AGREEMENT AND PLAN OF MERGER
by and among
CompuDyne Corporation,
New Tiburon, Inc.,
and
Tiburon, Inc.
Dated as of May 10, 2001
TABLE OF CONTENTS
ARTICLE I - THE MERGER
Section 1.1 The Merger
Section 1.2 Closing
Section 1.3 Effective Time of the Merger
Section 1.4 Effects of the Merger
Section 1.5 Certificate of Incorporation
Section 1.6 Bylaws
Section 1.7 Directors
Section 1.8 Officers
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
Section 2.1 Conversion of Shares
Section 2.2 Shares of Dissenting Stockholders
Section 2.3 Cancellation and Retirement of Shares
Section 2.4 [Intentionally Omitted]
Section 2.5 Exchange Agent
Section 2.6 Stock Options
Section 2.7 Exchange of Certificates
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Corporate Power
Section 3.2 Subsidiaries
Section 3.3 Capital Structure
Section 3.4 Authority, Noncontravention
Section 3.5 Financial Statements; No Undisclosed Liabilities
Section 3.6 Disclosure Documents
Section 3.7 Property; Sufficiency of Assets
Section 3.8 Absence of Certain Changes or Events
Section 3.9 Litigation
Section 3.10 Compliance with Laws, Etc.
Section 3.11 Absence of Changes in Stock or Benefit Plans
Section 3.12 ERISA Compliance
Section 3.13 Tax Matters
Section 3.14 Debt Instruments
Section 3.15 Insurance
Section 3.16 Labor Matters
Section 3.17 Business Relationships; No Restrictive Agreements
Section 3.18 Patents, Trademarks, Etc.
Section 3.19 Interests of Officers and Directors
Section 3.20 Environmental Matters
Section 3.21 Brokers
Section 3.22 Board Recommendation
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.1 Organization, Standing and Corporate Power
Section 4.2 Authority; Noncontravention
Section 4.3 SEC Documents; Financial Statements; No Undisclosed
Liabilities
Section 4.4 Information Supplied
Section 4.5 Absence of Certain Changes or Events
Section 4.6 Interim Operations of Merger Sub
Section 4.7 Capital Structure
Section 4.8 Litigation
Section 4.9 Compliance with Laws, Etc.
Section 4.10 Financing
Section 4.11 Brokers
ARTICLE V - COVENANTS OF THE COMPANY
Section 5.1 Conduct of Business
Section 5.2 Company Stockholders Meeting
Section 5.3 Letter of the Company's Accountants
Section 5.4 Access to Information
Section 5.5 [Intentionally Omitted]
Section 5.6 Cooperation in Arrangements with Lenders
Section 5.7 No Solicitation
Section 5.8 Confidentiality
ARTICLE VI - COVENANTS OF PARENT
Section 6.1 Access to Information
Section 6.2 Confidentiality
Section 6.3 Obligations of Merger Sub
Section 6.4 Voting of Shares
Section 6.5 Letter of Parent's Accountants
Section 6.6 [Intentionally Omitted]
Section 6.7 Director and Officer Liability
ARTICLE VII - COVENANTS OF PARENT, MERGER SUB AND THE COMPANY
Section 7.1 Preparation of Form S-4 and the Information
Statement Stockholder Meetings
Section 7.2 HSR Act Filings; Reasonable Efforts; Notification
Section 7.3 Public Announcements
Section 7.4 Affiliates
Section 7.5 Stock Exchange Listing
Section 7.6 Takeover Statutes
Section 7.7 Company Employee Benefits
Section 7.8 Tax Consequences
ARTICLE VIII - CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party
Section 8.2 Conditions to the Obligations of Parent and Merger
Sub
Section 8.3 Conditions to the Obligations of the Company
ARTICLE IX - TERMINATION
Section 9.1 Termination
Section 9.2 Effect of Termination
Section 9.3 Fees and Expenses
ARTICLE X - MISCELLANEOUS
Section 10.1 Definitions
Section 10.2 Notices
Section 10.3 Survival of Representations and Warranties
Section 10.4 Amendments; No Waivers
Section 10.5 Successors and Assigns; Parties in Interest
Section 10.6 Governing Law; Submission to Jurisdiction
Section 10.7 Specific Performance
Section 10.8 Counterparts; Effectiveness; Interpretation
EXHIBIT A - Major Stockholders
EXHIBIT B - STOCKHOLDER AGREEMENT
EXHIBIT C - INDUCEMENT OPTION AGREEMENT
EXHIBIT D - FORM OF COMPANY AFFILIATE LETTER
ANNEX I - TO EXHIBIT C
INDEX OF DEFINED TERMS
Agreement
Acquisition
Agreement
Benefit Plans
Certificate of Merger
Closing
Closing Date
Code
Company
Company Acquisition
Company Common Stock
Company Disclosure Letter
Company Preferred Stock
Company Stock Options
Company Stockholder Approval
Company Stockholders Meeting
Confidentiality Agreement
Consents
Consideration for Company Common Stock 2.1
Controlled Group Liability
6.0% Cumulative Preferred
6.5% Cumulative Preferred
7.5% Cumulative Preferred
Dissenting Shares
Dissenting Stockholder
Effective Time
Environmental Claims
Environmental Conditions
Environmental Law
Environmental Reports
ERISA
ERISA Affiliate
Exchange Act
Exchange Agent
Exchange Fund
Exchange Ratio
Form S-4
GAAP
Governmental Entity
Hazardous Substances
HSR Act
Indebtedness
Indemnified Party
Inducement Option Agreement
Intellectual Property
Liens
Major Stockholders
Material Adverse Change
Material Adverse Effect
Material Agreement
Merger
Merger Consideration
Merger Sub
Merger Sub Stockholder Approval
Multiemployer Plan
Multiple Employer Plan
Option Plan
Parent
Parent Disclosure Letter
Parent's Notice of Merger Election
Parent Plans
Parent SEC Documents
Parent Stockholder Approval
Parent Stockholder Meeting
Person
Plans
Properties
Proxy Statement
Qualified Plans
Redelivering Party
Restraints
SEC
Securities Act
Stock Percentage
Stock Plans
Stockholders Agreement
Subsidiary
Superior Offer
Surviving Corporation
Surviving Corporation Preferred Stock
Systems
Taxes
Virginia Corporation Law
VWAP
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 10,
2001 by and among COMPUDYNE CORPORATION, a corporation organized under
and governed by the laws of the State of Nevada with its principal
offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Parent"),New
Tiburon, Inc., a corporation organized under and governed by the laws of
the Commonwealth of Virginia, with its principal offices located at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and a wholly-owned subsidiary of
Parent ("Merger Sub") and TIBURON, INC., a corporation organized under
the laws of the Commonwealth of Virginia, with its primary offices
located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company").
