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EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
ENGINEERING ANIMATION, INC.,
EAI VICTORY, INC.
AND
VARIATION SYSTEMS ANALYSIS, INC.
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DATED AS OF AUGUST 19, 1998
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TABLE OF CONTENTS
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
ARTICLE I. THE MERGER............................................... 1
1.1. The Merger.................................................. 1
1.2. Closing..................................................... 1
1.3. Effective Time.............................................. 1
1.4. Effects of the Merger....................................... 1
1.5. Articles of Incorporation and By-Laws....................... 2
1.6. Directors and Officers...................................... 2
1.7. Tax and Accounting Consequences............................. 2
ARTICLE II. CONVERSION AND EXCHANGE OF SHARES....................... 2
2.1. Definitions................................................. 2
2.2. Total Merger Consideration.................................. 2
2.3. Conversion of Sub Stock..................................... 2
2.4. Conversion of VSA Stock..................................... 2
2.5. Exchange of Shares.......................................... 3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF VSA.................. 4
3.1. Corporate Organization...................................... 4
3.2. Capitalization.............................................. 4
3.3. Authority; No Violation..................................... 4
3.4. Consents and Approvals...................................... 5
3.5. Reports..................................................... 5
3.6. Compliance with Applicable Law.............................. 5
3.7. Financial Statements........................................ 5
3.8. Absence of Certain Changes or Events........................ 5
3.9. Legal Proceedings and Restrictions.......................... 6
3.10. Taxes and Tax Returns....................................... 6
3.11. Employee Benefits........................................... 8
3.12. ESOP........................................................ 9
3.13. Employment and Labor Relations.............................. 9
3.14. Contracts................................................... 9
3.15. Undisclosed Liabilities..................................... 10
3.16. Environmental Liability..................................... 10
3.17. Tangible Assets............................................. 11
3.18. Real Property............................................... 11
3.19. Intellectual Property....................................... 11
3.20. Notes and Accounts Receivable............................... 12
3.21. Bank Accounts and Powers of Attorney........................ 12
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3.22. Guaranties.................................................. 12
3.23. Insurance................................................... 12
3.24. Service Contracts and Warranties............................ 12
3.25. Certain Relationships....................................... 12
3.26. S-4 Information............................................. 13
3.27. Broker's Fees............................................... 13
3.28. Certain Customer Relationships.............................. 13
3.29. Disclosure.................................................. 13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF EAI................... 13
4.1. Corporate Organization...................................... 13
4.2. Capitalization.............................................. 13
4.3. Authority; No Violation..................................... 13
4.4. Consents and Approvals...................................... 14
4.5. SEC Reports................................................. 14
4.6. S-4 Information............................................. 14
4.7. Ownership of Sub; No Prior Activities....................... 14
4.8. Broker's Fee................................................ 15
4.9. Absence of Certain Changes or Events........................ 15
4.10. Legal Proceedings and Restrictions.......................... 15
4.11. Compliance With Applicable Law.............................. 15
4.12. Intellectual Property....................................... 15
4.13. Disclosure.................................................. 15
ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS................ 15
5.1. Conduct of Business Prior to the Effective Time............. 15
5.2. VSA Forbearances............................................ 16
5.3. EAI Forbearances............................................ 16
ARTICLE VI. ADDITIONAL AGREEMENTS................................... 17
6.1. Regulatory and Other Matters................................ 17
6.2. Access to Information....................................... 17
6.3. Stockholders' Approval...................................... 17
6.4. NNM Listing................................................. 17
6.5. Affiliates.................................................. 17
6.6. Additional Agreements....................................... 17
6.7. Advice of Changes........................................... 18
6.8. Takeover Proposals.......................................... 18
6.9. Tax Matters................................................. 18
6.10. ESOP Committee.............................................. 19
6.11. Termination of ESOP......................................... 19
6.12. Tax Matters................................................. 19
6.13. Intellectual Property Assignment............................ 19
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6.14. Employment Agreement........................................ 19
6.15. Form 8-K.................................................... 19
6.16. Indemnification............................................. 19
ARTICLE VII. CONDITIONS PRECEDENT................................... 20
7.1 Conditions to Each Party's Obligation To Effect the
Merger...................................................... 20
7.2. Conditions to Obligations of EAI and Sub.................... 20
7.3. Conditions to Obligations of VSA............................ 21
ARTICLE VIII. TERMINATION AND AMENDMENT............................. 21
8.1. Termination................................................. 21
8.2. Effect of Termination....................................... 22
8.3. Amendment; Extension; Waiver................................ 22
ARTICLE IX. INDEMNIFICATION......................................... 23
9.1. Indemnification by Stockholder.............................. 23
9.2. Claims...................................................... 23
9.3. Notice of Third-Party; Assumption of Defense................ 23
9.4. Settlement or Compromise.................................... 23
9.5. Failure of Indemnifying Person to Act....................... 24
9.6. Limitations on Stockholders Indemnity....................... 24
ARTICLE X. GENERAL PROVISIONS....................................... 24
10.1. Expenses.................................................... 24
10.2. Notices..................................................... 24
10.3. Interpretation.............................................. 25
10.4. Counterparts; Facsimile..................................... 25
10.5. Entire Agreement............................................ 25
10.6. Governing Law............................................... 25
10.7. Survival.................................................... 25
10.8. Severability................................................ 26
10.9. Publicity................................................... 26
10.10. Assignment; Third Party Beneficiaries....................... 26
10.11. Knowledge and Awareness..................................... 26
10.12. Construction................................................ 26
10.13. Pooling of Interests Accounting; Tax Free Reorganization.... 26
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of August 19,
1998 (the "Agreement"), by and among ENGINEERING ANIMATION, INC., a Delaware
corporation ("EAI"), EAI VICTORY, INC., a Michigan corporation and a wholly
owned subsidiary of EAI ("Sub") and VARIATION SYSTEMS ANALYSIS, INC., a Michigan
corporation ("VSA").
WHEREAS, the Boards of Directors of EAI and VSA have determined that it is
in the best interests of their respective companies and stockholders to
consummate the business combination provided for in this Agreement in which Sub,
subject to the terms and conditions set forth herein, shall merge with and into
VSA (the "Merger") and as a result, VSA shall become a wholly owned subsidiary
of EAI.
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and to establish certain conditions to
the Merger.
WHEREAS, the Stockholder (as defined in Article IX) is the majority
stockholder of VSA.
WHEREAS, as of July 29, 1998, EAI, Sub and VSA entered into an Agreement
and Plan of Merger (the "Original Agreement"), and the parties amended and
restated the Original Agreement in its entirety pursuant to an Amended and
Restated Agreement and Plan of Merger dated as of August 5, 1998 the "Amended
Agreement").
WHEREAS, the parties desire to amend and restate the Amended Agreement in
its entirety in the manner provided herein.
WHEREAS, the Disclosure Schedule delivered by VSA in connection with the
Amended shall be deemed to by the Disclosure Schedule delivered by VSA in
connection with this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, the parties agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Michigan Business Corporation Act (the "MBCA"), at the
Effective Time (as hereinafter defined), Sub shall merge with and into VSA. VSA
shall be the surviving corporation in the Merger (hereinafter sometimes referred
to as the "Surviving Corporation"), and shall continue its corporate existence
under the laws of the State of Michigan under the name of "Variation Systems
Analysis, Inc.". Upon consummation of the Merger, the separate corporate
existence of Sub shall terminate.
1.2. Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m., at the
offices of ▇▇▇▇▇▇▇, Carton & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
as soon as practical, but in any event not later than five business days after
the satisfaction or waiver of the latest to occur of the conditions set forth in
Article VII, unless extended by mutual agreement of the parties (the actual date
of the Closing is referred to herein as the "Closing Date"). The parties
anticipate that the Closing shall occur on or before September 30, 1998.
1.3. Effective Time. Subject to the terms and conditions of this
Agreement, the Merger shall become effective as set forth in the certificate of
merger in a form mutually agreeable to the parties hereto (the "Certificate of
Merger"), which shall be filed with the Secretary of State of the State of
Michigan (the "Michigan Secretary") in accordance with the provisions of the
MBCA on or, if the parties agree, before the Closing Date. The term "Effective
Time" shall be the date and time when the Merger becomes effective, as set forth
in the Certificate of Merger.
1.4. Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in the MBCA.
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1.5. Articles of Incorporation and By-Laws. Subject to the terms and
conditions of this Agreement, at the Effective Time, the Articles of
Incorporation and By-Laws of VSA shall be amended and restated in the forms
attached as Exhibit F and Exhibit G, respectively, and be the Amended and
Restated Articles of Incorporation and Amended and Restated By-Laws of the
Surviving Corporation, until thereafter amended in accordance with applicable
law.
1.6. Directors and Officers. The directors and officers of Sub immediately
prior to the Effective Time shall continue as the directors and officers of the
Surviving Corporation, unless and until thereafter changed in accordance with
the provisions of the MBCA and the Surviving Corporation's Articles of
Incorporation and By-Laws.
1.7. Tax and Accounting Consequences. EAI and VSA intend that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
shall constitute a "plan of reorganization" for the purposes of Section 368 of
the Code. EAI and VSA also intend that the Merger be accounted for as a pooling
of interests pursuant to Opinion No. 16 of the Accounting Principles Board.
ARTICLE II.
CONVERSION AND EXCHANGE OF SHARES
2.1. Definitions. The following terms shall have the following respective
meanings for purposes of this Agreement:
(a) "EAI Common Stock" shall mean each share of the Common Stock, $.01 par
value per share, of EAI.
(b) "EAI Stock Value" shall mean $48.00 per share of EAI Common Stock.
(c) "Sub Stock" shall mean each share of the common stock, no par value per
share, of Sub.
(d) "VSA Certificate" shall mean each certificate representing any shares
of VSA Stock outstanding immediately prior to the Effective Time.
(e) "VSA Stock" shall mean each share of the common stock, $1.00 par value
per share, of VSA, including the common stock of VSA being held pursuant to
VSA's Employee Stock Ownership Plan.
2.2. Total Merger Consideration. The total consideration payable as
provided herein to holders of VSA Stock upon consummation of the Merger shall be
equal to that amount of EAI Common Stock having an aggregate EAI Stock Value
equal to Twenty Six Million and 00/00 U.S. Dollars (U.S. $26,000,000).
2.3. Conversion of Sub Stock. At the Effective Time, each share of Sub
Common Stock issued and outstanding immediately prior thereto shall be converted
into one share of common stock, $1.00 par value per share, of the Surviving
Corporation.
