. The design of the products, services, and other
item(s) at issue to ensure compliance with the foregoing warranties and
representations includes proper date/time data century recognition and
recognition of 1999 and 2000, calculations that accommodate single century and
multi-century formulae and date/time values before, on, after, and spanning
January 1, 2000, and date/time data interface values that reflect the century,
1999, and 2000. In particular, but without limitation: (i) no value for current
date/time will cause any error, interruption, or decreased performance in or for
such product(s), service(s), and other item(s); (ii) all manipulations of date
and time related data (including calculating, comparing, sequencing, processing,
and outputting) will produce correct results for all valid dates and times when
used independently or in combination with other products, services, or items;
(iii) date/time elements in interfaces and data storage will specify the century
to eliminate date ambiguity without human intervention, including leap year
calculations; (iv) where any date/time element is represented without a century,
the correct century will be unambiguous for all manipulations involving that
element; (v) authorization codes, passwords, and zaps (purge functions) will
function normally and in the same manner during, prior to, on and after January
1, 2000, including the manner in which they function with respect to expiration
dates and CPU serial numbers; and (vi) the supply of the products, services, and
other item(s) will not be interrupted, delayed, decreased or otherwise affected
by the advent of the year 2000.
18
3.20 Environmental Matters. Except for matters as set forth on Schedule
3.20:
(a) All of the properties, operations and activities of the Company and its
Subsidiaries comply with all applicable Environmental Laws (as defined below).
(b) None of the Company, its Subsidiaries, their properties and operations
are subject to any existing, pending or, threatened action, suit, investigation,
inquiry or proceeding by or before any governmental authority or third party
under any Environmental Law.
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed by the Company under any Environmental Law in
connection with any aspect of the businesses of the Company or its Subsidiaries,
including without limitation those relating to the treatment, storage, disposal
or release of a hazardous substance or solid waste, have been duly obtained or
filed and will remain valid and in effect after the Merger, and the Company and
its Subsidiaries are in compliance with the terms and conditions of all such
notices, permits, licenses and similar authorizations.
(d) The Company and each Subsidiary has satisfied and is currently in
compliance with all financial responsibility requirements applicable to its
operations and imposed by any governmental authority under any Environmental
Law, and neither the Company nor any Subsidiary has received any notice of
noncompliance with such financial responsibility requirements.
(e) There are no physical or environmental conditions existing on any
property of the Company or its Subsidiaries or resulting from the Company's
operations or activities with respect to any of the Company's or its
Subsidiaries' properties, past or present, at any location, that would give rise
to any on-site or off-site investigation, remedial, response, contribution or
similar obligations under any Environmental Law.
(f) Since the effective date of the relevant requirements of applicable
Environmental Laws, all hazardous substances or solid wastes generated by the
Company and its Subsidiaries or used in connection with any of their properties
or operations have to the extent required by Environmental Laws been transported
only by carriers authorized under Environmental Laws to transport such
substances and wastes, and disposed of only at treatment, storage and disposal
facilities authorized under Environmental Laws to treat, store or dispose of
such substances and wastes, such carriers and facilities have been and are
operating in compliance with such authorizations, are not subject to any
material unperformed investigative, remedial, response, contribution or similar
obligations under, and are not the subject of any existing, pending or overtly
threatened action, investigation or inquiry by an governmental authority or
third party in connection with, an Environmental Laws.
(g) There has been no exposure of any person or property to hazardous
substances, solid waste or any pollutant or contaminant, nor has there been any
release of hazardous substances, solid waste or any pollutant or contaminant
into the environment by the Company or its Subsidiaries in connection with their
properties or operations.
(h) The Company has or will make available to Acquiror all internal and
external environmental audits and studies and all correspondence on substantial
environmental matters in the possession of the Company and its Subsidiaries
relating to any of the current or former properties or operations of the Company
and its Subsidiaries.
For purposes of this Agreement, "Environmental Laws " shall mean: any and all
laws, rules, orders, regulations, statutes, ordinances, guidelines, codes or
decrees of the United States or any other nation, or any state, local, municipal
or other governmental authority or other laws (including common law) regulating,
relating to or imposing liability or standards of conduct concerning protection
of human health or the environment, as now or may at any time hereafter be in
effect. For purposes of this Agreement, "Hazardous Substances" shall mean: (i)
any "hazardous waste" as defined by the Resource Conservation and Recovery Act
of 1976, as amended from time to time, and regulations promulgated thereunder;
(ii) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
and regulations promulgated thereunder; (iii) any oil, petroleum products and
their byproducts; and (iv) any substance which is or becomes regulated by
Environmental Laws.
19
3.21 Disclosure. Except as contemplated by or disclosed in
this Agreement, and in Schedule 3.21, there is no fact or circumstance known to
the Company and/or the Stockholder that reasonably would be expected to result
in any Material Adverse Effect. None of the statements or information contained
in any of the representations, warranties or covenants of the Company and/or the
Stockholder set forth in this Agreement, or in the Schedules and Exhibits to be
furnished hereunder, contains or will contain any misstatement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
4. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants to Acquiror and Acquisition as follows:
4.1 Organization. The Stockholder is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power to own, lease and operate its properties
and assets and to carry on its business in the manner in which such business is
now being conducted.
4.2 Authorization.
(a) The Stockholder is, and at the Effective Time will be, the holder of
all of the outstanding capital stock of the Company, free and clear of all
covenants, conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, security agreements, options, claims and restrictions whatsoever
(other than those which will be released and discharged at the Effective Time as
listed on Schedule 4.2(a)). The Stockholder has the unrestricted power, right,
capacity and authority to enter into and consummate the transactions
contemplated by this Agreement, and at the Effective Time the Stockholder will
have the power, right, capacity and authority to sell, transfer and deliver the
Shares in accordance with the terms, covenants and conditions of this Agreement.
(b) This Agreement and all other agreements herein contemplated to be
executed in connection herewith by the Stockholder have been (or upon execution
will have been) duly executed and delivered by the Stockholder, have been duly
authorized by all necessary corporate action on the part of the Stockholder and
constitute binding obligations of the Stockholder, enforceable in accordance
with their respective terms; and (ii) the Stockholder is not, and immediately
prior to the Effective Time the Stockholder will not be, a party to, subject to
or bound by any provision of the its certificate of incorporation or bylaws, or
any agreement or judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body that would prevent the execution and delivery,
or consummation, of the transactions contemplated by, this Agreement and the
Merger.