RECITALS
WHEREAS, the Board of Directors of the Company has (i) determined
that this Agreement and the transactions contemplated hereby, including
the Merger (as defined herein), are advisable and are fair to and in the
best interests of the stockholders of the Company, (ii) determined that
the consideration to be paid in the Merger is fair to and in the best
interests of the stockholders of the Company, (iii) approved this
Agreement and the transactions contemplated hereby, including the
Merger, and (iv) resolved to recommend approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby by
such stockholders;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company, and Parent, acting as the sole stockholder of Merger
Sub, have approved the merger of the Company with and into Merger Sub
with Merger Sub as the surviving corporation as set forth below (the
"Merger"), upon the terms and subject to the conditions set forth in
this Agreement and the provisions of Title 13.1, Chapter 9, of the Code
of Virginia (1950)(the "Virginia Corporation Law") pursuant to which,
among other things, each issued and outstanding share of Common Stock
par value $0.10 per share, of the Company (the "Company Common Stock"),
excluding any shares of Company Common Stock owned, directly or
indirectly, by the Company or any subsidiary of the Company or by
Parent, Merger Sub or any other subsidiary of Parent and any Dissenting
Shares (as defined herein), shall be convertible into the right to
receive the Merger Consideration (as defined herein);
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code, as amended
(together with the Treasury regulations thereunder, the "Code"), and
this Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 of the Code;
WHEREAS, as a condition and an inducement to the willingness of
Parent and Merger Sub to enter into this Agreement and consummate the
transactions contemplated hereby, Parent has required that certain
affiliate and other stockholders set forth on Exhibit A hereto (each a
"Major Stockholder" and collectively, the "Major Stockholders") agree,
among other things, to enter into an agreement, dated as of the date
hereof and in the form of Exhibit B hereto, among each Major
Stockholder, Parent and Merger Sub (each a "Stockholders Agreement");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the consummation
of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Virginia Corporation Law, if and only if the Parent elects in its sole
and absolute discretion, to consummate the Merger and deliver to the
Company notice of such election (the "Parent's Notice of Merger
Election") on or before September 30, 2002, the Company shall be merged
with and into Merger Sub at the Effective Time (as defined herein).
Notwithstanding any other provision in this Agreement to the contrary,
neither Parent, Merger Sub, or any other of Parent's subsidiaries shall
have any obligations under this Agreement unless and until the Parent
shall have elected to consummate the Merger and delivered to the Company
the Parent's Notice of Merger Election. At the Effective Time, the
separate corporate existence of the Company shall cease, and Merger Sub
(a) shall continue as the surviving corporation as a direct wholly owned
subsidiary of Parent (as the context requires, Merger Sub, after giving
effect to the Merger, is sometimes hereinafter referred to as the
"Surviving Corporation"), (b) shall succeed to and assume all the
rights and obligations of the Company in accordance with the Virginia
Corporation Law, and (c) shall have the corporate name "Tiburon, Inc."
Section 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1, and subject to the satisfaction or
waiver of the conditions set forth in Article VIII, the closing of the
Merger (the "Closing") shall take place at 10:00 a.m. on the second
business day after satisfaction or waiver of the conditions set forth in
Article VIII (the "Closing Date"), at the offices of the Parent in
Hanover, Maryland unless another date, time or place is agreed to in
writing by the parties hereto. At the time of the Closing, the Company
and Merger Sub will cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the State
Corporation Commission of Virginia in such form as required by and
executed in accordance with the relevant provisions of the Virginia
Corporation Law and shall make all other filings or recordings required
by the Virginia Corporation Law, and other law in connection with the
Merger.
Section 1.3 Effective Time of the Merger. The Merger shall,
subject to the Virginia Corporation Law, become effective as of such
date and time as the Articles of Merger are duly filed with the State
Corporation Commission of Virginia or at such later date and time as is
specified in the Certificate of Merger (the "Effective Time").
Section 1.4 Effects of the Merger. From and after the Effective
Time, the Surviving Corporation shall possess all the property, rights,
privileges, immunities, powers and franchises and be subject to all of
the debts, restrictions, disabilities and duties of the Company and
Merger Sub, all as provided under the Virginia Corporation Law.
Section 1.5 Articles of Incorporation. The Articles of
Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or
by applicable law.
Section 1.6 Bylaws. The Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
Section 1.7 Directors. The directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case
maybe.
Section 1.8 Officers. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly appointed and qualified, as the
case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1 Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of
any shares of the capital stock of the Company or any shares of capital
stock of Merger Sub:
(a) Each share of Company Common Stock owned by the Company
or owned by Parent, Merger Sub or any subsidiary of any of the Company,
Parent or Merger Sub immediately prior to the Effective Time and each
share of Company 7.5% Cumulative Convertible Preferred Stock, $5.76 par
value per share (the "7.5% Cumulative Preferred") owned by Parent or
Merger Sub immediately prior to the Effective Time shall be canceled,
and no payment shall be made with respect thereto.
(b) Each share of common stock of Merger Sub outstanding
immediately prior to the Effective Time shall remain outstanding as a
share of common stock of the Surviving Corporation and such shares shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(c) (i) Except as otherwise provided in Section 2.1(a), Section
2.2, or Section 2.7, each Share of Company Common Stock outstanding
immediately prior to the Effective Time shall be converted into the
right to receive consideration of $4.80, plus increments for each full
calendar month (i.e. each monthly period ending on the same date within
each month) that passes from the closing date under the Preferred Stock
Purchase Agreement of even date herewith between the Company and the
Parent to the Parent's Notice of Merger Election in amounts equal to (x)
$0.045 for each of the first six (6) full months, (y) $0.05 for each of
the next six (6) full calendar months, and (z) $0.075 for each full
calendar month thereafter, provided however, that if, for any reason
other than the Company's failure to timely comply with its obligations
under Sections 2.4 and 6.19 hereof, the Effective Date is not within
seventy-five (75) days of the date of the Parent's Notice of Merger
Election, the Parent's Notice of Merger Election shall be deemed to have
been given on the date determined by adding to the actual date of
delivery the number of days in excess of seventy-five (75) that the
Effective Date follows such actual delivery of the Parent's Notice of
Merger Election, and minus any Unindemnified Common Stock Purchase
Agreement Loss, as defined below in this Section 2.1 ( the
"Consideration for Company Common Stock"), payable, except as set forth
below in Section 2.4, in immediately available funds or shares of Parent
Common Stock, par value $.75 per share ("Parent Common Stock"), or a
combination of both, as follows:
(A) If the volume weighted average price of all Parent
Common Stock traded, as reported on the NASDAQ National Market during
the sixty (60) calendar days ending two (2) business days prior to the
Parent's Notice of Merger Election (the "VWAP") is $8.00 or higher, the
aggregate Consideration for Company Common Stock payable to all holders
of shares of Company Common Stock shall include such number of shares of
Parent Common Stock, issued in accordance with the Exchange Ratio
described below, as is necessary in order that the aggregate number of
shares of Company Common Stock exchanged through the Merger for shares
of Parent Common Stock is at least 50% of the total number of shares of
Company Common Stock outstanding immediately prior to the Effective Time
(including shares owned by Parent, Merger Sub, or any subsidiary of
Parent or Merger Sub), taking into account (as shares of Company Common
Stock which are not acquired in exchange for shares of Parent Common
Stock) Dissenting Shares (as defined in Section 2.2) and fractional
shares for which payment is made pursuant to Section 2.7(e). The Parent
may elect, in its sole discretion, to increase the percentage of the
aggregate of such Consideration for Company Common Stock payable in
Parent Common Stock to any amount in excess of the amount determined as
described above, up to and including one-hundred percent (100%) (the
percentage of Consideration for Company Common Stock chosen by Parent to
be paid in Parent Common Stock is hereinafter referred to as the
"Stock Percentage"). The Parent shall set forth the Stock Percentage it
has chosen in the Parent's Notice of Merger Election. With respect to
that portion of the Consideration for Company Common Stock to be paid in
Parent Common Stock in accordance with the Stock Percentage, holders of
shares of Company Common Stock shall be entitled to receive, for each
such share of Company Common Stock, that fraction of a share of Parent
Common Stock determined by multiplying a fraction (the "Exchange
Ratio"), the numerator of which is the amount of the Consideration for
Company Common Stock and the denominator of which is the VWAP, by the
Stock Percentage, with the balance of such Consideration for Company
Common Stock consisting of immediately available funds.