2.4. Conversion of VSA Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of EAI, Sub, VSA or any stockholder of
VSA (the "VSA Stock Conversion"):
(a) Each share of the VSA Stock issued and outstanding immediately prior to
the Effective Time (including, but not limited to, the Bonus Shares (as defined
in Section 2.5(d) below)), other than Dissenter's Shares (as defined below),
shall be converted into the right to receive shares of EAI Common Stock at the
Exchange Ratio. The "Exchange Ratio" shall be determined as follows: each share
of VSA Stock shall be exchanged for that number of shares of EAI Common Stock
equal to the quotient, carried to six decimal places, of (x) the number obtained
by dividing (i) $26,000,000 by (ii) the total of the number of shares of VSA
Stock outstanding immediately prior to the Effective Time, divided by (y) the
EAI Stock Value. If, prior to the Effective Time, the outstanding shares of EAI
Common Stock or VSA Stock shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities as a result of
a reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or
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other similar change in capitalization, then an appropriate and proportionate
adjustment shall be made to the Exchange Ratio.
(b) No fractional shares of EAI Common Stock shall be issued, and in lieu
thereof, EAI shall pay to each former stockholder of VSA who otherwise would be
entitled to receive such fractional share an amount in cash determined by
multiplying (i) the EAI Stock Value by (ii) the fraction of a share (rounded to
six decimal places when expressed as an Arabic number) of EAI Common Stock to
which such holder would otherwise be entitled to receive pursuant to this
Section 2.4.
(c) All of the shares of VSA Stock to be converted into EAI Common Stock
pursuant to this Article shall no longer be outstanding and shall automatically
be canceled and cease to exist at the Effective Time, and each VSA Certificate
shall thereafter represent the right to receive (i) a certificate representing
the number of whole shares of EAI Common Stock and (ii) cash in lieu of
fractional shares into which the shares of VSA Stock represented by such VSA
Certificate have been converted.
(d) Subject to the terms and conditions of this Agreement, shares of VSA
Stock with respect to which dissenters rights have been properly demanded in
accordance with the MBCA ("Dissenters' Shares") shall not be converted into EAI
Common Stock at the Effective Time, but shall be converted into the right to
receive from EAI such consideration as is determined to be due and payable with
respect to such Dissenters' Shares pursuant to the provisions of the MBCA. VSA
shall give EAI (i) prompt notice of any written demands for appraisals,
withdrawals or demands for appraisal and any other instruments in respect
thereof received by VSA and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal. VSA shall not voluntarily
make any payment with respect to any demands for appraisal and will not, except
with the prior written consent of EAI, settle or offer to settle any such
demands.
(e) At the Effective Time, all shares of VSA Stock that are owned by VSA as
treasury stock and all shares of VSA Stock that are owned, directly or
indirectly, by VSA or EAI or any wholly owned subsidiary of EAI shall be
canceled and shall cease to exist, and no stock of EAI or other consideration
shall be delivered in exchange therefor. All shares of EAI Common Stock that are
owned by VSA shall become treasury stock of EAI.
(f) After the Effective Time, there shall be no transfers on VSA's stock
transfer books of shares of VSA Stock.
2.5 Exchange of Shares. (a) At or any time after the Closing, each
stockholder of VSA shall have the right to deliver to EAI a properly completed
letter of transmittal in form reasonably satisfactory to EAI (the "Transmittal
Letter") and VSA Certificates representing all of the issued and outstanding
shares of VSA Stock owned by such stockholder, other than shares which are
Dissenter's Shares, duly endorsed for transfer or accompanied by duly executed
stock powers, free and clear of all options, liens, claims, charges,
restrictions and other encumbrances of any nature or kind whatsoever, other than
federal and state securities law restrictions. Upon proper surrender of a VSA
Certificate for exchange and cancellation to EAI, and in accordance with and
subject to the other provisions of this Agreement and the Transmittal Letter,
the holder of such VSA Certificate shall receive in exchange therefor (i) a
certificate representing that number of whole shares of EAI Common Stock to
which such holder of VSA Stock shall have become entitled, and (ii) a check
representing the amount of any cash in lieu of fractional shares which such
holder has the right to receive. The VSA Certificate so surrendered shall
forthwith be canceled. No interest shall be paid or accrued on any cash in lieu
of fractional shares payable to holders of VSA Certificates.
(b) If any certificate representing shares of EAI Common Stock is to be
issued in a name other than that in which the VSA Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the VSA Certificate shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to EAI in advance any
transfer or other taxes required by reason thereof, or shall establish to the
satisfaction of EAI that such tax has been paid or is not payable.
(c) In the event any VSA Certificate shall have been lost, stolen or
destroyed, the person so claiming shall make an affidavit of that fact and
indemnify EAI against any claim that may be made against it with
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respect to such VSA Certificate. Thereafter, EAI shall issue in exchange for
such lost, stolen or destroyed VSA Certificate the shares of EAI Common Stock
and any cash in lieu of a fractional share deliverable in respect thereof
pursuant to this Agreement.
(d) At the Effective Time, all outstanding warrants, options, phantom
stock, convertible securities or any other rights to acquire shares of the
capital stock of VSA, if any such rights exist, shall be canceled and
extinguished without any conversion thereof or any payment with respect thereto.
Notwithstanding the foregoing, however, immediately prior to the Effective Time,
VSA shall be entitled to issue 3,498 shares of VSA Stock pursuant to certain
stock bonus agreements, which shares shall then be subject to conversion and
exchange as provided in Section 2.4 and 2.5 hereof (the "Bonus Shares").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF VSA
Except as disclosed by VSA in the disclosure schedule delivered pursuant to
this Agreement (the "Disclosure Schedule"), VSA represents and warrants to EAI
and Sub as follows:
3.1. Corporate Organization. (a) VSA and the entities listed in Section
3.1(b) of the Disclosure Schedule that are designated as subsidiaries in such
Section ("Subsidiaries") are each a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, which
is set forth in Section 3.1(b) of the Disclosure Schedule. VSA and each
subsidiary have the corporate power and authority to own or lease all of their
respective properties and assets and to carry on their respective business as it
is now being conducted, and is duly licensed or qualified to do business and are
in good standing in each jurisdiction in which the nature of the business
conducted by them or the character or location of the properties and assets
owned or leased by them makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified would not have a material
adverse effect on the business, properties, operations or financial condition (a
"Material Adverse Effect") of VSA and its Subsidiaries, taken as a whole.
Correct and complete copies of the Articles of Incorporation and By-Laws of VSA
and the charter documents and By-Laws of each Subsidiary, as in effect on the
date of this Agreement, have been made available to EAI by VSA. For purposes of
this Article III and Article VI, each reference to VSA shall also include each
Subsidiary, unless the context requires otherwise.
(b) Except as set forth in Section 3.1(b) of the Disclosure Schedule, VSA
does not own of record or beneficially, directly or indirectly, (i) any shares
of outstanding capital stock or securities convertible into capital stock of any
other corporation or (ii) any participating interest in any partnership, limited
liability company, joint venture or other non-corporate business.
3.2. Capitalization. The authorized capital stock of VSA consists of
100,000 shares of common stock, $1.00 par value per share, of which 69,970
shares are issued and outstanding as of the date hereof and 73,468 shares will
be issued and outstanding as of the Effective Time. No shares of VSA Stock are
held in VSA's treasury and no shares of VSA Stock are reserved for issuance
other than the Bonus Shares. All of the issued and outstanding shares of VSA
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Other than the Bonus Shares and the
ESOP (as defined in Section 3.12), VSA does not have and is not bound by any
outstanding subscriptions, options, convertible securities, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of its capital stock.
3.3. Authority; No Violation. (a) VSA has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of VSA. Except for the adoption of
this Agreement by the requisite vote of holders of the issued and outstanding
shares of VSA Stock, no other corporate proceedings on the part of VSA are
necessary to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by VSA and Stockholder and constitutes a valid
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and binding obligation of VSA and Stockholder, enforceable against VSA and
Stockholder in accordance with its terms.
(b) The execution and delivery of this Agreement by VSA, the consummation
by VSA of the transactions contemplated hereby, and the compliance by VSA with
the terms or provisions hereof, shall not (i) violate any provision of the
Articles of Incorporation or By-Laws of VSA, (ii) violate any law, statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to VSA or any of its properties or assets, or (iii) violate, conflict
with, breach any provision of or result in the loss of any benefit or the
increase in the amount of any liability or obligation under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any liens, pledges,
charges, encumbrances or security interests of any nature or kind (collectively,
"Liens") upon any of the properties or assets of VSA under any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, agreement or other
instrument or obligation to which VSA is a party, or by which it or any of its
properties or assets may be bound or affected, which, in any such case, would
have a Material Adverse Effect on VSA.
3.4. Consents and Approvals. Except for (i) the filing of Certificate of
Merger with the Michigan Secretary pursuant to the MBCA, (ii) the approval of
this Agreement by the requisite vote of the holders of VSA Stock, and (iii) the
filing with the Securities and Exchange Commission (the "SEC") and declaration
of effectiveness of a Registration Statement on Form S-4 (the "S-4"), no
consent, approval or authorization of, or withholding of objection on the part
of, or filing, registration or qualification with, or notice to (collectively,
the "Consents") any court, administrative agency, commission or other
governmental authority or instrumentality, whether Federal, state, local or
foreign (each a "Governmental Authority"), or with any third party are necessary
in connection with the execution and delivery by VSA of this Agreement and the
consummation by VSA of the Merger and the other transactions contemplated by
this Agreement, except where the failure to obtain the same would not have a
Material Adverse Effect on VSA.
3.5. Reports. Except in each case where failure to do so would not have a
Material Adverse Effect on VSA, VSA has timely filed all reports, registrations
and statements required to be filed since January 1, 1995 with any Governmental
Authority and has paid all fees and assessments due and payable in connection
therewith. No Governmental Authority has initiated any proceeding or, to the
best knowledge of VSA, investigation into the business or operations of VSA.
3.6. Compliance with Applicable Law. VSA holds all licenses, franchises,
permits and authorizations necessary for the lawful conduct of its business
except where failure to hold the same would not have a Material Adverse Effect
on VSA. VSA has complied with and is not in default under any law, statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
of any Governmental Authority applicable to VSA, except where the failure to be
in compliance would not have a Material Adverse Effect on VSA.