4.3 Investment Representations.
(a) The Stockholder is acquiring the Debenture and the shares of common
stock, part value $0.01 per share of Acquiror (the "Common Stock"), if any, to
be issued upon conversion of the Debenture, for its own account for investment
and not with a view toward, or for sale in connection with, any distribution
thereof, and has no present or contemplated agreement, undertaking, arrangement
or commitment providing for the disposition thereof, except in accordance with a
distribution thereof registered under the Securities Act of 1933, as amended
(the "Securities Act").
20
(b) The Stockholder understands that because the Debenture and the shares
of Common Stock, if any, to be issued upon conversion of the Debenture have not
been registered under the Securities Act, it cannot dispose of the Debenture or
any or all of such shares of Common Stock unless such securities are
subsequently registered under the Securities Act or exemptions from such
registration are available. The Stockholder acknowledges and understands that
the Debenture and the certificates for any shares of Common Stock, if any, to be
issued upon conversion of the Debenture will bear a legend substantially to such
effect.
(c) The Stockholder is knowledgeable and experienced in business and
financial matters and capable of evaluating the merits and risks of the
investment in the Debenture and the shares of Common Stock, is able to bear the
economic risk of loss of its investment in the Debenture and the shares of
Common Stock, has been granted the opportunity to make a thorough investigation
of the affairs of the Acquiror, and has availed itself of such opportunity
either directly or through its authorized representatives.
(d) The Stockholder has been advised that the Debenture and the shares of
Common Stock, have not been and are not being registered under the Securities
Act or under the "blue sky" laws of any jurisdiction and that the Acquiror in
issuing such shares is relying upon, among other things, the representations and
warranties of the Stockholder contained in this Section 4.3 in concluding that
each such issuance is a "private offering" and does not require compliance with
the registration provisions of the Securities Act.
4.4 Agreement Not in Breach of Certain Instruments. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate or conflict with any provision of
the Certificate of Incorporation or Bylaws of the Stockholder or result in a
breach of any of the terms and provisions of, or constitute a violation or
default (or an event that with notice or lapse of time, or both, would
constitute a default) under, or conflict with, (a) any Contract, mortgage,
indenture, license, permit, trust or other instrument to which the Stockholder
is or may be bound, (b) any judgment, decree, order or award of any court,
governmental body or arbitrator to which the Stockholder is a party, or (c) any
law, rule or regulation applicable to the Stockholder.
5. Representations and Warranties of the Acquiror and Acquisition. Each
of the Acquiror and Acquisition, jointly and severally, represent and warrant to
the Company and the Stockholder as follows:
5.1 Organization. Acquiror and Acquisition are each duly
organized and validly existing as corporations in good standing under the laws
of their respective states of incorporation, each with the corporate power to
own, lease and operate its properties and assets and to carry on its business in
the manner in which such business is now being conducted. Acquiror and
Acquisition are each duly qualified to transact business, and each is in good
standing, as foreign corporations where the character of their respective
activities requires such qualification.
21
5.2 Authority. Acquiror and Acquisition each have the
requisite corporate power, and prior to the Effective Time will have taken all
corporate action, necessary to execute, deliver and perform this Agreement. This
Agreement and all other agreements herein contemplated to be executed by
Acquiror and/or Acquisition have been (or upon execution will have been) duly
executed and delivered by Acquiror or Acquisition, as the case may be, have been
duly authorized by all necessary corporate action on the part of the Acquiror
and Acquisition and constitute (or upon execution will constitute) legal, valid
and binding obligations of the Acquiror and Acquisition, enforceable against
Acquiror and Acquisition in accordance with their respective terms.
5.3 Brokerage. Neither Acquiror nor any affiliate, director,
officer or employee of Acquiror has dealt with any finder or broker, in
connection with any of the transactions contemplated by this Agreement or the
negotiations looking toward the consummation of such transactions which might as
a result reasonably give rise to the obligation to pay a fee therefor.
5.4 Agreement Not in Breach of Certain Instruments. Neither
Acquiror nor Acquisition is in violation of its Articles of Incorporation or
Bylaws and neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate or conflict
with any provision of the Articles of Incorporation or Bylaws of either Acquiror
or Acquisition or result in a breach of any of the terms and provisions of, or
constitute a violation or default (or an event that with notice or lapse of
time, or both, would constitute a default) under, or conflict with, (a) any
Contract, mortgage, indenture, license, permit, trust or other instrument to
which Acquiror or Acquisition is or may be bound, (b) any judgment, decree,
order or award of any court, governmental body or arbitrator to which Acquiror
is a party, or (c) any law, rule or regulation applicable to Acquiror or
Acquisition.
5.5 Capitalization. The authorized capital stock of Acquiror
consists of: 20 million shares of common stock ("Acquiror Common Stock") and 10
million shares of preferred stock ("Acquiror Preferred Stock"). At close of
business on March 31, 1999, 12,008,083 shares of Acquiror Common Stock were
outstanding, and 2,112,542 shares of Acquiror Common Stock were subject to
issuance upon the exercise of outstanding stock options ("Acquiror Options"). As
of March 31, 1999, 866,000 shares of Acquiror Common Stock were held by Acquiror
in its treasury, and no shares of Acquiror Preferred Stock were outstanding. All
of the outstanding shares of Acquiror Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights. The shares of Acquiror Common
Stock issuable upon conversion of the Debenture (as provided therein) have been
duly authorized and reserved for issuance and, when issued in accordance with
the terms of the Debenture, will be validly issued, fully paid, nonassessable
and free of preemptive rights. Except for the shares referred to above that are
issuable pursuant to Acquiror Options, there are not any options, warrants,
calls, conversion rights, commitments or agreements of any character to which
Acquiror is a party or by which it may be bound obligating Acquiror to issue,
deliver or sell, or caused to be issued, delivered or sold, additional shares of
the capital stock of Acquiror or obligating Acquiror to grant, extend or enter
into any such option warrant, call, conversion right, commitment or agreement.
5.6 SEC Documents; Acquiror Financial Statements. Acquiror has
furnished or made available to Company and the Stockholder a true and complete
copy of each statement, quarterly and other report, and registration statement
(without exhibits) filed by Acquiror with the United States Securities and
Exchange Commission ("SEC") since March 20, 1997, (the "Acquiror SEC
Documents"), which are all the documents (other than preliminary material) that
Acquiror was required to file with the SEC since such date. As of their
respective filing dates, the Acquiror SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended, or the Securities Act of 1933, as amended, as the case may be, and none
of the Acquiror SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a subsequently
filed Acquiror SEC Document provided to the Company and the Stockholder prior to
the Closing Date. The financial statements of Acquiror included in the Acquiror
SEC Documents (the "Acquiror Financial Statements") comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles
consistently applied (except as may be included in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of Acquiror and its consolidated
subsidiaries at the date thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments). There has been no
change in Acquiror's accounting policies except as described in the notes to the
Acquiror Financial Statements.