(B) If the VWAP is less than $8.00 per share, the amount of
Consideration for Common Stock that shall consist of Parent Common Stock
or immediately available funds, or both, and the Exchange Ratio shall be
determined in the same manner as in A) above, except that as an
alternative to the Stock Percentage determined as described above, the
Parent may, at its option, elect a Stock Percentage of zero percent (0%),
and thereby elect to pay the entire amount of the Consideration for
Common Stock in immediately available funds.
(C) Notwithstanding the Stock Percentage chosen by the Parent
in (A) or (B) above, any holder of Company Common Stock may elect, by
giving notice of such election at the time such holder's shares of
Company Common Stock are surrendered to the Exchange Agent pursuant to
Section 2.7, to receive a percentage of the Consideration for Company
Common Stock greater than the Stock Percentage chosen by the Parent, up
to and including one-hundred percent (100%), provided however, if the
VWAP is less than $8.00 per share, notwithstanding the provisions of (A)
above, the Exchange Ratio for any shares of Parent Common Stock issued
in excess of the Stock Percentage upon such an election by a holder of
Company Common Stock shall be 0.6 share of Parent Common Stock for each
share of Company Common Stock.
If the Effective Time occurs subsequent to any stock split,
reverse stock split, share dividend, split-up, recapitalization or
reorganization with respect to the Parent or the Parent Common Stock, as
applicable, as a result of which shares of Parent Common Stock shall
have been issued in respect of outstanding shares of Parent Common Stock
or shares of Parent Common Stock shall be changed into the same or a
different number of shares of Parent Common Stock or another class or
classes of capital stock of the Parent, the VWAP and the Exchange Ratio
shall be adjusted equitably to reflect such stock split, reverse stock
split, share dividend, split-up, recapitalization or reorganization.
Neither the Company or any shareholder thereof holding more
than one percent (1%) of the outstanding Company Common Stock, at any
time prior to the delivery to the Company of the Parent's Notice of
Merger Election, shall purchase, sell or otherwise engage in any trading
transactions (including without limiting the generality of the
foregoing, short sales and trading in options or other derivatives) with
respect to any shares of Parent Common Stock. None of the Parent, any
subsidiary of the Parent, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇▇ Mezzanine Capital Fund II Limited Partnership shall, at any time
prior to the delivery to the Company of the Parent's Notice of Merger
Election, purchase, sell or otherwise engage in any trading transactions
(including without limiting the generality of the foregoing, short sales
and trading in options or other derivatives) with respect to any shares
of Parent Common Stock other than in private transactions, provided
however, that, notwithstanding the above, Parent shall be permitted to
purchase shares of Parent Common Stock (A) in accordance with its
ongoing stock buy back program in amounts not greater than 6,000 shares
per week, at a purchase price per share not to exceed $9.00, (B) in an
amount required to satisfy its obligations under the CompuDyne Employee
Stock Purchase Plan, and(C) from BI, Incorporated, or its nominee,
provided, however, that any purchases of shares of Parent Common Stock
permitted in (C) above shall be excluded from the calculation of the
VWAP, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be permitted to sell up to 100,000
shares of Parent Common Stock, provided however that nothing herein
shall prohibit Parent from issuing shares of Parent Common Stock in an
underwritten public offering at any time; and
(ii) At the Effective Time, each share of Company 6.0%
Cumulative Convertible Preferred Stock, $100 par value (the "6.0%
Cumulative Preferred"), and each share of Company 6.5% Cumulative
Convertible Preferred Stock, $100 par value (the "6.5% Cumulative
Preferred")(the 6.0% Cumulative Preferred and the 6.5% Cumulative
Preferred hereinafter referred to collectively as the "Company Preferred
Stock"), issued and outstanding immediately prior to the Effective Time
shall be converted to a share of such stock of Surviving Corporation, in
accordance with all of such share's current terms and conditions (the
"Surviving Corporation Preferred Stock"), except that rather than being
convertible into Company Common Stock, at the Effective Time, such
shares of Surviving Corporation Preferred Stock shall be nonconvertible
and Parent will issue to the holders of such Surviving Corporation
Preferred Stock the option to receive, in exchange for the Surviving
Corporation Preferred Stock, cash and Parent Common Stock as more fully
described and set forth in Section 2.6(b) hereof.
The Consideration for Company Common Stock and the consideration
for the Surviving Corporation Preferred Stock referred to in this
subsection 2.1 (c) are hereinafter referred to together as the "Merger
Consideration"). The term "Unindemnified Common Stock Purchase
Agreement Loss" shall mean (x) the aggregate amount of the Parent's
loss, costs, damages and expenses subject to indemnification under
Section 11.3(b) and (c) of that certain Common Stock Purchase Agreement,
dated as of May 10, 2001, by and among the Parent, the Company and
certain of the Major Stockholders (the "Common Stock Purchase
Agreement") and under Section 11.3(a) of that certain 7.5% Cumulative
Convertible Preferred Stock Purchase Agreement, dated as of May 10,
2001, by and between the Parent and the Company (the "Preferred
Stock Purchase Agreement") for which the Parent has made claim to the
Company on or before delivery to the Company of the Parent's Notice of
Merger Election and has been agreed to by the Company, or to the extent
not so agreed upon, determined in an arbitration as set forth in
Sections 2.4 and 6.19 hereof prior to the Effective Time, and has not
been indemnified pursuant to the terms of either such agreement, divided
by (y) the number of shares of Company Common Stock outstanding on a
fully-diluted basis, immediately prior to the Effective Time.
Immediately prior to the Effective Time, Parent shall contribute to
Merger Sub the right to cause the delivery of the Consideration for
Company Common Stock in consideration of the issuance to Parent by Merger
Sub of 1000 shares of common stock, $.00l par value per share, of Merger
Sub. Merger Sub shall satisfy its obligations to deliver the
Consideration for Company Common Stock by exercising such right to cause
Parent to deliver the same. Parent shall cause Merger Sub to deliver
the Merger Consideration pursuant to the terms of this Article II.
Section 2.2 Shares of Dissenting Stockholders. Notwithstanding
anything in this Agreement to the contrary, any shares of Company Common
Stock ("Dissenting Shares") that are outstanding immediately prior to
the Effective Time and which are held by a person (a "Dissenting
Stockholder") who has not voted in favor of or consented to the Merger
and who shall not have failed to perfect or shall not have effectively
withdrawn or otherwise lost his rights to payment or appraisal under the
Virginia Corporation Law shall not be converted into the right to
receive the Merger Consideration, but shall be entitled to receive such
consideration as shall be determined pursuant to Article 15of the
Virginia Corporation Law. If, however, such Dissenting Stockholder
effectively withdraws his demand for payment or fails to perfect or
otherwise loses his right to payment or appraisal, in any case pursuant
to the Virginia Corporation Law, his shares of Company Common Stock
shall thereupon be deemed to have been converted as of the Effective
Time into the right to receive the Merger Consideration, without
interest, pursuant to Section 2. The Company shall give Parent (i)
prompt notice of any demands for payment for shares of Company Common
Stock received by the Company and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle, offer to settle
or otherwise negotiate, any such demands.