3.7. Financial Statements. VSA has previously provided EAI with correct
and complete copies of the unaudited balance sheets of VSA as of June 30, 1995,
1996, 1997 and 1998 and the related unaudited statements of income and retained
earnings and cash flows for the fiscal years ended June 30, 1995, 1996, 1997 and
1998 (collectively, the "VSA Financial Statements"). The VSA Financial
Statements fairly present in all material respects the financial position of VSA
as of the dates thereof, and the results of operations and cash flows of VSA for
the respective fiscal periods or as of the respective dates thereof. Each of the
VSA Financial Statements, including the notes thereto, has been, or shall be,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except that the same are not
audited and do not contain any required footnotes.
3.8. Absence of Certain Changes or Events. (a) Since June 30, 1998, (i)
VSA has not incurred any material liability that is not disclosed in the VSA
Financial Statements, (ii) no event has occurred which, individually or in the
aggregate, would have a Material Adverse Effect on VSA, and (iii) VSA has
carried on its business in the ordinary and usual course.
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(b) Since June 30, 1998, VSA has not (i) increased in any material respect
the salaries, wages, or other compensation, or pensions, fringe benefits or
other perquisites payable to any director, executive officer or other management
employee or to any non-management employee (except to the extent customary and
consistent with past practice), or (ii) granted any severance or termination
pay, or (iii) paid or accrued any bonuses or commissions (except to the extent
customary and consistent with past practice), or (iv) suffered any strike, work
stoppage, slowdown, or other labor disturbance which would, either individually
or in the aggregate, result in a Material Adverse Effect on VSA.
3.9. Legal Proceedings and Restrictions. (a) There are no actions, suits,
proceedings or, claims pending, or to the knowledge of VSA, threatened against
or affecting VSA at law or in equity or before any Governmental Authority.
(b) There is no judgment, order, writ, decree, injunction or regulatory
restriction imposed upon VSA or its assets which has not been satisfied and
which could reasonably be expected to have, a Material Adverse Effect on VSA.
3.10. Taxes and Tax Returns.
(a) (i) VSA (which term for purposes of this Section 3.10 shall
include any former subsidiaries of VSA for periods during which they were
owned) has filed correct and complete Returns in respect of Taxes required
to be filed; all Taxes shown on such Returns or otherwise known by VSA to
be due or payable by VSA have been paid; no adjustment relating to any such
Return has been proposed in writing by any Governmental Authority, except
proposed adjustments that have been resolved prior to the date hereof; and
there are no outstanding summons, subpoenas or written requests for
information with respect to any such Returns or the Taxes reflected
thereon. To VSA's knowledge, there is no reasonable basis for imposing any
additional Taxes on it other than the Taxes shown on such Returns. There
are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which VSA is subject
and, to VSA's knowledge, VSA is not under audit by any Governmental
Authority for any Tax. There are no Tax liens on any assets of VSA other
than liens for Taxes not yet due or payable;
(ii) VSA has paid, on the basis of VSA's good faith estimate of the
required installments, all estimated Taxes required to be paid under
Section 6655 of the Code or any comparable provision of state, local or
foreign law; and all Taxes which shall be due and payable for any period or
portion thereof ending on or prior to the Closing Date shall have been paid
or shall be reflected on VSA's books as an accrued Tax liability, either
current or deferred. All Taxes required to be withheld, collected or
deposited by VSA during any taxable period for which the applicable statute
of limitations on assessment remains open have been timely withheld,
collected or deposited and, to the extent required, have been paid to the
relevant Governmental Authority;
(iii) For each taxable period for which the statute of limitations on
assessment remains open, VSA has not (A) been either a common parent
corporation or a member corporation of an affiliated group of corporations
filing a consolidated Federal income tax return, or (B) acquired any
corporation that filed a consolidated Federal income tax return with any
other corporation that was not also acquired by VSA; and no other entity
that was included in the filing of a Return with VSA on a consolidated,
combined, or unitary basis has left VSA's consolidated, combined or unitary
group in a taxable year for which the statute of limitations on assessment
remains open. VSA has not been at any time a member of any partnership,
limited liability company or joint venture or the holder of a beneficial
interest in any trust for any period for which the statute of limitations
for any Tax potentially applicable as a result of such membership or
holding has not expired;
(iv) No consent under Section 341(f) of the Code has been filed with
respect to VSA; and
(v) There is no significant difference on the books of VSA between the
amounts of the book basis and the tax basis of assets (net of liabilities)
that is not accounted for by an accrual on the books for Federal income tax
purposes.
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(b) VSA:
(i) Does not have any property that is or will be required to be
treated as being owned by another person under the provisions of Section
168(f)(8) of the Code (as in effect prior to amendment by the Tax Reform
Act of 1986) or is "tax-exempt use property" within the meaning of Section
168 of the Code;
(ii) Does not have any Tax sharing or allocation agreement or
arrangement (written or oral), does not owe any amount pursuant to any Tax
sharing or allocation agreement or arrangement, and will not have any
liability in respect to any Tax sharing or allocation agreement or
arrangement with respect to any entity that has been sold or disposed of;
(iii) Was not acquired in a qualified stock purchase under Section
338(d)(3) of the Code and no elections under Section 338(g) of the Code,
protective carryover basis elections, offset prohibition elections or other
deemed or actual elections under Section 338 are applicable to VSA;
(iv) Is not and has not been subject to the provisions of Section
1503(d) of the Code related to "dual consolidated loss" rules;
(v) Is not a party to any agreement, contract or arrangement that
would result, individually or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code
by reason of the Merger;
(vi) Does not have any income reportable for a period ending after the
Closing Date but attributable to an installment sale occurring in or a
change in accounting method made for a period ending on or prior to the
Closing Date which resulted in a deferred reporting of income from such
transaction or from such change in accounting method (other than a deferred
intercompany transaction), or deferred gain or loss arising out of any
deferred intercompany transaction;
(vii) Does not have any unused net operating loss, unused net capital
loss, unused tax credit, or excess charitable contribution for Federal
income tax purposes;
(viii) Is not a United States real property holding corporation as
defined in Section 897 of the Code ("USRPHC") and as of the Closing has not
been a USRPHC for the five year period immediately preceding the Closing
Date;
(ix) No withholding of Taxes by EAI will be required in this
transaction under Sections 3406 or 1445 of the Code or any other provision
of the Code or state, local or foreign law and VSA will provide any
required certificates to avoid any such withholding; and
(x) Is not a Small Business Corporation ("S" Corporation) as defined
in Section 1361(a) of the Code.
(c) For purposes of this Agreement:
(i) "Returns" means any and all returns, reports, information returns
and information statements with respect to Taxes required to be filed with
any Governmental Authority, including consolidated, combined and unitary
tax returns.
(ii) "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
and other governmental assessments and impositions of any kind, payable to
any Governmental Authority, including income, franchise, net worth,
profits, gross receipts, minimum alternative, estimated, ad valorem, value
added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social security,
Medicare, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, customs duties, imposts, charges, levies
or other similar assessments of any kind, and interest, penalties and
additions to tax imposed with respect thereto.
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3.11. Employee Benefits.
(a) VSA (which for purposes of this Section 3.11 shall include any ERISA
Affiliate (as hereinafter defined)) has not at any time within the past three
years, maintained, administered or contributed to any pension, profit-sharing,
thrift or 401(k), disability, medical, dental, health, life (including any
individual life insurance policy), death benefit, group insurance or any other
welfare plan, bonus, incentive, deferred compensation, stock purchase, stock
option, severance plan, salary continuation, vacation, holiday, sick leave,
fringe benefit, personnel policy, or similar plan, trust, program, policy,
commitment or arrangement whether or not covered by Employee Retirement and
Income Security Act of 1974, as amended ("ERISA") and whether or not funded or
insured and whether written or oral (hereinafter referred to as the "VSA
Plans"), which would result in EAI, VSA or the Surviving Corporation having any
material liabilities, whether direct or indirect.
(b) VSA has made available to EAI correct and complete copies of (i) each
VSA Plan document, amendments thereto and board resolutions adopting such plans
and amendments, (ii) each current summary plan description, (iii) any and all
agreements, insurance policies and other documents related to any VSA Plan, (iv)
the most recent determination letter from the Internal Revenue Service (the
"IRS") for each VSA Plan (as applicable), and (v) the three most recent Annual
Reports -- Form 5500 (including accompanying schedules) and summary annual
reports for each VSA Plan.
(c) (i) Each VSA Plan and VSA have at all times complied in all material
respects with the applicable requirements of ERISA, the Code and any other
applicable law (including regulations and rulings thereunder), and the VSA Plans
have at all times been properly administered in all material respects in
accordance with all such laws, including reporting and disclosure requirements
under ERISA and the Code, and with the terms of each applicable plan document,
(ii) each of the VSA Plans intended to be "qualified" within the meaning of Code
Section 401(a) is so qualified and, to VSA's knowledge, no facts exist that
would reasonably be expected to affect adversely such "qualified" status, (iii)
no VSA Plan provides benefits, including, without limitation, death or medical
benefits (whether or not insured), for current or former employees following
their retirement or other termination of service, other than coverage mandated
by applicable statutes or death benefits or retirement benefits under any
"employee pension plan" (as such term is defined in ERISA Section 3(2)), (iv)
there has not occurred nor, to the knowledge of VSA, is any person contractually
bound to enter into any non-exempt "prohibited transaction" within the meaning
of Code Section 4975 or ERISA Section 406 with respect to a VSA Plan, (v) VSA
has not engaged in a transaction which would subject it to either a civil
penalty under ERISA Section 409 or a tax under Code Section 4976, (vi) there are
no pending, or, to VSA's knowledge, threatened claims (other than routine claims
for benefits) by, on behalf of or against VSA, any of the VSA Plans or any
trusts related thereto, (vii) VSA has made or caused to be made on a timely
basis any and all contributions, premiums and other amounts due and owing under
the terms of any VSA Plan or as otherwise required by applicable law with
respect to a VSA Plan, (viii) VSA has in all respects complied with Code Section
4980B and other applicable laws concerning the continuation of employer-provided
health benefits following a termination of employment or any other event that
would otherwise terminate such coverage, (ix) VSA has in all respects complied
with Section 9801 of the Code concerning the portability of employee health
coverage, (x) VSA has not at any time maintained, administered or contributed to
any plan subject to ERISA Title IV, and (xi) VSA has not at any time
participated in, made contributions to or had any other liability with respect
to a "multiemployer plan" under ERISA Section 4001, a "multiple employer plan"
under Code Section 413(c), or a "multiple employer welfare arrangement" under
ERISA Section 3(40).
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (other than as provided in
Section 6.10) will (i) result in any material payment (including, without
limitation, severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director, officer or employee of VSA, (ii) increase in any
material respect any benefits otherwise payable under any VSA Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits.