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5.7 No Material Adverse Change. Since December 31, 1998,
Acquiror has conducted its business in the ordinary course and there has not
occurred: (a) any Material Adverse Effect in the business, financial condition,
results of operations, properties, assets or liabilities of Acquiror or its
subsidiaries, taken as a whole; (b) any amendments or changes to the Articles of
Incorporation or Bylaws of Acquiror; (c) any damage, destruction or loss,
whether covered by insurance or not, resulting in a material adverse change to
the properties or business of Acquiror or its subsidiaries, taken as a whole; or
(d) any sale of a material amount of property of Acquiror or its subsidiaries,
taken as a whole, except in the ordinary course of business.
5.8 Disclosure. None of the statements or information
contained in any of the representations, warranties or covenants of Acquiror or
Acquisition set forth in this Agreement, or in the Schedules and Exhibits to be
furnished hereunder, or in the SEC Documents, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements or information contained herein or therein not misleading.
5.9 Litigation and Claims.
(a) Litigation Pending or Threatened. There is no action, suit, arbitration
proceeding, including any grievance proceeding, or investigation pending or, to
the best knowledge of Acquiror and Acquisition threatened, before any court,
tribunal, panel, master or governmental agency, authority or body in which
Acquiror is a party or to which their businesses or properties are subject, nor
is Acquiror bound by any valid injunction or order of any court or tribunal.
(b) Violation of Law. Neither Acquiror nor Acquisition is in violation of
any provision of any law, decree, order or regulation applicable to Acquiror or
Acquisition or their business or properties, and Acquiror and Acquisition have
all federal, state, local and foreign licenses, permits and other governmental
authorizations required in the conduct of its business and the operation of
their properties. Other than the filing of the Certificate, no consent of any
governmental agency or body issuing any of such permits, licenses or other
governmental authorizations, or otherwise having jurisdiction over Acquiror or
Acquisition, their businesses, properties and operations, is required in order
to permit the execution, delivery or performance of this Agreement by Acquiror
or Acquisition, the consummation of the transactions contemplated hereby or the
sale, transfer and delivery of the Shares or the continuation of the Company's
or it Subsidiaries' businesses and operations after the Closing. Neither
Acquiror nor Acquisition is a party to any consent decree issued by any
governmental agency, authority or body relating to the Acquiror's business.
5.10 Investment Representations.
(a) Acquiror is acquiring the shares of common stock, par value $0.01 per
share of the Company (the "Company Common Stock"), for its own account for
investment and not with a view toward, or for sale in connection with, any
distribution thereof, and has no present or contemplated agreement, undertaking,
arrangement or commitment providing for the disposition thereof, except in
accordance with a distribution thereof registered under the Securities Act.
(b) Acquiror understands that because the shares of Company Common Stock,
have not been registered under the Securities Act, it cannot dispose of any or
all of such shares of Company Common Stock unless such securities are
subsequently registered under the Securities Act or exemptions from such
registration are available. Acquiror acknowledges and understands that the
certificates for any shares of Company Common Stock will bear a legend
substantially to such effect.
(c) Acquiror is knowledgeable and experienced in business and financial
matters and capable of evaluating the merits and risks of the investment in the
shares of Company Common Stock, is able to bear the economic risk of loss of its
investment in the shares of Company Common Stock, has been granted the
opportunity to make a thorough investigation of the affairs of the Company and
has availed itself of such opportunity either directly or through its authorized
representatives.
(d) Acquiror has been advised that the shares of Company Common Stock have
not been and are not being registered under the Securities Act or under the
"blue sky" laws of any jurisdiction and that the Company in issuing such shares
is relying upon, among other things, the representations and warranties of
Acquiror contained in this Section 4.3 in concluding that each such issuance is
a "private offering" and does not require compliance with the registration
provisions of the Securities Act.
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5.11 Acquisition. Acquisition is a newly-formed wholly-owned
subsidiary of Acquisition that has not engaged in any operations through the
Closing Date.
6. Covenants and Agreements of the Company and the Stockholder. The
Company and the Stockholder, jointly and severally, covenant and agree with
Acquisition and Acquiror as follows:
6.1 Current Information. The Company and the Stockholder will
advise the Acquiror in writing as promptly as possible, but in any event prior
to the Closing, of:
(a) the occurrence of any event that renders any of the representations or
warranties of the Company or the Stockholder set forth herein inaccurate;
(b) the awareness of the Company or the Stockholder that any representation
or warranty of the Company or the Stockholder set forth herein was not accurate
in all respects when made; and
(c) the failure of the Company or the Stockholder to comply with or
accomplish any of the covenants or agreements set forth herein.
6.2 Consents. The Company and the Stockholder shall use their
best efforts to procure all consents, approvals or waivers that must be obtained
by the Stockholder, the Company or its Subsidiaries and which are necessary for
completion of the transactions described herein, including using their best
efforts to obtain all required consents of any governmental agency or body
issuing any permits, licenses or other governmental authorizations affecting the
Company , its Subsidiaries or their businesses or properties, so that the
Surviving Corporation may continue to operate the businesses and properties of
the Company and its Subsidiaries without interruption following the Effective
Time. Without limitation on the foregoing, the Stockholder and the Company shall
use their best efforts to obtain all consents, authorizations, waivers and
approvals required from third parties under all Contracts by reason of the
Merger and the consummation of the transactions contemplated hereby.
6.3 Business Operations. Without the Acquiror's prior written
consent, which consent shall not be unreasonably withheld, the Company and each
Subsidiary shall operate its business only in the ordinary course, will not
introduce any new method of management or operation and the Stockholder and the
Company shall use their reasonable efforts to preserve the businesses of the
Company and its Subsidiaries intact, to retain its present customers and
suppliers so that it will be available to Acquiror after the Closing and to
cause consummation of the transactions contemplated by this Agreement in
accordance with its terms and conditions. Without the Acquiror's prior written
consent, which consent shall not be unreasonably withheld, the Company and the
Stockholder shall not take any action that might reasonably be expected to
impair the businesses or assets of the Company or its Subsidiaries.