Section 2.3 Cancellation and Retirement of Shares. As of the
Effective Time, all shares (other than shares cancelled pursuant to
Section 2.1(a)) of capital stock of the Company issued and outstanding
immediately prior to the Effective Time, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate(s) representing any such shares
shall cease to have any rights with respect thereto, except (subject to
Section 2.2) the right to receive the Merger Consideration in accordance
with Section 2.1 and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.7.
Section 2.4 Resolution of Unindemnified Common Stock Purchase
Agreement Loss Disputes. If, immediately after the delivery to the
Company of the Parent's Notice of Merger Election, the Parent and the
Company have not agreed on the value of any applicable Unindemnified
Common Stock Purchase Agreement Loss, the Parent and the Company will,
as soon thereafter as possible, identify the amount of the Unindemnified
Common Stock Purchase Agreement Loss that has been claimed by the Parent
but not agreed by the Company (the "Disputed Amount"). The Parent and
the Company will, within twenty (20) days after the date of the delivery
to the Company of the Parent's Notice of Merger Election, submit to
binding arbitration the dispute concerning the Disputed Amount in
accordance with the provisions of Section 6.19 hereof.
Section 2.5 Exchange Agent. Prior to the mailing of the
Information Statement (as defined in Section 4.4), Parent shall appoint
a nationally recognized stock transfer agent designated by Parent and
reasonably satisfactory to the Company to act as exchange agent (the
"Exchange Agent") for payment of the Merger Consideration.
Section 2.6 Stock Options and Warrants. Prior to the mailing of
the Information Statement, the Board of Directors of Parent and the
Board of Directors of the Company shall adopt such resolutions or take
such other actions as may be required to effect the following:
(a) Adjust the terms of all outstanding employee and director
stock options to purchase shares of Company Common Stock ("Company Stock
Options") granted under the Company's 1994 Incentive Stock Plan (the
"Option Plan"), to provide that each Company Stock Option outstanding
immediately prior to the Effective Time shall (except to the extent that
Parent and the holder of a Company Stock Option otherwise agree in
writing prior to the Effective Time) be converted as follows: Parent
shall issue to the holder of each such Company Stock Option the option
to receive, upon the exercise thereof and payment of the exercise price,
Consideration for Company Common Stock, payable in accordance with
Section 2.1(c)(i), for each share of Company Common Stock into which the
Company Stock Option had been exercisable immediately prior to the
Effective Time; provided, that the holder of each such Company Stock
Option may make the election described in Section 2.1(c)(i)(C). Parent
agrees to file a registration statement on Form S-8 as soon as
reasonably practicable following the Effective Time to register the
shares of Parent Common Stock issuable pursuant to the Company Stock
Options referred to above. It is intended that the stock options
referred to above shall qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the
extent that they are qualified as incentive stock options immediately
prior to the Effective Time and to the extent permitted under applicable
law.
(b) At the Effective Time, the Parent shall issue to the
holders of shares of the Company Preferred Stock (described in Section
2.1 (c)(ii)) outstanding immediately prior to the Effective Time, which
shares of Company Preferred Stock shall have been converted into shares
of Surviving Corporation Preferred Stock in accordance with the
provisions of Section 2.1 hereof, (i) the option to receive, in exchange
for such shares of Surviving Corporation Preferred Stock, Consideration
for Company Common Stock, payable in accordance with Section 2.1(c)(i)
for each share of Company Common Stock into which the Company Preferred
Stock had been convertible immediately prior to the Effective Time;
provided, that the holder of each such share of Surviving Corporation
Preferred Stock may make the election described in Section 2.1(c)(i)(C).
(c) At the Effective Time, the Parent shall issue to the
holder of each option to exchange Tiburon Justice Systems, Inc. Series A
Preferred stock for Company Common Stock, in exchange for such option,
the option to receive Consideration for Company Common Stock payable in
accordance with Section 2.1(c)(i), for each share of Company Common
Stock into which each such option had been exercisable immediately prior
to the Effective Time, in exchange for Tiburon Justice Systems, Inc.
Series A Preferred Stock as provided in each such option; provided, that
the holder of each such option may make the election described in
Section 2.1(c)(i)(C).
(d) At the Effective Time, the Parent shall issue to the
holder of each warrant to purchase Company Common Stock outstanding as
of the Effective Date, in exchange for such warrant to purchase Company
Common Stock, a warrant which will entitle the holder to receive, upon
the exercise thereof and the payment of the exercise price,
Consideration for Company Common Stock, payable in accordance with
Section 2.1(c)(i), for each such share of Company Common Stock into
which each such warrant had been exercisable immediately prior to the
Effective Time; provided, that the holder of each such warrant may make
the election described in Section 2.1(c)(i)(C).
(e) Except as specifically provided in this Section 2.6, the
Company shall ensure that following the Effective Time no holder of a
Company Stock Option or holder of any option or warrant to purchase
Company Common Stock described in paragraphs (b), (c), or (d) above shall
have any right thereunder to acquire equity securities of the Company or
the Surviving Corporation and no shares of Company Common Stock shall be
purchased pursuant to the Option Plan.
(f) Any shares of Parent Common Stock issuable pursuant to
subsections (b), (c) and (d) hereof shall be restricted, unregistered
shares and shall bear legends reflecting such restrictions.
Section 2.7 Exchange of Certificates.
(a) Exchange Agent. As required from time to time as of or
after the Effective Time of the Merger, Parent shall deposit the
aggregate Consideration for Company Common Stock with the Exchange Agent
for the benefit of the holders of shares of Company Common Stock and for
exchange in accordance with this Article II.
(b) Exchange Procedures. As soon as practicable after the
Effective Time of the Merger, but in any case within 10 business days
thereafter, the Exchange Agent shall mail to each holder of an
outstanding certificate(s) which prior thereto represented shares of
Company Common Stock (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to such
certificate shall pass, only upon delivery of such certificate(s) to
such Exchange Agent), (ii) instructions for use in effecting the
surrender of the certificate(s) for the Consideration for Company
Common Stock, and (iii) an explanation of the election to receive
additional Parent Common Stock in lieu of some or all of the cash
component of the Consideration for Company Common Stock, as described in
Section 2.1(c)(i)(C). Upon surrender to the Exchange Agent of such
certificate(s) for cancellation, together with such letter of
transmittal, the holder of such certificate(s) shall be entitled to
the Consideration for Company Common Stock consisting of the
proportionate amount of cash (taking into account any election by a
former holder of Company Common Stock and a certificate(s) representing
the number of whole shares of Parent Common Stock into which the
aggregate number of shares previously represented by such certificate(s)
surrendered shall have been converted pursuant to Section 2.1(c) of this
Agreement. The Exchange Agent shall accept such certificate(s) upon
compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. After the Effective Time of the Merger,
there shall be no further transfer on the records of the Company of any
certificate(s) representing shares of Company Common Stock and if such
certificate(s) is presented to the Company for transfer, it shall be
canceled against delivery of a certificate(s) for cash and shares of the
Parent Common Stock as hereinabove provided. If any certificate(s) for
such shares of the Parent Common Stock is to be issued in a name other
than that in which the certificate(s) for shares of Company Common Stock
surrendered for exchange is registered, it shall be a condition of such
exchange that the certificate(s) so surrendered shall be properly
endorsed, with signature guaranteed, or otherwise in proper form for
transfer and that the person requesting such exchange shall pay to
Parent or its transfer agent any transfer or other taxes required by
reason of the issuance of a certificate(s) for such shares of Parent
Common Stock in a name other than that of the registered holder of the
certificate(s) surrendered, or establish to the satisfaction of Parent
or its transfer agent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.7(b), each
certificate for shares of Company Common Stock shall be deemed at any
time after the Effective Time of the Merger to represent only the right
to receive upon such surrender the applicable Consideration for Company
Common Stock. No interest will be paid or will accrue on any cash
payable in lieu of any fractional share of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to shares of Parent Common
Stock with a record date after the Effective Time of the Merger shall
be paid to the holder of any unsurrendered certificate(s) for shares of
Company Common Stock with respect to the shares of Parent Common Stock
represented thereby and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.7(e) until the
surrender of such certificate(s) in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any
such certificate(s), there shall be paid to the holder of the
certificate(s) representing whole shares of Parent Common Stock issued
in exchange therefor, without interest, (i) at the time of such
surrender the amount of any cash payable in lieu of a fractional share
of Parent Common Stock to which such holder is entitled pursuant to
Section 2.7(e) and the amount of dividends or other distributions with a
record date after the Effective Time of the Merger theretofore paid with
respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time of the Merger but prior to
such surrender and a payment date subsequent to such surrender payable
with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership, Rights in Shares. All shares of
Parent Common Stock issued and cash paid pursuant to Sections 2.1(c) and
2.7(e) upon the surrender for exchange of certificates representing
shares in accordance with the terms of this Article II shall be deemed
to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented
by such certificates.