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(e) There are no actions, claims or audits pending or, to VSA's knowledge,
threatened with respect to any VSA Plan (other than claims for benefits in the
ordinary course) that will create any liability or obligation for the Surviving
Corporation with respect to any VSA Plan participant, beneficiary, alternate
payee or other claimant, or with respect to any Governmental Authority,
including, but not limited to, the IRS, the Department of Labor and the Pension
Benefit Guaranty Corporation.
(f) For purposes of this Agreement, "ERISA Affiliate" means VSA and (i) any
corporation that is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Code of which VSA is a member, (ii) any trade
or business (whether or not incorporated) which is a member of a group of trades
or businesses under common control within the meaning of Section 414(c) of the
Code of which VSA is a member; and (iii) any member of an affiliated service
group within the meaning of Section 414(m) or (o) of the Code of which VSA, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member.
3.12. ESOP.
(a) Comerica Bank constitutes the sole trustee (the "ESOP Trustee") of the
Variation Systems Analysis, Inc. Employee Stock Ownership Plan (the "ESOP"), and
Trustee has been duly appointed a Trustee of the ESOP.
(b) The ESOP has been duly adopted by the Board of Directors of VSA and
executed on behalf of VSA and the ESOP Trustee. The ESOP meets all requirements
of an "employee stock ownership plan" as defined in Section 4975(e)(7) of the
Code, and the ESOP trust is a trust duly formed in accordance with its trust
agreement and Michigan law, and is validly existing under the laws of the State
of Michigan.
(c) The ESOP Trustee is the sole registered owner of 6243.78 shares of VSA
Stock, not in its individual capacity, but solely in its capacity as ESOP
Trustee.
(d) There is no "Qualified Loan" (as defined in the ESOP) outstanding.
3.13. Employment and Labor Relations. To the knowledge of VSA, no
executive, key employee or group of employees has any plans to terminate its or
their employment with VSA. There are no charges, complaints, investigations or
litigation currently pending, or to the knowledge of VSA threatened against VSA,
relating to alleged employment discrimination, unfair labor practices, equal pay
discrimination, affirmative action noncompliance, occupational safety and
health, breach of employment contract, employee benefit matters, wrongful
discharge or other employment-related matters, which, if determined adversely to
VSA would have a Material Adverse Effect on VSA. There are no outstanding orders
or charges against VSA under any applicable occupational safety and health laws
in any jurisdiction in which VSA conducts business which would result in a
Material Adverse Effect on VSA. All levies, assessments and penalties made
against VSA pursuant to any applicable workers' compensation legislation in any
jurisdiction in which VSA conducts business have been paid by VSA. VSA is not a
party to any contracts with any labor union or employee association nor has VSA
made commitments to or conducted negotiations with any labor union or employee
association with respect to any future contracts. VSA is not aware of any
current attempts to organize or establish any labor union or employee
association with respect to any employees of VSA, and there is no existing or
pending certification of any such union with regard to a bargaining unit.
3.14. Contracts. Section 3.14 of the Disclosure Schedule lists or
describes the following contracts, agreements, licenses, permits, arrangements,
commitments or understandings (whether written or oral) which are currently in
effect or which will, without any further action on the part of VSA become
effective in the future, to which VSA is a party (collectively, the "VSA
Contracts"):
(a) any agreement for the lease of personal property or real property to or
from any person or entity that individually involves an expenditure by the
lessee of in excess of $10,000 in any one year;
(b) any agreement for the purchase, sale or distribution of products,
materials, commodities, supplies or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than one year or involve consideration payable by any party in
excess of $10,000 in any one year;
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(c) any agreement creating, governing or providing for an investment or
participation in a partnership, limited liability company or joint venture;
(d) any agreement under which VSA has created, incurred, assumed or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, or under which VSA has imposed a Lien on any of its assets;
(e) any agreement outside the ordinary course of business imposing any
obligations on VSA of confidentiality or noncompetition;
(f) any written agreement with any director, officer, employee or
stockholder of VSA or any of their affiliates;
(g) any pension, profit sharing, thrift or 401(k), bonus, incentive,
deferred compensation, stock purchase, stock option, severance, salary
continuation or other material plan or arrangement for the benefit of current or
former directors, officers or employees;
(h) any agreement for the employment of any individual on a full-time,
part-time, consulting or other basis which is not terminable by VSA upon thirty
(30) days' notice or less without payment of any termination fee, severance or
other penalty by VSA;
(i) any agreement relating to any Intellectual Property (as that term is
defined in Section 3.18) used by VSA and which is material to the conduct of its
business, or that is licensed by VSA for use by others;
(j) any agreement under which the consequences of a default, termination or
acceleration would have a Material Adverse Effect on VSA; or
(k) any other agreement the performance of which involves consideration
payable by VSA in excess of $10,000 in any one year.
VSA has made available to EAI a correct and complete copy of each VSA
Contract. Except as set forth in Section 3.14 of the Disclosure Schedule, (i)
each VSA Contract is legal, valid, binding, enforceable in accordance with its
terms and in full force and effect, (ii) the consummation of the Merger will not
cause a breach or termination of any VSA Contract nor effect a change in any of
the terms of any VSA Contract which, in any such case, would have a Material
Adverse Effect on VSA, (iii) VSA is not, and, to VSA's knowledge, no other party
is, in breach or default in any material respect of any VSA Contract and no
event has occurred which with notice or lapse of time, or both, would constitute
a breach or default by VSA that would result in or permit termination,
modification or acceleration under any VSA Contract, and (iv) VSA has not, and,
to VSA's knowledge, no other party has, repudiated any provision of any VSA
Contract.
3.15. Undisclosed Liabilities. Except for liabilities (i) that are fully
reflected or reserved against on the June 30, 1998 balance sheet of VSA included
in the VSA Financial Statements (the "1998 Balance Sheet") or (ii) that were
incurred in the ordinary course of business consistent with past practice since
June 30, 1998, or (iii) that are fully reflected or reserved against in the VSA
Financial Statements, VSA has not incurred any material liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether due
or to become due).
3.16. Environmental Liability.
(a) VSA has not received any notice, and does not otherwise have knowledge,
of any claim, and no proceeding has been instituted raising any claim, against
VSA or any of the real properties now or formerly owned, leased or operated by
VSA or other assets of VSA, alleging any material damage to the environment or
violation of any Environmental Laws;
(b) VSA does not have knowledge of any facts which would give rise to any
claim, public or private, of violation in any material respect of Environmental
Laws or material damage to the environment emanating from, occurring on or in
any way related to real properties now or formerly owned, leased or operated by
VSA or to other assets of VSA or their use;
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(c) VSA has not stored or released any Hazardous Materials on real
properties now or formerly owned, leased or operated by it or disposed of any
Hazardous Materials, in each case in a manner contrary in any material respect
to any Environmental Laws; and
(d) All buildings on all real properties now owned, leased or operated by
VSA are in compliance with applicable Environmental Laws, except where the
failure to comply would not reasonably be expected to result in a Material
Adverse Effect on VSA.
(e) For purposes of this Agreement,
(i) "Environmental Laws" means any and all Federal, state, county,
local and foreign laws, statutes, codes, ordinances, rules, regulations,
judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to pollution and
the protection of the environment or the release of any materials into the
environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public
systems; and
(ii) "Hazardous Material" means any and all "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous wastes",
"restricted hazardous wastes", "toxic substances", "toxic pollutants" or
words of similar import, under any of the Environmental Laws.
3.17. Tangible Assets. VSA has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, shown on the 1998 Balance Sheet or acquired after the date thereof,
except for properties and assets disposed of in the ordinary course of business,
free and clear of all Liens. VSA owns or leases pursuant to a VSA Contract all
buildings, machinery, equipment and other tangible assets material to the
conduct of its business as presently conducted. Each such tangible asset is free
from defects (patent and latent) other than defects that do not individually or
in the aggregate materially impair its value or intended use, has been
maintained in accordance with normal industry practice, is in reasonably good
operating condition and repair (subject to normal wear and tear). Section 3.17
of the Disclosure Schedule contains a schedule of such tangible assets owned or
leased by VSA that have a value in excess of $10,000.
3.18. Real Property. VSA does not own any real property. Section 3.18 of
the Disclosure Schedule lists and describes briefly all real property leased or
subleased to VSA. VSA has made available to EAI correct and complete copies of
each such lease and sublease. Except as set forth in Section 3.18 of the
Disclosure Schedule:
(a) each such lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the consummation of the transactions contemplated hereby will neither
cause the termination of each such lease or sublease nor effect a change in any
of its terms;
(c) VSA is not, and, to the knowledge of VSA, no other party to such lease
or sublease is, in breach or default in any material respect, and no event has
occurred which, with notice or lapse of time, or both, would constitute a breach
or default by VSA that would permit termination, modification or acceleration
thereunder;
(d) neither VSA nor, to the knowledge of VSA, any other party to each such
lease or sublease has repudiated or disputed any provision thereof;
(e) VSA has not assigned, transferred, conveyed, mortgaged, deeded in trust
or encumbered any interest in any leasehold or subleasehold.
3.19. Intellectual Property. (a) Section 3.19 of the Disclosure Schedule
identifies each patent, trademark, service ▇▇▇▇, trade name, assumed name,
copyright, trade secret, license to or from third parties with respect to any of
the foregoing, applications to register or registrations of any of the foregoing
or other intellectual property rights which are material to the business of VSA
and are owned or used by or have been issued to VSA (collectively the
"Intellectual Property"). VSA has made available correct and complete copies of
all patents, trademarks, copyrights, registrations, licenses, permits,
agreements and applications related to the Intellectual Property to EAI and
correct and complete copies of all other written documentation
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evidencing ownership of or the right to use each such item. Except as set forth
in Section 3.19 of the Disclosure Schedule:
(i) VSA possesses all right, title and interest in and to the
Intellectual Property, free and clear of any Lien or other restriction;
(ii) the legality, validity, enforceability, ownership or use of the
Intellectual Property is not currently being challenged, nor to the
knowledge of VSA is there any reasonable basis for any such challenge;
(iii) VSA has taken all necessary action to maintain the patents
listed on Section 3.19 of the Disclosure Schedule in effect and will
continue to maintain those rights in effect prior to the Closing so as not
to affect materially the validity or enforcement thereof; and
(iv) the Intellectual Property will be owned or available for use by
the Surviving Corporation immediately subsequent to the Closing on the same
terms and conditions (except as contemplated by the Intellectual Property
Assignment described in Section 6.12) as in effect immediately prior to the
Closing and the transactions contemplated by this Agreement will have no
Material Adverse Effect on VSA's rights, title and interest in and to any
of the rights set forth in Section 3.19 of the Disclosure Schedule.