6.4 Covenant Not to Compete.
24
(a) To induce Acquiror to enter into this Agreement and consummate the
transactions contemplated by this Agreement, the Stockholder agrees that it will
not, without the prior written consent of Acquiror, for its own account or
jointly with another, directly or indirectly, for or on behalf of any person
other than Acquiror, as principal, agent, shareholder, participant, partner,
member, promoter, director, officer, manager, employee, consultant, sales
representative or otherwise:
(i) for a period of three (3) years from the Closing Date, engage in
or Control (as hereinafter defined) any business that provides (A) products
substantially similar to those provided by the Company or its Subsidiaries
as of the date hereof and which are principally intended to be used in the
creation of (1) computer generated metafiles using CGM for
internet-accessible applications (other than internet-accessible GIS
products and Process and Building products) or (2) internet-accessible
maintenance or similar technical manuals, (B) products substantially
similar to the Active Graphics server product which is currently under
development by the Company and which is principally intended to be used in
the creation of computer generated metafiles using CGM for
internet-accessible applications (other than internet-accessible GIS
products and Process and Building products), or (C) services directly
related to the installation, use, maintenance, revision, modification or
adaptation of the foregoing products. For purposes hereof, "Control" shall
mean, with respect to any business covered hereby, the possession by the
Stockholder, directly or indirectly, of ownership of more than 50% of the
voting equity interests of any such business;
(ii) for a period of three (3) years from the Closing Date, solicit,
or assist in the solicitation of, any person within the United States of
America to whom the Company sold or provided services or products during
the three (3) year period ending on the Closing Date, for the purpose of
selling to such person any services or products substantially similar to
the products and services specified in Section 6.4(a)(i) hereof;
(iii) for a period of three (3) years from the Closing Date, solicit,
or assist in the solicitation of, any person employed or retained by the
Company and employed or retained by Acquisition after the Effective Time
(as an employee, independent contractor or otherwise) to leave such
service, whether or not such employment is pursuant to a contract and
whether or not such employment is at will; or
(iv) Except as expressly permitted herein or by that certain OEM
License Agreement (the "OEM License Agreement"), dated March 10, 1999,
between the Company and the Stockholder and its subsidiaries, use, disclose
or reveal to any person other than Acquiror confidential information,
including the Intellectual Property Rights, of or relating to the Company
(which confidential information is being acquired by Acquiror); provided,
however, that the obligations of this clause (iv) shall terminate on the
third anniversary of the Closing Date with respect to any confidential
information that does not constitute a trade secret under applicable law
(without limitation on the generality of the foregoing, and for the
avoidance of any doubt, notwithstanding any provision in the OEM License
Agreement, neither the Stockholder nor any of its subsidiaries shall
distribute or sell any products licensed to them by the Company under the
OEM License Agreement as stand-alone products, although such licensed
products may be bundled and distributed by the Stockholder as a component
part of other products distributed by the Stockholder and/or its
subsidiaries that, without giving consideration to the component part of
the product licensed under the OEM License Agreement, do not directly
compete with the Company's products or services);
25
(b) The Stockholder acknowledges that it has submitted a bid proposal for
the furnishing of products and services to Avondale Shipyards (the "Stockholder
Proposal") which included a proposal by the Company captioned "Common Diagram
Authoring System for LPD-17" dated April 12, 1999 (the "Company Proposal"). As
included in the Stockholder Proposal, the Company Proposal included products and
services priced at $1,397,900. Stockholder agrees that if Avondale Shipyards
accepts the Stockholder Proposal (including the Company Proposal as submitted to
Stockholder) within 90 days of the Closing Date and subsequently awards a
contract to Stockholder, Stockholder will in good faith enter into negotiations
for a subcontract with the Company relating to the provision by the Company of
the products and services referred to in the Company Proposal. The Stockholder
represents to Acquiror that (i) the Stockholder does not intend to preserve
revenue covered by the Company Proposal for itself, and (ii) if the Stockholder
Proposal is successful, the Stockholder intends to look to the Company for those
products covered by the Company Proposal.
(c) Notwithstanding anything herein to the contrary, the covenants
described in this Section 6.4 shall apply only if the transactions contemplated
hereby are consummated at the Closing.
(d) Although the parties have, in good faith, used their best efforts to
make the provisions of this Section 6.4 reasonable in both geographic area and
duration, and the parties do not anticipate, or intend that a forum of competent
jurisdiction would find it necessary to reform any such provisions to make them
reasonable in geographic area, duration or otherwise, the parties understand and
agree that if a forum of competent jurisdiction determines it necessary to
reform the scope of this Section 6.4 in order to make it reasonable in
geographic area, duration or otherwise, with respect to the Stockholder, such
provisions shall be considered to be divisible in all respects, and such lesser
scope as any such forum shall determine to be reasonable shall be effective,
binding and enforceable against the Stockholder. The Stockholder acknowledges
and agrees that Acquiror's damages in the event of any breach or threatened
breach of its covenants set forth in this Section 6.4 will be difficult to
determine and that without limiting any other right or remedy of Acquiror,
Acquiror shall be entitled to appropriate injunctive or equitable relief from a
court of competent jurisdiction to prevent any breach or threatened breach.
6.5 Exclusive Dealings. The Company and the Stockholder agree
that the provisions of paragraph 9 of that Letter Agreement, dated March 20,
1999 between Acquiror, the Company and the Stockholder shall continue in full
force and effect, except that the provisions permitting an alternative
transaction with America Online, Inc. ("AOL") shall be null and void, with the
effect that any transaction involving AOL and the Company is hereby prohibited.
6.6 Lien Release. The Company and the Stockholder shall obtain the release
of the lien in favor of the Stockholder's lender on the Shares.
6.7 Discharges. Prior to the Closing Date, the Stockholder and
the Company shall cancel, at no cost and with no liability to the Company or any
of its Subsidiaries, (i) the $1.6 million note receivable due by the Stockholder
to the Company and (ii) all accounts payable due by the Company to the
Stockholder or any of its subsidiaries, including, without limitation, the
approximate $453,000 account payable due the Stockholder reflected in the
Interim Financial Statements.
26
7. Covenants and Agreements of the Acquiror. Each of the Acquiror and
Acquisition covenant and agree with the Stockholder as follows:
7.1 Current Information. The Acquiror will advise the
Stockholder in writing as promptly as possible, but in any event prior to the
Closing, of:
(a) the occurrence of any event that renders any of the representations or
warranties of the Acquiror or Acquisition set forth herein inaccurate;
(b) the awareness of the Acquiror that any representation or warranty of
the Acquiror or Acquisition, set forth herein was not accurate when made; and
(c) the failure of the Acquiror or Acquisition to comply with or accomplish
any of the covenants or agreements set forth herein.