(e) No Fractional Shares.
(i) No certificate or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of any certificate(s) representing shares of Company Common
Stock, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent; and
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock exchanged
pursuant to the Merger who would have otherwise been entitled to receive
a fraction of a share of Parent Common Stock shall receive, in lieu
thereof, an amount in cash equal to the product of such fraction and the
VWAP.
(f) Termination of Exchange Fund. Any portion of the
Consideration for Company Common Stock deposited with the Exchange Agent
pursuant to this Section 2.7 (the "Exchange Fund"), which remains
undistributed to the holders of the certificates representing shares of
Company Common Stock for six months after the Effective Time of the
Merger, shall be delivered to Parent, upon demand, and any holders of
shares of Company Common Stock who have not theretofore complied with
this Article II shall thereafter look only to Parent for, and except as
set forth in Section 2.7(g), Parent shall remain liable for any cash
portion of the Merger Consideration, shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to shares of Parent Common Stock
to which such holders may be entitled.
(g) No Liability. None of Parent, Merger Sub, the Company or
the Exchange Agent shall be liable to any person in respect of any
shares of Parent Common Stock (or dividends or distributions with
respect thereto) or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund in a deposit account with
any bank with assets exceeding one billion dollars ($1,000,000,000)
chartered under the laws of the United States or any state thereof, as
directed by Parent, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Parent.
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure letter delivered by the
Company prior to the execution of this Agreement (the "Company
Disclosure Letter"), the Company represents and warrants to the Parent
and Merger Sub as of the date hereof as follows. All references to
schedules in this Article IV are intended as references to Schedules of
the Company Disclosure Letter:
4.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. The Company has full power and authority
(corporate and other) to own, operate and lease its properties and to
conduct its business in the manner in which and in the places where such
properties are owned, operated or leased and such business is now
conducted or proposed to be conducted. The Company is not in breach of
any provision of either of its articles of incorporation or by-laws,
complete and accurate copies of which are attached as Exhibit 4.1. The
minute books containing the records of meetings of the shareholders, the
board of directors and any committees of the board of directors, the
stock certificate books and the stock record books of the Company are
correct and complete.
The Company is duly qualified, licensed and authorized to do
business as a foreign corporation and is in good standing as a foreign
corporation in each jurisdiction listed on Schedule 4.1, and there is no
jurisdiction not so listed in which the ownership of the Company's
properties or the conduct of its business requires such qualification in
which the failure to so qualify would have a material adverse effect on
the Company's business or results of operations. The Company has not
received any written notice within the last three years from the
Secretary of State or comparable official of any jurisdiction to the
effect that the Company is required to be qualified or otherwise
authorized to do business therein, in which jurisdiction the Company has
not qualified or obtained such authorization.
4.2 Capitalization; Ownership of Stock. The authorized capital
stock of the Company consists of twenty million (20,000,000) shares of
Common Stock, par value $0.10, four million six hundred forty five
thousand seventeen (4,645,017) shares of which are issued
and outstanding, two million forty nine thousand seven hundred fifty
eight (2,049,758) shares of which are reserved for issuance upon
the exercise of conversion rights, options or warrants and none of which
are held as treasury shares, and ten thousand (10,000) shares of 1997
6.0% Cumulative Convertible Preferred stock, par value $100.00 (the
"6.0% Preferred Stock"), three thousand three hundred thirty four
(3,334) shares of which are outstanding and none of which are treasury
shares, twenty five thousand (25,000) shares of 6.5% Cumulative
Convertible Preferred Stock, par value $100.00 (the "6.5% Preferred
Stock"), one thousand four hundred (1,400) shares of which are
outstanding and none of which are treasury shares, and, subject to the
completion of the closing under the 7.5% Cumulative Convertible
Preferred Stock Purchase Agreement of even date herewith by and between
the Company and the Parent ("Preferred Stock Purchase Agreement"),
five hundred twenty thousand eight hundred thirty three (520,833) shares
of 7.5% Cumulative Convertible Preferred Stock, par value $5.76 (the
"7.5% Preferred Stock"), all shares of which are outstanding,
(collectively, the Common Stock and the various series of preferred
stock are referred to as the "Capital Stock"). There are no other
authorized shares of any other class. All outstanding shares of Capital
Stock have been validly issued by the Company and are fully paid,
non-assessable and free of preemptive rights. Except as set forth in
Schedule 4.2, no shares of Capital Stock have been reserved for issuance
for any purpose and there is no subscription, option, warrant, call,
right, contract, commitment, understanding or arrangement relating to
the issuance, sale or transfer by the Company of any shares of Capital
Stock including any right of conversion or exchange under any
outstanding security or other instrument other than the Stockholders
Agreements of even date herewith between the Parent and the Sellers, as
defined in the Common Stock Purchase Agreement. The issuance and sale
of all shares of Capital Stock have been in full compliance with all
applicable federal and state securities laws.
4.3 No Subsidiaries. Except as set forth on Schedule 4.3, the
Company has never owned, directly or indirectly, any capital stock or
other equity of any corporation or had any direct or indirect equity or
ownership interest in any other business entity. The Company is not
subject to any obligation or requirement to make any investment (in the
form of a loan, capital contribution or otherwise) in any entity.
4.4 Authorization; Binding Agreement. The Company has full power
and authority to execute and deliver this Agreement and, subject to the
Company Stockholder Approval (as defined below) required in connection
with the consummation of the Merger, to consummate the transactions
contemplated by this Agreement. The Merger requires approval by the
holders of two-thirds of the outstanding Company Common Stock and the
holders of the Company Preferred Stock (collectively the "Company
Stockholder Approval"), which approval is the only vote of the holders
of any class or series of the capital stock of the Company necessary to
approve the Merger and this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
has been duly authorized by all necessary corporate action on the part
of the Company, except for the Company Stockholder Approval. This
Agreement has been duly executed and delivered by the Company and,
assuming this Agreement constitutes the valid and binding agreement of
Parent and Merger Sub and subject to obtaining the Company Stockholder
Approval, this Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally, and general
equitable principles.