(b) To the knowledge of VSA, (i) VSA has not interfered with, infringed
upon, misappropriated or otherwise come into conflict with any intellectual
property rights of third parties, nor is VSA currently interfering with,
infringing upon, misappropriating or otherwise coming into conflict with any
intellectual property rights of third parties, in each case in any manner which
would have a Material Adverse Effect on VSA and (ii) to VSA's knowledge, no
third party has, in the past three years, interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
rights of VSA that would result in a Material Adverse Effect on VSA, nor, to
VSA's knowledge, is any third party currently interfering with, infringing upon,
misappropriating or otherwise coming into conflict with any Intellectual
Property rights of VSA.
3.20. Notes and Accounts Receivable. All notes and accounts receivable of
VSA have arisen in the ordinary course of business, and to the knowledge of VSA
are not subject to any setoff or counterclaim and are collectible, subject only
to the reserve for bad debts, if any, established in accordance with the past
practice of VSA.
3.21. Bank Accounts and Powers of Attorney. Section 3.21 of the Disclosure
Schedule sets forth a list of all accounts and deposit boxes maintained by VSA
at any bank or other financial institution and the names of the persons
authorized to effect transactions in such accounts and with access to such
boxes. There are no outstanding powers of attorney executed on behalf of VSA.
3.22. Guaranties. VSA is not a guarantor or otherwise is liable for any
indebtedness, liability or other obligation of any other person or entity.
3.23. Insurance. Section 3.24 of the Disclosure Schedule lists each
insurance policy and self-insurance arrangement to which VSA is a party, a named
insured or otherwise the beneficiary of, specifying the insurer, type of
insurance, policy number and pending claims thereunder with respect to VSA. VSA
is in compliance in all material respects with all conditions contained in such
policies.
3.24. Service Contracts and Warranties. VSA is not a party to any service
contract pursuant to which any material services are provided by VSA to a third
party. Section 3.24 of the Disclosure Schedule includes copies of the standard
terms and conditions of all product warranties and service or maintenance
contracts currently granted or entered into by VSA.
3.25. Certain Relationships. No stockholder, director, officer or, to
VSA's knowledge, employee of VSA (i) is, or controls, or is an employee of any
competitor, supplier, customer or lessor or lessee of VSA, or (ii) is indebted
to VSA in an amount in excess of $10,000 in any individual case, or (iii) owns
any asset, tangible or intangible, which is used in the business of VSA, other
than assets that are immaterial in value; and VSA has not entered into any
transaction (including the furnishing of goods or services) with any
stockholder,
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director, officer, employer or other affiliate, except on terms and conditions
no less favorable to VSA than would be obtained in a comparable arm's-length
transaction with a third party.
3.26. S-4 Information. None of the written information to be supplied by
VSA for inclusion in the S-4 will, at the time the S-4 is filed with the SEC, at
any time it is amended or supplemented, at the time it becomes effective under
the Securities Act of 1933, as amended (the "Securities Act"), or at the Closing
Date, contains any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading. Notwithstanding the foregoing, VSA makes no
representation or warranty with respect to statements made in the S-4 based on
written information supplied by EAI specifically for inclusion therein.
3.27. Broker's Fees. Neither VSA nor any of its directors, officers or
employees has employed any person or entity as a broker, finder or agent or
incurred any liability for any broker's fees, finder's fees or other commission
in connection with the Merger or the related transactions contemplated by this
Agreement.
3.28. Certain Customer Relationships. Section 3.38 of the Disclosure
Schedule contains a complete and accurate list of VSA's ten largest customers
(in terms of dollar sales by VSA) for the fiscal year ending June 30, 1998 (the
"Primary Customers"), together with the total dollar amount of all sales by VSA
to such Primary Customers during such period. VSA has not received any written
notice that any Primary Customer intends to reduce in any material respect the
dollar amount of sales by VSA in the year ending June 30, 1999 from the year
ended June 30, 1998.
3.29. Disclosure. No representation or warranty by VSA contained in this
Agreement (including the Disclosure Schedule and the Exhibits referred to
herein), or in any certificate furnished or to be furnished by VSA to EAI in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact required to make the statements herein or therein not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF EAI
EAI represents and warrants to VSA and Stockholder as follows:
4.1. Corporate Organization. EAI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. EAI has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified could not have a Material Adverse Effect on EAI and its
subsidiaries, taken as a whole. Correct and complete copies of the Certificate
of Incorporation and By-Laws of EAI, as in effect as of the date of this
Agreement, have been made available to VSA by EAI.
4.2. Capitalization. The authorized capital stock of EAI consists of
60,000,000 shares of EAI Common Stock, of which as of May 11, 1998, 10,213,195
shares were issued and outstanding, and 20,000,000 shares of preferred stock,
$.01 par value per share, none of which is issued and outstanding. All of the
issued and outstanding shares of EAI Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. The shares of EAI
Common Stock to be issued pursuant to the Merger will be duly authorized and
validly issued and, at the Effective Time, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
4.3. Authority; No Violation. (a) EAI has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly
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approved by the Board of Directors of EAI. No other proceedings or approvals on
the part of EAI are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by EAI and constitutes a valid and binding obligation of
EAI, enforceable against EAI in accordance with its terms.
(b) The execution and delivery of this Agreement by EAI, the consummation
by EAI of the transactions contemplated hereby, and the compliance by EAI with
the terms or provisions hereof, will not (i) violate any provision of the
Certificate of Incorporation or By-Laws of EAI, (ii) violate any law, statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to EAI or any of its properties or assets, or (iii) violate, conflict
with, breach any provision of or result in the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any Lien upon any of the
properties or assets of EAI under any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, agreement or other instrument or obligation to
which EAI is a party, or by which it or any of its properties or assets may be
bound or affected.
4.4. Consents and Approvals. Except for (i) the filing of Certificate of
Merger with the Michigan Secretary pursuant to the MBCA, the filing with the SEC
and declaration of effectiveness of the S-4 and (ii) the filings and
authorizations necessary to list the shares of EAI Common Stock issued pursuant
to this Agreement on the Nasdaq Stock Market National Market ("NNM"), no
Consents from any Governmental Authority or any third party are necessary in
connection with the execution and delivery by EAI of this Agreement and the
consummation by EAI of the Merger and the other transactions contemplated by
this Agreement.
4.5. SEC Reports. The annual report on Form 10-K of EAI for the fiscal
year ended December 31, 1997, as filed under the Securities Exchange Act of 1934
("Exchange Act"), and all other reports and proxy statements filed or required
to be filed by EAI subsequent to such report (collectively, the "EAI SEC
Documents"), have been duly and timely filed by EAI, complied in all material
respects with all requirements under the Exchange Act and the rules and
regulations promulgated thereunder, were true and correct in all material
respects as of the dates at which the information was furnished, and contained
no untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading. The financial
statements of EAI included in the EAI SEC Documents complied in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of interim financial statements, as permitted by
Forms 10-Q or 8-K of the SEC) consistently applied during the periods involved
(except as may be indicated in the notes thereto) and fairly presented, in
accordance with the applicable requirements of GAAP, the financial position of
EAI as of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of interim financial statements, to
normal year-end adjustments). Except as set forth in the EAI SEC Documents or as
incurred in the ordinary course of business since the date of the most recent
EAI SEC Documents. EAI does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth in a balance sheet of EAI which would have a Material Adverse
Effect on EAI.
4.6. S-4 Information. None of the information that EAI will include or
incorporate by reference in the S-4 will, at the time the S-4 is filed with the
SEC, at any time it is amended, supplemented, or at the time it becomes
effective under the Securities Act or at the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
S-4 will comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder.
Notwithstanding the foregoing, EAI makes no representation or warranty with
respect to statements made in the S-4 based on written information supplied by
VSA specifically for inclusion therein.
4.7. Ownership of Sub; No Prior Activities.
(a) Sub was formed for the purpose of engaging in the transactions
contemplated by this Agreement.
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(b) As of the Effective Time, all of the outstanding capital stock of Sub
will be owned directly by EAI. As of the Effective Time, there will be no
options, warrants or other rights (including registration rights), agreements,
arrangements or commitments to which Sub is a party of any character relating to
the issued or unissued capital stock of, or other equity interests in, Sub or
obligating Sub to grant, issue or sell any shares of the capital stock of, or
other equity interests in, Sub, by sale, lease, license or otherwise. There are
no obligations, contingent or otherwise, of Sub to repurchase, redeem or
otherwise acquire any shares of the capital stock of Sub.
(c) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Sub has not and will not have
incurred, directly or indirectly, through any affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
4.8. Broker's Fees. Neither EAI nor any of its directors, officers or
employees has employed any person or entity as a broker, finder or agent or
incurred any liability for any broker's fees, finder's fees or other commission
in connection with the Merger or the related transactions contemplated by this
Agreement.
4.9. Absence of Certain Changes or Events. Since December 31, 1997, except
as disclosed in the EAI SEC Documents, no event has occurred which would have a
Material Adverse Effect on EAI.
4.10. Legal Proceedings and Restrictions. There are no actions, suits,
proceedings or claims that require disclosure by EAI pursuant to Item 103 of
Regulation S-K promulgated under the Exchange Act.
4.11. Compliance With Applicable Law. EAI has complied with and is not in
default under any law, statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction of any Governmental Authority applicable to
EAI, except where the failure to be in compliance would not have a Material
Adverse Effect on EAI.
4.12. Intellectual Property. To the knowledge of EAI, (a) EAI has not
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any intellectual property rights of third parties, nor is EAI currently
interfering with, infringing upon, misappropriating or otherwise coming into
conflict with any intellectual property rights of third parties, in each case in
any manner which would have a Material Adverse Effect on EAI, and (b) to EAI's
knowledge, no third party has, in the past three years, interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
intellectual property rights of EAI that would result in a Material Adverse
Effect on EAI, nor, to EAI's knowledge, is any third party currently interfering
with, infringing upon, misappropriating or otherwise coming into conflict with
any intellectual property rights of EAI.
4.13. Disclosure. No representation or warranty by EAI contained in this
Agreement, or in any certificate furnished or to be furnished by EAI to VSA or
Stockholder in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to make the statements herein or therein not
misleading.
ARTICLE V.