7.2 Consent to Pledge. Acquiror and Acquisition shall obtain
the consent of its lender to (i) the pledge of all of the shares of common stock
of the Surviving Corporation to the Stockholder as contemplated hereby and (ii)
the incurrence of the indebtedness contemplated by the promissory note referred
to in Section 1.3 and the Debenture, as contemplated hereby.
7.3 Consents. Acquiror and Acquisition shall use their best
efforts to procure all consents, approvals or waivers that must be obtained by
Acquiror or Acquisition and which are necessary for completion of the
transactions described herein, including using their best efforts to obtain all
required consents of any governmental agency or body issuing any permits,
licenses or other governmental authorization affecting Acquisition, its business
or properties, so that the Surviving Corporation may continue to operate the
businesses and properties of the Company and its Subsidiaries without
interruption following the Effective Time. Without limitation on the foregoing,
Acquiror and Acquisition shall use their best efforts to obtain all consents,
authorizations, waivers and approvals required from third parties under all
Contracts by reason of the Merger and the consummation of the transactions
contemplated hereby.
8. Conditions to Obligations of the Stockholder and the Company. The
obligations of the Stockholder and the Company to consummate the Merger and to
make the deliveries contemplated at the Closing shall, in addition to the
conditions set forth elsewhere herein, be subject to satisfactory completion on
or prior to the Closing Date of each of the following conditions, any of which
may be waived by the Stockholder and the Company:
8.1 Correctness of Representations and Warranties. Each of the
representations and warranties of the Acquiror and Acquisition contained in this
Agreement shall have been true and correct in all material respects on the date
hereof and shall be true and correct in all material respects on the Closing
Date with the same effect as if made on the Closing Date, and the Acquiror shall
have executed and delivered to the Company and the Stockholder at Closing a
certificate to that effect.
8.2 Performance of Covenants and Agreements. All of the
covenants and agreements of the Acquiror contained in this Agreement and
required to be performed by the Acquiror before the Closing Date shall have been
performed in all material respects, and the Acquiror shall have executed and
delivered to the Company and the Stockholder at Closing a certificate to that
effect.
27
8.3 Additional Closing Documents. The Acquiror shall have
delivered to the Stockholder at or prior to the Closing such documents as the
Stockholder and the Company and its counsel may reasonably request in order to
enable the Stockholder and the Company to determine whether the conditions to
their obligations under this Agreement have been met and otherwise to carry out
the provisions of this Agreement.
8.4 No Legal Bar.
(a) There shall not have been instituted or threatened any legal proceeding
seeking to prohibit the consummation of the transactions contemplated by this
Agreement or to obtain substantial damages with respect thereto.
(b) None of the parties hereto shall be prohibited by any law, order, writ,
injunction or decree of any governmental body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no action or
proceeding shall then be pending that questions the validity of this Agreement,
any of the transactions contemplated hereby or any action that has been taken by
any of the parties or any corporate entity, in connection herewith, or in
connection with any of the transactions contemplated hereby.
8.5 Opinion of Counsel for Acquiror. The Stockholder and the
Company shall have received an opinion of counsel from R. ▇▇▇▇▇ ▇▇▇▇▇▇, general
counsel of Acquiror, in the form and substance reasonably satisfactory to the
Stockholder and the Company and dated the Closing Date, and substantially in the
form of Exhibit D. In rendering such opinion, counsel may rely upon certificates
of public officials and upon certificates of officers of Acquiror as to factual
matters and on opinions of other counsel of good standing, whom such counsel
believes to be reliable, provided that such certificates and opinions of other
counsel shall be delivered to the Stockholder along with such counsel's opinion.
9. Conditions to Obligations of Acquiror and Acquisition. The
obligations of the Acquiror and Acquisition to consummate the Merger and to make
the deliveries contemplated at the Closing shall, in addition to conditions set
forth elsewhere herein, be subject to the satisfactory completion on or prior to
the Closing Date of each of the following conditions, any of which may be waived
by the Acquiror and Acquisition:
9.1 Correctness of Representations and Warranties. Each of the
representations and warranties of the Stockholder and the Company contained in
this Agreement shall have been true and correct in all material respects on the
date hereof and shall be true and correct in all material respects on the
Closing Date with the same effect as if made on the Closing Date, and the
Company and the Stockholder shall have executed and delivered to Acquiror and
Acquisition at Closing a certificate of the Company and the Stockholder to that
effect.
9.2 Performance of Covenants and Agreements. All of the
covenants and agreements of the Company, the Stockholder or both contained in
this Agreement and required to be performed on or before the Closing Date shall
have been performed in all material respects, and the Company and the
Stockholder shall have delivered to the Acquiror at Closing a certificate of the
Company and of the Stockholder to that effect.
9.3 Additional Closing Documents. The Company and the
Stockholder shall have delivered to the Acquiror and Acquisition at or prior to
the Effective Time such additional documents as the Acquiror and its counsel may
reasonably request in order to enable the Acquiror and Acquisition to determine
whether the conditions to its obligations under this Agreement have been met and
otherwise to carry out the provisions of this Agreement.
28
9.4 No Legal Bar.
(a) There shall not have been instituted or threatened any legal proceeding
seeking to prohibit the consummation of the transactions contemplated by this
Agreement or to obtain substantial damages with respect thereto.
(b) None of the parties hereto shall be prohibited by any law, order, writ,
injunction or decree of any governmental body of competent jurisdiction from
consummating the transactions contemplated by this Agreement and no action or
proceeding shall then be pending that questions the validity of this Agreement,
any of the transactions contemplated hereby or any action that has been taken by
any of the parties in connection herewith or in connection with any of the
transactions contemplated hereby.
9.5 Employment Agreements. ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇, employees of the Company, shall have each entered
into an Employment Agreement with Acquiror, in the forms of agreements attached
hereto as Exhibits C-1, C-2 and C-3, providing for their employment by the
Surviving Corporation of such persons.
9.6 Consents. All consents, authorizations, orders and
approvals of, or filings or registrations with, any governmental entity required
in connection with the execution, delivery and performance of this Agreement
shall have been obtained or made, except for filings required under the DGCL in
connection with the Merger, and the Company, its Subsidiaries and the
Stockholder shall have obtained all consents, authorizations, waivers and
approvals required from third parties required under all Contracts by reason of
the Merger and the consummation of the transactions contemplated hereby.
9.7 Deliveries at Closing.
(a) The Seller shall have delivered to the Acquiror:
(i) The Certificate of Incorporation of the Company and all amendments
thereto, certified by the Secretary of State of Delaware;
(ii) A good standing certificate for the Company from the Secretary of
State of Delaware, dated as of a recent date;
(iii) A certificate representing the Shares, duly endorsed to
Acquiror;
(iv) Written evidencing satisfactory to Acquiror of the release of the
lien in favor of Stockholder's lender on the Shares.