Except as set forth on Schedule 4.4, the execution, delivery and
performance of this Agreement or any other agreement, document or
instrument by the Company and the consummation of the transactions
contemplated hereby do not and will not with the passage of time or the
giving of notice or both:
(a) conflict with or result in a breach of any provision of
the articles of incorporation or by-laws of the Company;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or
accelerate or create in any person the right to accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of the
Company under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, lease, contract, agreement or other instrument or commitment or
obligation to which the Company is a party or by which it or any of its
properties may be bound or affected; or
(c) violate any order, writ, injunction, decree, judgment or
ruling, or any law, rule or regulation of any court or governmental
authority, federal, state, local or foreign, applicable to the Company
or any of its properties, the violation of which would be material to
the Company.
4.5 Financial Statements and Undisclosed Liabilities. The Company
has delivered to the Parent audited Balance Sheets, income statements,
cash flow statements and statements of shareholder's equity for the
fiscal years ended June 30, 1997, June 30, 1998, June 30, 1999 and June
30, 2000, and the notes to such financial statements, as prepared by the
Company's accountants, PriceWaterhouse, n/k/a PricewaterhouseCoopers.
The Company has also delivered to the Parent monthly balance sheets
together with related statements of income, shareholders' equity and
cash flow as of the end of each of the nine months ending March 31,
2001. All of such financial statements of the Company are referred to
collectively as the "Financial Statements". The Financial Statements
have been prepared from and are in accordance with the books and records
of the Company, are true and correct and complete, and present fairly
the financial condition, results of operations and, except with respect
to unaudited interim financial statements, cash flows of the Company as
of the dates and for the periods indicated, in each case in conformity
with GAAP consistently applied during such periods, except as otherwise
stated in such financial statements or on Schedule 4.5, and except to
the extent that unaudited interim financial statements may be condensed
or summary statements and may omit footnotes to the extent permitted by
Rule 10.01(a)(5) of Regulation S-X of the Securities and Exchange
Commission. Except as and to the extent reflected in the Financial
Statements, the Company had at each such date no liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise and whether due or to become due). The books of account and
other financial records of the Company, all of which have been made
available to the Parent, are complete and correct and represent actual,
bona fide transactions and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act"), including the
maintenance of an adequate system of internal controls. Attached to
Schedule 4.5 are complete and correct copies of all letters from the
Company's Auditors to the Company's board of directors or its audit
committee during the 36 months preceding the execution of this
Agreement, together with complete and correct copies of all responses
thereto.
4.6 [Intentionally Omitted]
4.7 Taxes.
(a) Except as disclosed on Schedule 4.7, the Company has
filed all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or
attachment thereto and including any amendment thereof ("Tax Return")
required to be filed by it accurately reflecting any and all taxes owing
to the United States or any other government or any subdivision thereof,
state or local, or any other taxing authority, and has paid in full or
made or will make adequate provision as part of its current liabilities
in the Financial Statements for the payment of all taxes with respect to
all tax periods ending on or before the Closing Date (including
penalties and interest) for which the Company has or may have liability,
whether or not shown on any Tax Return. The Company has delivered or
made available to the Parent copies of, and Schedule 4.7 contains a
complete and accurate list of, all Tax Returns filed by the Company
since December 31, 1999. Except as disclosed on Schedule 4.7, there is
no unassessed tax deficiency proposed or to the knowledge of the
Company threatened against the Company. There are, and will hereafter
be, no net tax deficiencies (including penalties and interest) of any
kind assessed against or relating to the Company with respect to any of
the taxable periods ending on or before the Closing Date. The Company
is not currently the beneficiary of any extension of time within which
to file any Tax Return. Except as disclosed on Schedule 4.7, no claim
has ever been made to the Company by any authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state,
local or foreign tax return of the Company for any period. To the
Company's knowledge, the federal income tax returns of the Company have
never been audited by the Internal Revenue Service. To the Company's
knowledge, no state, local or foreign taxing authority has ever audited
any tax return or report filed therewith by the Company. Proper amounts
have been withheld by the Company from its employees, independent
contractors and other third parties in compliance with the tax
withholding provisions of all applicable federal, state, local, foreign
and other laws, and timely deposits have been made of all payroll taxes
due. Payment has been timely made by the Company of all estimated income
taxes and other taxes of any kind due.
The Company has not filed any consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments and will not be so obligated by reason of
the transactions contemplated hereby, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Section 280G of the Code.
The Company has disclosed on its federal income tax returns all
positions taken therein that could give rise to an underpayment of
federal income tax to which Section 6662 of the Code applies. The
Company is not a party to any tax allocation or sharing agreement. The
Company has never been a member of an Affiliated Group within the
meaning set forth in Section 1504(a) of the Code.
4.8 Environmental, Health and Safety Matters
Except as disclosed in Schedule 4.8:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither the Company nor either of the
Principals has any basis to expect, nor has any of them received, any
actual or threatened order, notice, or other communication from (i) any
governmental authority or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any Facility, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the
Company, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled or received.
(b) There are no pending or, to the knowledge of the Company,
threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any Facility.
(c) Neither the Company nor either of the Principals has any
knowledge of or any basis to expect, nor has any of them, received, any
citation, directive, inquiry, notice, order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply with
any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any Facility, or with respect to
any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the
Company have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(d) The Company has no Environmental, Health, and Safety
Liabilities with respect to any Facility or, to the knowledge of the
Company, with respect to (i) any Facility, or (ii) any property
geologically or hydrologically adjoining any Facility.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or to the Company's knowledge, at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether movable or
fixed) or other containers, either temporary or permanent, and deposited
or located in land, water, sumps, or any other part of the Facility or
such adjoining property, or incorporated into any structure therein or
thereon. Neither the Company nor, to the knowledge of the Company, any
other person, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to any Facility except in full
compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge of the
Company, Threat of Release, of any Hazardous Materials at or from any
Facility, or to the knowledge of the Company any geologically or
hydrologically adjoining property, whether by the Company or any other
person.
(g) The Company has delivered to the Parent true and complete
copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Company pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance, by the Company or any other person for whose
conduct it is or may be held responsible, with Environmental Laws.
As used in this Section 4.8 and Section 5.13, the following
capitalized terms shall have the following meanings:
"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor
air), plant and animal life, and any other environmental medium or
natural resource.
"Environmental, Health and Safety Liabilities" -- any cost,
damages, expense, liability, obligation, or other responsibility arising
from or under any Environmental Law or Occupational Safety and Health
Law, including those consisting of or relating to:
(a) any environmental, health, or safety matter or condition
(including on-site or off-site contamination, occupational safety and
health, and regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response,
remedial, or inspection cost or expense (other than costs and expenses
of routine inspections) arising under any Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by any
Environmental Law or Occupational Safety and Health Law (whether or not
such Cleanup has been required or requested by any governmental
authority or any other person) and for any natural resource damages; or
(d) any other corrective or remedial measure required under
any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA").
"Environmental Law" -- any statute, regulation or other legal
requirement that requires or relates to:
(a) advising appropriate authorities, employees, or the
public of intended or actual Releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and the commencement of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the Release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the Release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been Released,
preventing the threat of Release, or paying the costs of such clean up
or prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to
recover for injuries done to public assets.