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Conduct of Business Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement, VSA shall (i) conduct its business
in the usual, regular and ordinary course consistent with past practice, (ii)
use its reasonable efforts to maintain and preserve intact its business
organization and advantageous business relationships and retain the services of
its key officers and employees and (iii) take no action which would materially
and adversely affect or delay the ability of VSA or EAI to obtain any necessary
approvals of any Governmental Authority required for the transactions
contemplated hereby or to perform its covenants and agreements under this
Agreement. During the period from the date of this Agreement to the Effective
Time,
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except as expressly contemplated or permitted by this Agreement, EAI shall take
no action which would materially and adversely affect or delay the ability of
VSA or EAI to obtain any necessary approvals of any Governmental Authority
required for the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement.
5.2. VSA Forbearances. During the period from the date of this Agreement
to the Effective Time, except as expressly contemplated or permitted by this
Agreement, VSA shall not, without the prior written consent of EAI:
(a) incur any indebtedness for borrowed money (except pursuant to existing
funded debt agreements described in Section 3.14 of the Disclosure Schedule),
assume, guarantee, endorse or otherwise as an accommodation, become responsible
for the obligations of any other individual, partnership, limited liability
company, corporation or other entity (collectively, "Person"), or make any loan
or advance;
(b) (i) adjust, split, combine or reclassify any capital stock; (ii) make,
declare or pay any dividend, or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, (iii) grant any Person any right to acquire any
shares of its capital stock, or (iv) issue any additional shares of capital
stock other than the Bonus Shares;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any Person, or cancel or release any indebtedness or
claims owed to or held by VSA or by any Person, except in the ordinary course of
business consistent with past practice;
(d) make any investment in any Person by purchase of securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other Person;
(e) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any VSA Contract, or change any
terms in any VSA Contract, other than renewals or changes in immaterial terms
thereof;
(f) increase in any material respect the compensation or fringe benefits of
any of its directors, officers or employees other than in the ordinary course of
business consistent with past practice, pay any pension or retirement allowance
not required by any existing plan or agreement to any of the foregoing, or
become a party to, amend or commit itself to, any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement with
or for the benefit of any of the foregoing;
(g) settle any claim, action or proceeding involving money damages, except
in the ordinary course of business consistent with past practice;
(h) take any action that would prevent or impede the Merger from qualifying
(i) for "pooling of interests" accounting treatment, or (ii) as a reorganization
within the meaning of Section 368 of the Code;
(i) amend its Articles of Incorporation or By-Laws; or
(j) take any action that is intended or may reasonably be expected to
result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or (ii) any of the
conditions to the Merger set forth in Article VII not being satisfied or (iii)
any violation of any provision of this Agreement, except, in each case, as may
be required by applicable law.
5.3. EAI Forbearances. During the period from the date of this Agreement
to the Effective Time, except as expressly contemplated or permitted by this
Agreement, EAI shall not, without the prior written consent of VSA:
(a) make, declare or pay any cash dividend or other cash distribution on
any shares of its capital stock;
(b) sell, transfer, mortgage, encumber or otherwise dispose of
substantially all of its properties or assets;
(c) merge, amalgamate, consolidate or enter into a share exchange (or cause
or permit any of its subsidiaries to merge, amalgamate, consolidate or enter
into a share exchange) with any other Person, except,
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in any such case, in connection with the acquisition by EAI or a subsidiary of
EAI of the stock and/or assets of any Person; provided, however, in no event
shall EAI issue an aggregate amount of shares as a result of such transactions
in excess of the number of shares outstanding as of the date hereof;
(d) take any action that would prevent or impede the Merger from qualifying
(i) for "pooling of interests" accounting treatment, or (ii) as a reorganization
within the meaning of Section 368 of the Code;
(e) amend its Articles of Incorporation or By-Laws in any manner which
would effect the EAI Common Stock; or
(f) take any action that is intended or may reasonably be expected to
result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or (ii) any of the
conditions to the Merger set forth in Article VII not being satisfied or (iii)
any violation of any provision of this Agreement, except, in each case, as may
be required by applicable law.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1. Regulatory and Other Matters. (a) EAI, with the cooperation of VSA,
shall promptly prepare and file the S-4 with the SEC and use its reasonable best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing and to maintain its effectiveness through the
Closing Date. VSA shall, upon request, furnish EAI with all information or
documents concerning VSA and its directors, officers and stockholders and such
other matters as may be reasonably necessary or advisable in connection with the
S-4. EAI shall also use its reasonable best efforts to obtain all necessary
state securities law or "Blue Sky" qualifications, permits and approvals
required to carry out the transactions contemplated by this Agreement, and VSA
shall furnish all information concerning VSA and the holders of VSA Stock as may
be reasonably requested by EAI in connection with such qualifications, permits
and approvals.
(b) The parties shall cooperate with each other and use their reasonable
best efforts to prepare and file promptly all necessary documentation to effect
all applications, notices, petitions and filings and to obtain as promptly as
practicable all Consents of Governmental Authorities and third parties which are
necessary or advisable to consummate the Merger and the other transactions
contemplated by this Agreement, and the parties shall keep each other apprised
of the status of matters relating to completion of the transactions contemplated
herein.
6.2. Access to Information. Subject to the existing confidentiality
agreement between EAI and VSA, upon reasonable notice, VSA shall afford to the
officers, employees, accountants, counsel and other representatives of EAI
access during normal business hours during the period prior to the Effective
Time to all of VSA's books and records, properties and contracts, and, during
such period, VSA shall make available to EAI all information concerning its
business, assets and personnel as EAI may reasonably request.
6.3. Stockholders' Approval. VSA shall call a meeting of its stockholders
for the purpose of voting upon the adoption of this Agreement and the Merger,
which meeting shall be held as soon as reasonably practicable after the S-4 is
declared effective by the SEC.
6.4. NNM Listing. EAI shall cause the shares of EAI Common Stock to be
issued in the Merger to be approved for listing on the NNM, subject to official
notice of issuance, prior to the Effective Time.
6.5. Affiliates. Prior to the Effective Time, VSA shall obtain from each
of the stockholders listed in Section 6.5 of the Disclosure Schedule as being
"affiliates" of VSA a written agreement substantially in the form attached as
Exhibit A (the "Affiliate Letter").
6.6. Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement shall take all such necessary or advisable action.
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6.7. Advice of Changes. EAI and VSA shall promptly advise each other of
any change or event which is likely to have a Material Adverse Effect on each
other or which EAI or VSA believes would or would be reasonably likely to cause
or constitute a material breach of any of its representations, warranties or
covenants contained herein.
6.8. Takeover Proposals. (a) VSA agrees that from and after its execution
of this Agreement through the Effective Time, it shall not and it shall use its
reasonable best efforts to cause the directors, officers, employees and
stockholders, and all investment bankers, attorneys or other advisors or
representatives retained by VSA not to, (i) solicit or encourage the submission
of any Takeover Proposal (as hereinafter defined), (ii) participate in any
discussions or negotiations regarding, or furnish to any third party any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, a Takeover Proposal,
(iii) make or authorize any statement or recommendation in support of any
Takeover Proposal, or (iv) enter into any agreement with respect to any Takeover
Proposal.
(b) Notwithstanding the foregoing paragraph (a), nothing contained in this
Section 6.8 shall prohibit the Board of Directors, executive officers or
stockholders of VSA, or the investment bankers, attorneys, or other advisors or
representatives retained by VSA from participating in any discussions or
negotiations with, or furnishing any information to, any third party that makes
a Takeover Proposal if all of the following events shall have occurred: (i) EAI
has been notified in writing of such Takeover Proposal within 24 hours of VSA's
receipt thereof, including the identity of the party making the Takeover
Proposal and the specific terms and conditions thereof, and has been given
copies of such Takeover Proposal; (ii) such third party has made a written
Takeover Proposal to the Board of Directors of VSA, which Takeover Proposal
identifies a price or range of values to be paid and based on the advice of
VSA's investment bankers, the Board of Directors of VSA has determined that such
Takeover Proposal is financially more favorable to the stockholders of VSA than
the terms of the Merger; (iii) VSA's Board of Directors has determined, based on
the advice of VSA's investment bankers, that such third party is financially
capable of consummating the transactions specified in the Takeover Proposal; and
(iv) the Board of Directors of VSA has determined, after consultation with its
outside legal counsel, that its fiduciary duties require it to furnish
information to and negotiate with such third party. Notwithstanding the
foregoing, VSA shall not provide any non-public information to such third party
unless (x) prior to the date thereof VSA has provided such information to EAI;
(y) VSA has notified EAI in advance of any such proposed disclosure of
non-public information and has provided EAI with a description of the
information VSA intends to disclose; and (z) VSA provides such non-public
information pursuant to a nondisclosure agreement in a form satisfactory to EAI.
(c) In addition to the foregoing requirements, VSA shall not accept or
enter into any agreement concerning a Takeover Proposal until at least 48 hours
after EAI's receipt of a copy of such Takeover Proposal. Upon compliance with
the requirements in the foregoing paragraph (b) and this paragraph (c), VSA
shall be entitled to terminate this Agreement in accordance with the provisions
of Section 8.1(d).
(d) For purposes of this Agreement, "Takeover Proposal" means any proposal
or offer for a merger, consolidation or other business combination involving VSA
or any proposal or offer to acquire a material equity interest in, or a
substantial portion of the assets of, VSA other than by EAI as contemplated by
this Agreement.
(e) VSA shall be entitled to furnish a copy of this Section 6.8 to any
third party who expresses an interest in making a Takeover Proposal after the
execution of this Agreement.
6.9. Tax Matters. VSA and EAI agree as follows:
(a) VSA and EAI will not, and VSA and EAI will use its best efforts to
cause its stockholders not to file any tax return, make any disclosure or
otherwise take any position or any action that is inconsistent with the Merger
qualifying as a reorganization under Section 368(a)(1)(A) of the Code or would
alone or in conjunction with any other action cause the Merger to not qualify as
a reorganization under Section 368(a)(1)(A) of the Code. VSA and EAI will, and
VSA will use its best efforts to cause its stockholders to, file all Returns and
take such other actions as may be required for the Merger to qualify as a
reorganization
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under Section 368(a)(1)(A) of the Code and to comply with the regulations under
Section 368 of the Code as they apply to the Merger.
(b) EAI will use its reasonable best efforts to cause the historic business
of VSA to be continued or will use its reasonable best efforts to cause a
significant portion of the historic business assets of VSA to be used in a trade
or business, in a manner sufficient to comply with the continuity of business
enterprise requirements set forth in Treasury Regulation 1.368-1(d) under
Section 368 of the Code.