(b) The Acquiror shall have delivered to the Seller: (i) The Articles of
Incorporation of the Acquiror and all amendments thereto, certified by the
Secretary of State of Texas;
(ii) A Certificate of existence and good standing of Acquiror from the
Secretary of State of Texas, dated as of a recent date;
(iii) The Certificate of Incorporation of Acquisition, certified by
the Secretary of State of Delaware;
(iv) A certificate of good standing of Acquisition from the Secretary
of State of Delaware, dated as of a recent date;
(v) Written evidence satisfactory to the Seller of the consent of
Acquiror's lender to the pledge of the common stock of the Surviving
Corporation to the Stockholder and the incurrence of the indebtedness
contemplated by the promissory note referred to in Section 1.3 and the
Debenture;
(vi) The Closing Payment;
29
(vii) The promissory note referred to in Section 1.3; and
(viii) The Debenture.
9.8 Opinion of Counsel for the Company and the Stockholder.
The Acquiror shall have received an opinion of counsel from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
counsel for the Company and the Stockholder, in form and substance reasonably
satisfactory to the Acquiror and dated the Closing Date, and substantially in
the form of Exhibit E hereto. In rendering such opinion, counsel may rely upon
certificates of public officials and upon certificates of officers of the
Company as to factual matters and on opinions of other counsel of good standing,
whom such counsel believes to be reliable, provided that all such certificates
and opinions of other counsel shall be delivered to the Acquiror along with such
counsel's opinion.
10. Indemnification.
10.1 Indemnification Provisions for Benefit of Acquiror and
Surviving Corporation.
(a) Subject to Section 10.5 below, the Stockholder shall indemnify and hold
harmless the Acquiror, the Surviving Corporation, and their respective
affiliates, directors, officers and stockholders, and their respective
successors and assigns (collectively, "Acquiror Persons") against any and all
claims, losses, damages (including, without limitation, settlement costs and any
reasonable legal or other expenses for investigating or defending any actions or
threatened actions) (collectively, "Damages") incurred by Acquiror Persons in
connection with each and all of the matters set forth in subsections (b)(i),
(ii), (iii) and (iv) below; provided, however, that the Stockholder shall have
no obligation under this Section 10.1 if Acquiror or the Surviving Corporation,
as the case may be, fails to make a written claim for indemnification prior to
the expiration of any applicable survival period as set forth in Section 12.5.
(b) (i) Any misrepresentation or breach of any representation or warranty
of the Company or the Stockholder contained herein or in any agreement or
instrument delivered at the Closing by the Company or the Stockholder pursuant
to this Agreement; and
(ii) The breach of any covenant, agreement or obligation of the
Company or the Stockholder contained in this Agreement or any other
agreement or instrument contemplated by this Agreement.
(iii)(A)Any failure on the part of the Company or any Subsidiary to
discharge a liability for payment of Taxes relating to periods preceding
the Closing (which period shall be inclusive of the Closing Date) and which
result in Damages to Acquiror or the Surviving Corporation; (B) any and all
Damages arising from a claim by a third party, relating to or associated
with the ownership, use, possession, enjoyment of the Company's and the
Subsidiaries' businesses based on any occurrence arising prior to the
Closing Date; and (C) any tax filing or Return made, or position taken, by
the Company, any Subsidiary or the Stockholder that any governmental
authority challenges and which results in Damages to the Acquiror or the
Surviving Corporation.
(iv) All actions, orders, assessments, fees and expenses that result
from, relate to or arise in connection with any of the foregoing or in
enforcing this Agreement.
30
10.2 Indemnification Provisions for Benefit of the Stockholder.
(a) Subject to Section 10.5 below, Acquiror and the Surviving Corporation
shall jointly and severally indemnify and hold harmless the Stockholder and its
affiliates, directors, officers and stockholders, and its successors and assigns
(collectively, "Stockholder Persons") against any and all Damages incurred by
Stockholder Persons in connection with each and all of the matters set forth in
subsections (b)(i), (ii), (iii) and (iv) below; provided, however, that Acquiror
and the Surviving Corporation shall have no obligation under this Section 10.2
if the Stockholder fails to make a written claim for indemnification prior to
the expiration of any applicable survival period as set forth in Section 12.5.
(b) (i) Any misrepresentation or breach of any representation or warranty
of Acquiror or Acquisition contained herein or in any agreement or instrument
delivered at the Closing by Acquiror or Acquisition pursuant to this Agreement;
(ii) The breach of any covenant, agreement or obligation of Acquiror
or Acquisition contained in this Agreement or any other agreement or
instrument contemplated by this Agreement; (iii) Any and all Damages
arising from a claim by a third party, relating to or associated with the
ownership, use, possession, enjoyment of the Surviving Corporation's
business based on any occurrence arising after the Closing Date; and
(iv) All actions, orders, assessments, fees and expenses that result
from, relate to or arise in connection with any of the foregoing or in
enforcing this Agreement.
10.3 Claims and Defense by the Indemnifying Party.
(a) Claims. Whenever any claim or claims shall arise for indemnification
under this Section 10, the party seeking indemnification (the "Indemnified
Party") shall notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim(s) pursuant to Section 10.4 hereunder. Such
notice shall set forth, when known, the facts constituting the basis for such
claim(s) and the amount or estimate of the amount of the liability arising from
such claim(s). The Indemnified Party shall not settle or compromise any claim by
a third party for which the Indemnified Party is entitled to indemnification
under this Section 10 without the prior written consent of the Indemnifying
Party, unless:
(i) suit shall have been instituted against the Indemnified Party or,
in the case of a claim for Taxes, an assessment shall have been made for
such Taxes by the applicable taxing authority; and
(ii) the Indemnifying Party shall not have taken control of such suit
within 20 days after notification thereof, as provided in this Section
10.3(a).