"Facilities" -- for purposes of Section 4.8, any real property,
leasehold or other interest in real property currently or formerly owned
or operated by the Company, including the tangible personal property
being used or operated by the Company at the respective locations of the
real property specified on Schedule 4.9; provided, that any
representation or warranty with respect to any Facility shall be limited
to the knowledge of the Company except to the extent related to the
period during which the Company owned or operated the Facility; and for
purposes of Section 5.13, any real property, leasehold or other interest
in real property currently or formerly owned or operated by the Parent,
including the tangible personal property being used or operated by the
Parent at the respective locations of any real property owned or
operated by the Parent.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of Hazardous
Material in, on, under, about, or from any of the Facilities or any part
thereof into the Environment, and any other act, business, operation, or
thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the
Facilities.
"Hazardous Materials" -- any substance that is or contains:
(a) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C.
Section 9601 et. seq.) or any regulations promulgated under CERCLA.
(b) any "hazardous waste" as now or hereafter defined in the
Resource Conservation and Recovery Act, as amended ("RCRA") (42 U.S.C.
Section 6901 et. seq.) or any regulations promulgated under RCRA.
(c) any substance now or hereafter regulated by the Toxic
Substances Control Act, as amended ("TSCA") (15 U.S.C. Section 2601 et.
seq.) or any regulations promulgated under TSCA.
(d) petroleum, petroleum by-products, gasoline, diesel fuel,
or other petroleum hydrocarbons.
(e) asbestos and asbestos-containing material, in any form,
whether friable or non-friable.
(f) polychlorinated biphenyls;
(g) lead and lead-containing materials;
(h) radon gas; or
(i) any additional substance, material or waste on, under or
related to any Facility which requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined),
causes or threatens to cause a nuisance on such Facility or any adjacent
premises or poses or threatens to pose a hazard to the health or safety
of persons in or on such Facility or any adjacent premises; or which, if
it emanated or migrated from such Facility, could constitute a trespass,
or which is now or is hereafter classified or considered to be hazardous
or toxic under any Environmental Laws.
"Occupational Safety and Health Law" -- any statute, regulation or
other legal requirement designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards,
including the Occupational Safety and Health Act.
"Release" -- any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the Environment or into or
out of any property.
"Representative" -- with respect to a particular person, any
director, officer, manager, employee, agent, consultant, advisor,
accountant, financial advisor, legal counsel or other representative of
that Person.
"Threat of Release" -- a reasonable likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
4.9 Title to and Condition of Assets. The Company has (i) good,
valid and marketable title to all personal property relating to its
operations, business or properties, which it purports to own, including,
without limitation, Intellectual Property, as that term is defined in
Section 4.11 hereto, and (ii) to the knowledge of the Company, good,
valid and marketable leasehold estates to the leasehold premises
described on Schedule 4.9. All such properties which the Company
purports to own are held free and clear of all title defects and any
liens, pledges, claims, charges, security interests or other
encumbrances and are not, in the case of real property, subject to any
rights of way, building or use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever, except, with
respect to all such properties, real and personal, (a) as set forth in
Schedule 4.9, (b) liens for current taxes not yet due and assessments
not in default and (c) other liens and encumbrances incidental to the
conduct of its business or the ownership of its assets which were not
incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not in the aggregate materially
detract from the value of its assets or materially impair the use
thereof in the operation of its business. There are no claims adverse
or challenges to the title or ownership of any property which the
Company purports to own. Except as disclosed on Schedule 4.9, all
personal property and all buildings, structures and fixtures used by the
Company in the conduct of its business are in good operating condition
(subject to normal maintenance and repair) and the Company has not
received any notice of any violation (which has not been cured) of any
building, zoning or other law, ordinance or regulation in respect of such
property or structures or its use thereof.
Schedule 4.9 lists each lease (which term shall include subleases)
of real property to which the Company is a party, true copies of which
leases (including all amendments thereof and modifications thereto) have
been delivered to the Parent prior to the date hereof. All such leases
are valid and binding obligations of the Company and in full force and
effect; there are no material defaults by the Company or, to the
knowledge of the Company, the lessors thereunder; and no event has
occurred which (whether with or without notice, lapse of time or both)
would constitute a material default by the Company or, to the knowledge
of the Company, the lessors thereunder. To the knowledge of the Company,
no premises leased under any such lease are subject to any lien,
encumbrance, easement, right of way, building or use restriction,
exception, variance, reservation or limitation as might interfere with
or impair the present and continued use thereof in the usual and normal
conduct of the business of the Company. No party to any such lease has
repudiated any provision thereof and there are no disputes, oral
agreements or forbearance programs in effect as to any such lease.
Except as disclosed on Schedule 4.9, all assets other than motor
vehicles owned, used, or operated by the Company are located at premises
listed on Schedule 4.9.
Except as disclosed on Schedule 4.9, to the knowledge of the
Company, there is no existing, proposed or contemplated, plan to modify
or realign any street or highway or any existing, proposed or
contemplated eminent domain proceeding that would result in the taking
of all or any part of any real property owned or leased by the Company
or that would prevent or hinder the continued use of such real property
as heretofore used in the conduct of the business of the Company.
Except as disclosed on Schedule 4.9, to the knowledge of the Company
there are no encroachments onto any such real property by any
improvements on any adjoining property. To the knowledge of the Company
there are no encroachments onto any adjoining property by any
improvements on such real property that have an adverse impact on the
present use of such adjoining property. There are no unpaid taxes,
local improvement levies, assessments (special, general or otherwise) or
bonds of any nature affecting any real property owned by the Company or
any portion thereof. All covenants, conditions, restrictions,
easements and similar matters affecting any real property owned by the
Company have been complied with by the Company. Neither this Agreement
nor anything provided to be done under this Agreement violates or will
violate any contract, document, understanding, agreement, arrangement or
instrument affecting any real property owned by the Company.
4.10 Conduct of the Business. The Company is not a party to, or
subject to or bound by, nor are any of its assets subject to or bound
by, any agreement, oral or written, or any statute or any judgment,
rule, regulation, order, writ, injunction or decree of any court or
governmental or administrative body, which prohibits or adversely
affects or, upon the consummation of the transactions contemplated
hereby, would prohibit or adversely affect: (i) the use of any or all of
the assets and property associated with, necessary to, or used or
employed in the business of the Company, or (ii) the conduct of such
business in the same manner as it has been conducted. Upon consummation
of the transactions contemplated by this Agreement, the Company will
continue to have all of the properties and rights necessary to conduct
its business in all respects in the same manner and at the same
production levels as such business has been conducted by it prior to the
Closing.
4.11 Intellectual Property. As used in this Agreement,
"Intellectual Property" shall mean (a) all computer software (including
without limitation, source code, data and related documentation), (b)
all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (c) all trademarks, service marks, trade dress,
logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all
goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (d) all copyrightable works, all
copyrights, and all applications, registrations, and renewals in
connection therewith, (e) all mask works and all applications,
registrations, and renewals in connection therewith, (f) all trade
secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof, in whatever form or medium.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
currently used in the operation of its business. With respect to
Intellectual Property previously incorporated by the Company into its
products, the Company owned or had the right to use pursuant to license,
sublicense, agreement or permission such Intellectual Property at the
time of its use by the Company. Except as set forth on Schedule
4.11(a), each item of Intellectual Property owned or used in connection
with the Company's business immediately prior to the Closing will be
owned or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing. The transactions
contemplated in this Agreement will not require obtaining the consent of
any person to permit the continued use of the Intellectual Property.