6.10. ESOP Committee. The Company shall use its reasonable best efforts to
cause Committee that administers the ESOP to take all necessary steps to comply
with the provisions of Section 9.6 of the ESOP concerning the exercise of
stockholder rights by ESOP participants and the ESOP Trustee, and to perfect any
dissenters rights pursuant to the MBCA with respect to any shares of VSA Stock
owned by the ESOP Trustee which are not being exchanged pursuant to Section 2.5.
6.11. Termination of ESOP. As soon as practicable after the Effective
time, the Surviving Corporation shall, at its own expense, cause the termination
of the ESOP in accordance with the Code and ERISA, and the distribution of
participants' interests in the ESOP.
6.12. Tax Matters. VSA will use its best efforts to provide EAI with
information as to the adjusted tax basis of its stockholders in their VSA Stock.
6.13. Intellectual Property Assignment. Effective as of the Effective
Time, VSA and Stockholder shall assign (without the payment of additional
consideration) all of their respective right title and interest in and to all
Intellectual Property to the Surviving Company or its designee in a form
satisfactory to EAI (the "Intellectual Property Assignment").
6.14. Employment Agreement. At the Closing, VSA or EAI shall enter into an
employment agreement with ▇▇▇▇ ▇. ▇▇▇▇▇ substantially in the form attached
hereto as Exhibit B (the "Employment Agreement").
6.15. Form 8-K. EAI shall use its reasonable best efforts to file a
current report on Form 8-K with the SEC with respect to the combined financial
results of EAI and VSA for the thirty-day period following Closing, which filing
shall be effected as soon as reasonably practicable following the end of such
thirty-day period.
6.16. Indemnification. EAI and VSA shall, from and after the Effective
Time, indemnify, defend and hold harmless each person who is now or has been at
any time prior to the date hereof or who becomes prior to the Effective Time, an
officer or director of VSA or any subsidiary of VSA (the "VSA Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
attorneys' fees and expenses), liabilities or judgments or amounts that are paid
in settlement of, with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) or otherwise in connection with any
threatened or actual claim, action, suit, proceeding or investigation based on
or arising out of the fact that such person is or was a director or officer of
VSA or any subsidiary of VSA at or prior to the Effective Time, whether asserted
or claimed prior to or at or after the Effective Time ("VSA Indemnified
Liabilities"), including all VSA Indemnified Liabilities based on, or arising
out of, or pertaining to this Agreement or the transactions contemplated hereby,
in each case to the full extent a corporation is permitted under applicable law
to indemnify its own directors or officers, as the case may be (and EAI and VSA
will pay expenses in advance of the final disposition of any such action or
proceeding to each VSA Indemnified Party to the full extent permitted by law).
The provisions of this Section are intended to be for the benefit of, and shall
be enforceable by, each Indemnified Party, his or her heirs and his or her
personal representatives and shall be binding on all successors and assigns of
EAI and VSA.
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ARTICLE VII.
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) APPROVALS AND CONSENTS. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(b) S-4. The S-4 shall have become effective under the Securities Act, and
no stop order suspending the effectiveness of the S-4 shall have been issued and
no proceeding for that purpose shall have been initiated or threatened by the
SEC.
(c) NNM LISTING. The shares of EAI Common Stock which shall be issued to
the stockholders of VSA upon consummation of the Merger shall have been
authorized for listing on the NNM, subject to official notice of issuance.
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction or
decree issued by any Governmental Authority or other legal restraint or
prohibition preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement shall be in effect. No law, statute,
rule, regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Authority which prohibits,
materially restricts or makes illegal the consummation of the Merger or the
other transactions contemplated by this Agreement.
(e) VSA STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite holders of the
issued and outstanding shares of VSA Stock.
7.2. Conditions to Obligations of EAI and Sub. The obligation of EAI and
Sub to effect the Merger is also subject to the satisfaction or waiver by EAI at
or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
VSA set forth in this Agreement that are qualified with reference to a Material
Adverse Effect shall be true and correct, and the representations and warranties
of VSA that are not so qualified shall be true and correct, except where the
failure to be true and correct would not have a Material Adverse Effect on VSA,
in each case as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. EAI shall have received a
certificate signed on behalf of VSA by the Chief Executive Officer or President,
to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF VSA. VSA shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, except to the extent that the failure
to so perform would not have a Material Adverse Effect on VSA, and EAI shall
have received a certificate signed on behalf of VSA by the Chief Executive
Officer and President to such effect.
(c) DISSENTERS RIGHTS. Holders of not more than ten percent (10%) of the
outstanding VSA Stock shall have validly exercised their "dissenters rights"
pursuant to the MBCA.
(d) AFFILIATES AGREEMENTS. EAI shall have received executed Affiliate
Letters from each stockholder of VSA listed in Section 6.5 of the Disclosure
Schedule as an "affiliate" of VSA.
(e) PROPRIETARY INFORMATION AGREEMENTS. VSA shall have in its personnel
files an executed copy of VSA's proprietary information agreement (substantially
in the form included in the Disclosure Schedule) from each employee of VSA.
(f) EMPLOYMENT AGREEMENT. ▇▇▇▇ ▇. ▇▇▇▇▇ shall have executed and delivered
to EAI an employment agreement substantially in the form attached as Exhibit B.
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(g) LEGAL OPINION; CLOSING CERTIFICATES. EAI shall have received from
legal counsel to VSA an opinion substantially in the form attached as Exhibit C,
together with such customary closing documents and certificates as EAI or its
counsel shall reasonably request.
(h) ESOP OPINION. EAI shall have received from legal counsel to the ESOP
an Opinion substantially in the form attached hereto as Exhibit D.
(i) INTELLECTUAL PROPERTY ASSIGNMENT. EAI shall have received the executed
Intellectual Property Assignment.
(j) MATERIAL ADVERSE CHANGE. There shall not have occurred any change
which would constitute a Material Adverse Effect on VSA and its subsidiaries,
taken as a whole.
(k) REPAYMENT OF INDEBTEDNESS. VSA shall have received payment in full of
all amounts owed to it by ▇▇▇▇ ▇. ▇▇▇▇▇ or any entity controlled by him or any
of his immediate family members.
7.3. Conditions to Obligations of VSA. The obligation of VSA to effect the
Merger is also subject to the satisfaction or waiver by VSA at or prior to the
Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
EAI set forth in this Agreement that are qualified with a reference to Material
Adverse Effect shall be true and correct, and the representations and warranties
of EAI that are not so qualified shall be true and correct, except where the
failure to be true and correct would not have a Material Adverse Effect on EAI,
in each case, as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. VSA shall have received a
certificate signed on behalf of EAI by the Chief Executive Officer or the Chief
Financial Officer of EAI to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF EAI. EAI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, except to the extent that the failure
to so perform would not have a Material Adverse Effect on EAI, and VSA shall
have received a certificate signed on behalf of EAI by the Chief Executive
Officer or the Chief Financial Officer of EAI to such effect.
(c) LEGAL OPINION; CLOSING CERTIFICATES. VSA shall have received from
▇▇▇▇▇ ▇. ▇▇▇▇, General Counsel of EAI, an opinion substantially in the form
attached as Exhibit E together with such customary closing documents and
certificates as VSA or its counsel shall reasonably request.
(d) RELEASE OF GUARANTEE. ▇▇▇▇ ▇. ▇▇▇▇▇ shall have received (i) a release
of all guarantees by him of any obligations of VSA, and (ii) payment in full of
all amounts owed to him by VSA other than salary payable in the ordinary course
of business on regular payroll dates.
(e) EMPLOYMENT AGREEMENT. VSA or EAI shall have executed and delivered to
▇▇▇▇ ▇. ▇▇▇▇▇ the Employment Agreement.
(f) MATERIAL ADVERSE CHANGE. There shall not have occurred any change
which would constitute a Material Adverse Effect on EAI and its subsidiaries,
taken as a whole.
ARTICLE VIII.
TERMINATION AND AMENDMENT TERMINATION AND AMENDMENT 1
8.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
stockholders of VSA:
(a) by mutual consent of VSA and EAI in a written instrument, if the Board
of Directors of each so determines by a vote of a majority of the members of its
entire Board;
(b) by either the Board of Directors of VSA or the Board of Directors of
EAI if any Governmental Authority which must grant a Requisite Regulatory
Approval has denied approval of the Merger and such
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denial has become final and non-appealable, or any Governmental Authority of
competent jurisdiction shall have issued an order permanently enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement and such order has become final and non-appealable;
(c) by either the Board of Directors of VSA or the Board of Directors of
EAI (provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein) if (x)
there shall have been a breach of any of the representations or warranties or
any of the covenants or agreements set forth in this Agreement on the part of
the other party which has resulted in a Material Adverse Effect on such other
party, which breach is not cured within 60 days following written notice to the
party committing such breach, (y) the Closing shall not have occurred on or
before November 30, 1998; provided, however, that neither Board of Directors
shall be entitled to terminate the Agreement pursuant to this clause (y) if the
reason the Closing has not occurred by such date is because any Governmental
Authority which must grant a Requisite Regulatory Approval has failed to act,
the VSA stockholder meeting shall not have occurred in accordance with the
requirements of the MBCA or some similar event beyond the control of both
parties shall not have occurred by such date, or (z) the Closing shall not have
occurred on or before December 31, 1998; or
(d) by the Board of Directors of VSA (after consulting with its legal
counsel), if such action is required for the Board of Directors to comply with
its fiduciary duties to VSA and its stockholders as contemplated in Section 6.8
hereof; provided, however, if such action is taken by VSA, then (i) within 2
days of such termination VSA shall reimburse EAI for its out-of-pocket expenses
(in an amount not to exceed $100,000) incurred in connection with the
transactions contemplated by this Agreement; and (ii) if VSA shall consummate
any transaction pursuant to a Takeover Proposal (x) within 12 months following
the date of this Agreement, or (y) pursuant to a definitive agreement executed
by VSA during such 12-month period, VSA shall also promptly pay to EAI
$1,300,000 upon the occurrence of such transaction; provided, however, if the
VSA stockholder meeting shall have occurred and the VSA stockholders shall have
voted with respect to approval of the Merger and the requisite vote necessary to
approve the Merger shall not have been received, then this Agreement shall
automatically be terminated as of the date of such VSA stockholder meeting
without further action of any of the parties hereto and within 2 days of such
termination VSA pay to EAI $1,300,000 and shall reimburse EAI for its
out-of-pocket expenses (in an amount not to exceed $100,000) incurred in
connection with the transactions contemplated by this Agreement.