(b) Defense by the Indemnifying Party. In connection with any claim giving
rise to indemnity under this Section 10 resulting from or arising out of any
claim or legal proceeding by a person other than the Indemnified Party (a "Third
Party Claim"), the Indemnifying Party, at its sole cost and expense, may, upon
written notice to the Indemnified Party assume the defense of any such Third
Party Claim, provided that the Indemnifying Party acknowledges its obligation to
indemnify the Indemnified Party in respect of the claims asserted therein. If
the Indemnifying Party assumes the defense of any such Third Party Claim, the
Indemnifying Party shall select counsel that is reasonably acceptable to the
Indemnified Party to conduct the defense of such Third Party Claim and at its
sole cost and expense shall take all steps necessary in the defense or
settlement thereof. The Indemnifying Party shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld), unless the Indemnifying Party admits in writing
its liability to hold the Indemnified Party harmless from and against any
losses, damages, expenses and liabilities arising out of such settlement and
concurrently with such settlement the Indemnifying Party pays the full amount of
all losses, damages, expenses and liabilities to be paid by the Indemnifying
Party (or by the Indemnified Party, if applicable) in connection with such
settlement. The Indemnified Party shall cooperate fully in the defense of any
such claim or action by taking such actions as the Indemnifying Party may
reasonably request. The Indemnified Party shall be entitled to participate in
(but not control) the defense thereof with its own counsel and at its own
expense. If the Indemnifying Party does not assume the defense of any such claim
or litigation resulting therefrom in accordance with the terms hereof, the
Indemnified Party may defend against such claim or litigation in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate. The Indemnifying Party
shall cooperate fully in the defense of any such claim or litigation by taking
such action as the Indemnified Party may reasonably request. The Indemnifying
Party shall be entitled to participate in (but not control) the defense thereof
with its own counsel and at its own expense. Notwithstanding any of the
foregoing, the Indemnifying Party shall have the right to assume the defense of
any Third Party Claim at any time.
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10.4 Notice. The Surviving Corporation, the Acquiror and the
Stockholder agree that in the event of any occurrence that may give rise to a
claim by an indemnified party against the indemnifying party under this Section
10, the indemnified party will give prompt written notice thereof to the
indemnifying party, and in any event, such notice shall be delivered prior to
the expiration of any survival period set forth in Section 12.5.
10.5 Setoff. Acquiror and the Surviving Corporation may
withhold and setoff any amounts otherwise due to the Stockholder as to which the
liability of the Stockholder to indemnify Acquiror Persons hereunder has been
finally determined by a court of competent jurisdiction.
10.6 Limitation on Damages. Notwithstanding the
indemnification provisions set forth in this Section 10, no claim shall be made
by Acquiror or the Surviving Corporation under Section 10.1 or the Stockholder
under Section 10.2 unless the amount of all claims made by Acquiror and the
Surviving Corporation, on the one hand, or the Stockholder, on the other hand,
exceeds $150,000, and if the aggregate amount of all claims exceeds $150,000,
the Stockholder shall be liable to the Acquiror and the Surviving Corporation
only with respect to that portion of the total amount of damages that exceeds
$150,000. Notwithstanding the foregoing, (i) the limitation set forth in the
immediately preceding sentence shall not be applicable with respect to any claim
made by Acquiror or the Surviving Corporation under Section 10 if such claim is
based on an alleged misrepresentation or breach by the Company or the
Stockholder of any representation or warranty contained in Sections 3.3(c)
and/or 3.13; (ii) no party hereto shall be liable for claims hereunder or under
any other document or instrument contemplated hereby for any aggregate amount
exceeding $12,353,000; and (iii) no party hereto shall be liable for indirect,
incidental, consequential, punitive or exemplary damages.
10.7 Right to Remediate. If (A) any third party shall notify
Acquiror or any of its affiliates, or (B) if Acquiror or any of its affiliates
become aware, of a claimed or potential breach of the Company's representations
and warranties under Sections 3.6 or 3.19 hereof, Acquiror shall promptly notify
the Stockholder in writing, setting forth all relevant facts known to Acquiror
or its affiliates in respect of the claimed or potential breach. Upon receipt of
such notice, the Stockholder shall have the right, at its election and expense,
to remediate the basis for any such claimed potential breach, including
obtaining any necessary rights an altering or adapting products or software, but
such efforts at remediation shall not limit Acquiror's or the Surviving
Corporation's rights under this Section 10.
11. Termination.
11.1 Termination. This Agreement may be terminated at any time
prior to the Closing as follows:
(a) by Acquiror or the Stockholder, as the case may be, if the conditions
to the Closing contained in Section 8 or 9, respectively, have not been and
cannot be satisfied, provided, however, that the Acquiror if it elects to
terminate, or the Stockholder and the Company, if the Stockholder elects to
terminate, as the case may be, shall have complied with or performed or tendered
performances of all covenants and agreements to be complied with or performed by
such party or parties prior to or at the Closing, and satisfied all conditions
herein that are to be complied with, performed or satisfied by such party or
parties immediately prior to or at the Closing; provided, further, that a party
shall promptly notify the other parties hereto in writing if it becomes aware of
circumstances which would cause any party to breach or be unable to comply with
or perform the conditions to the Closing contained in Section 8 or 9, as
applicable;
32
(b) by either the Acquiror or the Stockholder, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting any of the transactions contemplated hereby
and such order, decree, ruling or other action shall have become final and
non-appealable preventing the consummation of the Merger; or
(c) by either the Acquiror or the Stockholder, if the Effective Time shall
not have occurred on or before April 16, 1999; provided that neither the
Acquiror nor the Stockholder shall be entitled to terminate this Agreement
pursuant to this paragraph if such party's material breach of this Agreement has
been the cause of or resulted in the failure of the Effective Time to occur at
or prior to such time.
11.2 Effect of Termination; Remedies. Except as provided in
this Section 11.2, in the event of the termination of this Agreement pursuant to
Section 11.1, this Agreement shall forthwith become void, there shall be no
liability on the part of any party hereto or any of their respective officers or
directors to the other and all rights and obligations of any party hereto shall
cease, except that nothing herein shall relieve any party from its obligations
with respect to any breach of this Agreement.
33
12. Miscellaneous Provisions.
12.1 Construction. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State of
Delaware without regard its principles of conflicts of laws.
12.2 Notices. All notices and other communications called for
or contemplated hereunder shall be in writing and shall be deemed to have been
duly given when delivered to the party to whom addressed or when sent by
telecopy, telegram, telex or wire (if promptly confirmed by registered or
certified mail, return receipt requested, prepaid and addressed) to the parties,
their successors in interest, or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to the Acquiror: Micrografx, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
With copies to:
Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: L. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to the Company or the Stockholder:
Intergraph Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
With copies to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
12.3 Assignment. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof nor any of the
documents executed in connection herewith may be assigned by any party without
the consent of the other parties; provided, however, that the rights of
Acquisition under this Agreement shall be vested in the Surviving Corporation at
and after the Effective Time. Nothing contained herein, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their successors in interest and permitted assignees any rights or remedies
under or by reason of this Agreement unless so stated herein to the contrary.
34
12.4 Amendments and Waivers. No breach of any covenant,
agreement, warranty or representation shall be deemed waived unless expressly
waived in writing by the party who might assert such breach. No waiver of any
right hereunder shall operate as a waiver of any other right or of the same or a
similar right on another occasion. This Agreement and all Exhibits and Schedules
hereto may be modified only by a written instrument duly executed by the parties
hereto and authorized as provided herein.
12.5 Survival. The representations and warranties set forth in
Sections 3, 4 and 5 shall survive any investigation heretofore or hereafter made
by Acquiror and Acquisition, on the one hand, or by the Stockholder and the
Company, on the other hand, and the Closing and shall continue in full force and
effect until September 30, 2000; provided, however, that (i) representations and
warranties of the Stockholder with respect to the payment of taxes of any nature
whatsoever or the filing of tax returns and with respect to environmental
matters shall continue until the expiration of any applicable statute or period
of limitations, and any extensions thereof, (ii) the representations contained
in Sections 3.1, 3.2 and 3.6 and Sections 4.1 and 4.2 shall survive indefinitely
and (iii) the representations contained in Sections 5.1 and 5.2 shall survive
indefinitely; and further provided, that if written notice of a claim has been
given prior to the expiration of the applicable representations and warranties
by a party in whose favor such representations and warranties have been made,
the relevant representations and warranties shall survive as to that claim until
the claim has finally been resolved.
12.6 Attorneys' Fees. In the event that any action or
proceeding, including arbitration, is commenced by any party hereto for the
purpose of enforcing any provision of this Agreement, the parties to such
action, proceeding or arbitration may receive as part of any award, judgment,
decision or other resolution of such action, proceeding or arbitration their
costs and reasonable attorneys' fees as determined by the person or body making
such award, judgment, decision or resolution, including those incurred on
appeal.
12.7 Binding Nature of Agreement. The Agreement includes each
of the Schedules and Exhibits that are referred to herein or attached hereto,
all of which are incorporated by reference herein. All the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective executors, heirs, legal representatives, successors
and permitted assigns.
12.8 Expenses. The costs and expenses and the legal fees and
disbursements of counsel retained by the Stockholder or the Company in
connection herewith shall be borne by the Stockholder. The costs and expenses of
the Acquiror, including the legal fees and disbursements of Jenkens & ▇▇▇▇▇▇▇▇▇,
a Professional Corporation, shall be borne by the Acquiror or, upon or after the
Effective Time, by the Surviving Corporation.
12.9 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all prior agreements and understandings relating to the subject
matter hereof, except that the provisions of Sections 5, 6, 8, 9 and 10 of the
Letter Agreement, dated March 20, 1999 between the Stockholder, the Company and
Acquiror shall continue in full force and effect, except the provisions of
paragraph 9 permitting an alternative transaction with AOL shall not be of
further force or effect, with the effect that any transaction involving AOL and
the Company is hereby prohibited. Notwithstanding anything to the contrary
contained in this Agreement, it is the explicit intention of the parties hereto
that no party is making any representation or warranty whatsoever, express or
implied, beyond those expressly given in Section 3, 4 and 5 hereof and those
expressly set forth in any of the Schedules and Exhibits hereto, including, but
not limited to, any implied warranty or representation as to condition,
merchantability, fitness for any particular purpose or suitability of the
business or assets of the Company; provided, however, the foregoing provision
shall not limit or impair any of the expressed representations or warranties or
indemnities contained herein.
35
12.10 Severability. Any provision of this Agreement that is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
12.11 Counterparts. This Agreement may be executed by the
parties in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts shall together constitute
but one and the same instrument. A telecopy or facsimile transmission of a
signed counterpart of this Agreement shall be sufficient to bind the party or
parties whose signature(s) appear(s) thereon.
12.12 Public Announcements. The Acquiror, the Stockholder and
the Company will consult with each other before issuing any press release or
otherwise making any public statements with respect to the Merger and shall not
issue any such press release or make any such public statement prior to
consultation, except as may be required by law or rules of the Nasdaq National
Market.
12.13 Table of Contents; Section Headings. The table of
contents and the headings of each Section, subsection or other subdivision of
this Agreement are for reference only and shall not limit or control the meaning
thereof.
12.14 Best Efforts; Further Assurances; Cooperation. Subject
to the other provisions of this Agreement, the parties hereto shall each use
their reasonable, good faith efforts to perform their obligations herein and to
take, or cause to be taken or do, or cause to be done, all things necessary,
proper or advisable under applicable law to obtain all regulatory approvals and
satisfy all conditions to the obligations of the parties under this Agreement
and to cause the Merger and the other transactions contemplated herein to be
effected as promptly as is practicable, in accordance with the terms hereof and
shall cooperate fully with each other and their respective officers, directors,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as a part of their respective obligations under
this Agreement, including without limitation:
(a) Acquiror and the Company shall promptly make their respective filings
and submissions and shall take, or cause to be taken, all actions and do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to obtain any required approval of any other federal, state
or local governmental agency or regulatory body with jurisdiction over the
transactions contemplated by this Agreement.
(b) In the event any claim, action, suit, investigation or other proceeding
by any governmental body or other person is commenced which questions the
validity or legality of the Merger or any of the other transactions contemplated
hereby or seeks damages in connection therewith, the parties agree to cooperate
and use all reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit or other proceeding, to use all reasonable efforts to
have such injunction or other order lifted, and to cooperate reasonably
regarding any other impediment to the consummation of the transactions
contemplated by this Agreement.
(c) Without the prior written consent of Acquiror, the Company will not
terminate any employee if such termination would result in the payment of any
amounts pursuant to "change in control" provisions of any employment agreement
or arrangement.
36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
MICROGRAFX, INC.
By:
Name:
Title:
INTERCAP ACQUISITION, INC.
By:
Name:
Title:
INTERCAP GRAPHICS SYSTEMS, INC.
By:
Name:
Title:
INTERGRAPH CORPORATION
By:
Name:
Title:
37
Exhibit "A"
Form of Convertible Debenture
38
Exhibit "B"
Form of Promissory Note
39
Exhibit "C-1"
Employment Agreement of ▇▇▇▇ ▇▇▇▇▇▇▇▇
40
Exhibit "C-2"
Employment Agreement of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
41
Exhibit "C-3"
Employment Agreement of ▇▇▇ ▇▇▇▇▇▇▇▇▇
42
Exhibit "C-4"
Employment Agreement of ▇▇▇ ▇▇▇▇▇▇
43
Exhibit "D"
Opinion of Acquiror's Counsel
44
Exhibit "E"
Opinion of Counsel for the Company and the Stockholder
45