8.2. Effect of Termination. In the event of termination of this Agreement
by either VSA or EAI as provided in Section 8.1, this Agreement shall forthwith
become void and have no effect, and none of VSA or EAI or any of their directors
or officers shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except that (i) Sections
8.1(d) and 9.1, the final proviso clause of Section 8.1 and this Section 8.2
shall survive any termination of this Agreement, and (ii) notwithstanding
anything to the contrary contained in this Agreement, neither VSA nor EAI shall
be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
8.3. Amendment; Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (i) amend any term or
provision of this Agreement, (ii) extend the time for the performance of any of
the obligations or other acts of the parties hereto, (iii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iv) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the transactions contemplated by this Agreement by the stockholders
of VSA, there may not be, without further approval of such stockholders, any
amendment, extension or waiver of this Agreement which reduces the amount or
changes the form of the consideration to be delivered to the holders of VSA
Stock hereunder other than as contemplated by this Agreement. Any agreement on
the part of a party hereto to any such amendment, extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party,
but such amendment, extension or waiver or failure to insist on strict
compliance with any obligation, covenant, agreement or condition in this
Agreement shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
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ARTICLE IX.
INDEMNIFICATION
9.1. Indemnification by Stockholder. Subject to Section 9.6 hereof, ▇▇▇▇
▇. ▇▇▇▇▇ (the "Stockholder") shall indemnify EAI, and its affiliates (including
after the Closing, the Surviving Corporation), and their respective
stockholders, officers, directors, employees and agents, from and against, and
will pay them the amount of, any and all losses, costs, claims, liabilities,
damages (including incidental and consequential damages), penalties and expenses
(including attorneys' and auditor fees and the costs of investigation and
defense) (collectively, the "Losses"), incurred or suffered by EAI or its
affiliates relating to or arising out of or in connection with any of the
following:
(a) any breach of or any inaccuracy in any representation or warranty made
by VSA as of the date hereof or as the Closing Date in respect to Sections 3.2,
3.7, 3.9, 3.10, 3.11, 3.12 or 3.19 or any matter disclosed on the portion of the
Disclosure Schedule pertaining to such Sections; or
(b) any breach of or failure by VSA to perform any of its covenants or
obligations set out or contemplated in this Agreement or any document delivered
at or in connection with the Closing.
9.2. Claims. As soon as is reasonably practicable after becoming aware of
a claim for indemnification under this Agreement, EAI shall promptly give notice
to the indemnifying person ("Indemnifying Person") of such claim and the amount
EAI will be entitled to receive hereunder from the Indemnifying Person. If the
Indemnifying Person does not object in writing to such indemnification claim
within 30 days of receiving notice thereof, EAI shall be entitled to recover, on
the 31st day after such notice was given, from the Indemnifying Person the
amount of such claim, and no later objection by the Indemnifying Person shall be
permitted; if the Indemnifying Person agrees that he has an indemnification
obligation but objects that he is obligated to pay only a lesser amount, EAI
shall nevertheless be entitled to recover, on the 31st day after such notice was
given, from the Indemnifying Person the lesser amount, without prejudice to
EAI's claim for the difference.
9.3. Notice of Third-Party; Assumption of Defense. EAI shall give notice
as promptly as is reasonably practicable to the Indemnifying Person of the
assertion of any claim, or the commencement of any suit, action or proceeding,
by any Person not a party hereto in respect of which indemnity may be sought
under this Agreement. The Indemnifying Person may, at his own expense, (a)
participate in the defense of any claim, suit, action or proceeding; and (b)
upon notice to EAI and Indemnifying Person's delivering to EAI a written
agreement that EAI is entitled to indemnification for all Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Person shall be
liable for the entire amount of any Loss, at any time during the course of any
such a claim, suit, action or proceeding, assume the defense thereof; provided,
however, that (i) the Indemnifying Person's counsel is reasonably satisfactory
to EAI, and (ii) the Indemnifying Person shall thereafter consult with EAI upon
EAI's reasonable request for such consultation from time to time with respect to
such claim, suit, action or proceeding. If the Indemnifying Person assumes such
defense, EAI shall have the right (but not the duty) to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person. If, however, EAI reasonably
determines in its judgment that representation by the Indemnifying Person's
counsel of both the Indemnifying Person and EAI would present such counsel with
a conflict of interest, then EAI may employ separate counsel to represent or
defend it in any such claim, action, suit or proceeding and the Indemnifying
Person shall pay the fees and disbursements of such separate counsel. Whether or
not the Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
9.4. Settlement or Compromise. Any settlement or compromise made or caused
to be made by EAI or the Indemnifying Person, as the case may be, of any claim,
suit, action or proceeding shall also be binding upon the Indemnifying Person or
EAI, as the case may be, in the same manner as if a final judgment or decree
had been entered by a court of competent jurisdiction in the amount of such
settlement or compromise; provided, however, that no obligation, restriction or
Loss shall be imposed on EAI as a result of such settlement without its prior
written consent. EAI will give the Indemnifying Person at least 30 days' notice
of
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any proposed settlement or compromise of any claim, suit, action or proceeding
it is defending, during which time the Indemnifying Person may reject such
proposed settlement or compromise, provided, however, that from and after such
rejection, the Indemnifying Person shall be obligated to assume the defense of
and full and complete liability and responsibility for such claim, suit, action
or proceeding and any and all Losses in connection therewith in excess of the
amount of unindemnifiable Losses which EAI would have been obligated to pay
under the proposed settlement or compromise.
9.5. Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of EAI to defend or to participate in the
defense of any such claim, suit, action or proceeding or to cause the same to be
done, shall not relieve the Indemnifying Person of his obligations hereunder.
9.6. Limitations on Stockholders Indemnity. Notwithstanding anything to
the contrary contained in this Agreement:
(a) In order for EAI and its affiliates (including after Closing the
Surviving Corporation), and their respective, stockholders, officers, directors,
employees and agents, to make a claim against Stockholder for indemnification
pursuant to this Article IX, each such indemnifiable claim must exceed a minimum
threshold of $10,000 (a "Covered Claim");
(b) The Stockholder shall not be liable for any Covered Claim under this
Article IX unless and until the aggregate amount of the Covered Claims shall
exceed $300,000, in which event the Stockholder shall only be liable for the
aggregate amount of all Covered Claims in excess of $300,000, subject, however
to the other limitations set forth herein; and
(c) In no event shall the aggregate liability of Stockholder under this
Agreement exceed $3,000,000.
ARTICLE X.
GENERAL PROVISIONS
10.1. Expenses. Except as set forth in Article IX, Section 8.1(e) or the
final proviso clause of Section 8.1, all costs and expenses incurred by EAI or
Sub in connection with this Agreement and the transactions contemplated hereby
shall be by paid EAI, and all costs and expenses incurred by VSA (and/or
Stockholder in connection with this Agreement and the transactions contemplated
hereby shall be paid by VSA.
10.2. Notices. All notices and other required communications hereunder
shall be in writing and shall be deemed given: if delivered personally, when so
delivered; if telecopied, on the date telecopied (provided there is written
confirmation of receipt and a confirming notice or communication is delivered in
the manner set forth herein); if mailed by registered or certified mail (postage
prepaid and return receipt requested), on the date five days after deposit in
the mail; or if delivered by overnight courier (with written confirmation of
delivery to such courier), on the next business after such delivery, in each
case to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to EAI, to:
Engineering Animation, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Vice President of Administration, General Counsel and Secretary
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇, Carton & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
(b) if to VSA or Stockholder, to:
Variation Systems Analysis, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Timmis & ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
10.3. Interpretation. When a reference is made in this Agreement to
Sections, Schedules or Exhibits, such reference shall be to a Section of or
Schedule or Exhibit to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require EAI,
Sub, VSA or any of their respective affiliates to take any action which would
violate any applicable law, rule or regulation.
10.4. Counterparts; Facsimile. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement. The
Agreement may be executed and delivered by facsimile transmission, and a
facsimile of this Agreement or of a signature of a party shall be as effective
as an original.
10.5. Entire Agreement. This Agreement (including the Disclosure Schedule,
Exhibits, documents and instruments referred to herein) constitutes the entire
agreement of the parties and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof. Disclosure of any matter in the Disclosure Schedule for purposes of any
Section of this Agreement shall constitute disclosure of such matter for
purposes of all Sections within such Article for purposes of this Agreement.
10.6. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan, without regard to any
applicable conflicts of law which would result in the application of any other
law.
10.7. Survival. All representations, warranties, covenants and agreements
contained in this Agreement, or in any Schedule, certificate, document or
statement delivered pursuant hereto, shall survive the Closing for a period of
two (2) years, except for the representations and warranties contained in
Section 3.7, which shall expire at the Effective Time.
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10.8. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.9. Publicity. Except as otherwise required by applicable law or the
rules of the NNM, neither VSA nor EAI shall, or shall permit any of their
respective affiliates to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the prior consent of the other party, which consent shall not be unreasonably
withheld.
10.10. Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations set forth herein shall be assigned
by either of the parties (whether by operation of law or otherwise) without the
prior written consent of the other party. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns. This
Agreement (including the Disclosure Schedule, Exhibits, documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder, other than in respect
to the parties entitled to indemnification pursuant to Article IX.
10.11. Knowledge and Awareness. As used in this Agreement, "knowledge" or
"awareness" of VSA means the actual knowledge or awareness of ▇▇▇▇ ▇. ▇▇▇▇▇.
10.12. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumptions or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any Federal, state,
county, local or foreign law or statute shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise.
10.13. Pooling of Interests Accounting; Tax Free Reorganization. In the
event that either EAI or VSA becomes aware of any provisions of this Agreement
which would prevent the Merger from being accounted for as a pooling of
interests or qualifying as a reorganization within the meaning of Section 368 of
the Code, such parties shall negotiate in good faith with a view toward amending
this Agreement in a manner which would permit the Merger to be accounted for as
a pooling of interests or qualified as such a reorganization, as applicable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, EAI, Sub and VSA have caused this AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER to be executed by their respective officers
thereunto duly authorized as of the date first above written.
ENGINEERING ANIMATION, INC EAI VICTORY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------ ----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------- --------------------
Title: Vice President Title: Vice President
--------------------------- -------------------
VARIATION SYSTEMS ANALYSIS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive
Officer
AGREED TO WITH RESPECT TO
SECTION 6.12 AND ARTICLE IX AS OF
THE DATE FIRST ABOVE WRITTEN
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, individually as
the Stockholder
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