The Company has taken all commercially reasonable steps to maintain and
protect each item of Intellectual Property that it owns or uses.
(b) The Company, in operating its business, has not, to the
knowledge of the Company, interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and has not received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation. To the knowledge of the
Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Company relating to its business.
(c) Schedule 4.11(c) identifies each patent or registration,
which has been issued to the Company, each trademark and service ▇▇▇▇
registered by the Company, and each copyright filed by the Company with
respect to any of its Intellectual Property relating to its business,
identifies each pending patent, trademark and service ▇▇▇▇ application
or application for registration which the Company has made with respect
to any of its Intellectual Property relating to the Company's business,
and identifies each license, agreement, or other permission which the
Company has granted to any third party with respect to any of its
Intellectual Property relating to the Company's business. The Company
has delivered to the Parent correct and complete copies of all such
patents, trademarks, service marks, copyrights, registrations,
applications, licenses, agreements, and permissions, as amended to date,
and has made available to the Parent correct and complete copies of all
other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 4.11(c) also identifies each
trade name or unregistered trademark used by the Company or any of its
affiliates in connection with the Company's business. With respect to
each item of Intellectual Property required to be identified in Schedule
4.11(c), except as otherwise set forth in Schedule 4.11(c):
(i) the Company possesses all right, title, and interest
in and to the item, free and clear of any security interest, lien,
encumbrance, license, or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Company, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) the Company has not agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 4.11(d) identifies each item of Intellectual
Property that any third party owns and that is used in connection with
the Company's business pursuant to license, sublicense, agreement, or
permission, other than license agreements for standard "shrink wrapped,
off the shelf" commercially available products used by the Company. The
Company has delivered to Parent correct and complete copies of all such
licenses, sublicenses, agreements, and permissions. With respect to each
item of Intellectual Property required to be identified in Schedule
4.11(d);
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, and binding obligation of the
Company;
(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, and binding, obligation of the Company
following the Closing;
(iii) neither the Company nor, to the knowledge of the
Company, any other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by the
Company or, to the knowledge of the Company, by any other person or
permit termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, to the knowledge of
the Company the representations and warranties set forth in subsections
(a) through (d) above are true and correct with respect to the
underlying license;
(vi) to the knowledge of the Company, the underlying item
of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(vii) to the knowledge of the Company, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
is pending or, threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission; and
(ix) to the knowledge of the Company, the transaction
contemplated by this Agreement will not require obtaining the consent of
any person relating to the continued use of the Intellectual Property by
the Company or the Parent.
(e) To the knowledge of the Company, the continued operation
of the Company's business will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties.
(f) The Company has no knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that
any competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or process
that is material to the Company's business.
4.12 Contracts. Schedule 4.12 lists and briefly describes all of
the following contracts, commitments, plans, agreements, instruments,
arrangements and understandings (written or oral), bids and proposals,
including all amendments and supplements thereto, to which the Company
is a party (whether or not legally bound thereby),:
(a) Contracts or other understandings (whether oral or
written) for or regarding the employment of any officer or employee,
including, without limitation, terms, conditions and policies relating
to vacation and sick days, severance pay and incentive, sales
commissions and other bonuses which are not included in Schedule 4.16;
(b) Collective bargaining agreements and any other agreement
or contract with any labor union or other employees' association;
(c) Leases and agreements relating to real or personal
property;
(d) Bonus, pension, profit-sharing, retirement,
hospitalization, or insurance or similar plans or practices, formal or
informal which are not included in Schedule 4.15;
(e) Franchise, dealer, distribution, sales and agency
contracts and commitments;
(f) Contracts of sale and distribution agreements creating
any obligation of the Company to sell or distribute services or
products;
(g) Guarantees and indemnities, direct or indirect, current
or contingent of the obligations of customers or any other person or
entity;
(h) Contracts with suppliers, vendors, distributors, clients,
customers or others for the future performance of services or provision
of goods by or for the Company, and bids and proposals for such
contracts and in each case, in the event that the contract is for the
purchase of goods and services, involving an amount in excess of $50,000
and, in the event that the contract is for the provision of goods or
services by the Company, involving an amount in excess of $250,000;
(i) Insurance policies;
(j) Advertising contracts and commitments;
(k) Bank accounts, lock box and similar depository
arrangements;
(l) License agreements (as licensor or licensee) which are
not included in Schedule 4.11;
(m) Loan or credit agreements with lenders, real estate
mortgages, indentures, pledges, conditional sale or title retention
agreements, equipment obligations and leases, and lease purchase
agreements;
(n) Contracts purporting to limit the freedom of the Company
or any of its employees to compete in any line of business or in any
geographic area;
(o) Agreements concerning a partnership or joint venture;
(p) Agreements concerning confidentiality or noncompetition;
(q) Agreements granting options or warrants to purchase
shares of the Company's common stock. With respect to the agreements
set forth in this subsection (q), Schedule 4.12 shall list the name of
the holder of the option or warrant, the number of shares of the
Company's common stock which such holder is entitled to purchase with the
option or warrant and the exercise and vesting terms for each option or
warrant.
(r) Agreements relating to the issuance by the Company of
preferred stock; and
(s) Agreements relating to any and all outstanding
performance and bid bonds.
Except as set forth on Schedule 4.12, each contract, commitment,
plan, agreement, instrument, arrangement, understanding, bid and
proposal required to be listed in Schedule 4.12 is the valid and binding
obligation of the Company and, to the knowledge of the Company, any
other party thereto, enforceable in accordance with its respective terms
and conditions.
Except as set forth on Schedule 4.12, no contract required to be
set forth on Schedule 4.12 requires the consent of any other person, in
order to remain the binding obligation of such person, to the
acquisition of the Shares by the Parent, and to the extent that such
consent is required, such consent has been obtained and is in full force
and effect.
Except as set forth on Schedule 4.12, the Company is not a party to
any lease relating to personal property which cannot be terminated by
it, without penalty, on 30 days' notice.
Neither the Company nor, to the knowledge of the Company, any other
party thereto is in violation of or in default in respect of or has
failed in any material respect to perform any obligation under or
repudiated any provision of any such contract, commitment, plan,
agreement, instrument, arrangement, understanding, bid or proposal, and
nothing has occurred which with lapse of time or the giving of notice or
both would constitute a breach or default by the Company, or, to the
knowledge of the Company, any other party thereto or which would cause
acceleration of any obligation of the Company or, to the knowledge of
the Company, any other party thereto or the creation thereunder of any
lien, encumbrance or security interest in or upon the properties or
assets of the Company. The Parent has been furnished with true copies
of those items listed on Schedule 4.12 which are identified on Schedule
4.12 as having been so furnished.
Except as set forth on Schedule 4.12, there is no outstanding power
of attorney executed on behalf of the Company.
4.13 Litigation. Except as set forth on Schedule 4.13, there is no
action, suit, claim, demand, investigation or proceeding pending or, to
the knowledge of the Company, threatened against, relating to or
affecting the Company or its business or which would in any way affect
the transactions contemplated by this Agreement, and to the knowledge of
the Company there is no basis for any of the foregoing. No order, writ,
injunction or decree has been issued by or requested of any court or
governmental agency which might result in any adverse change in the
business, property or assets or in the condition, financial or otherwise,
of the Company or which might adversely affect the transactions
contemplated by this Agreement. The Company has not been subject to any
bankruptcy or other insolvency proceedings.
4.14 Insurance. The Company is and has been insured by insurers
unaffiliated with the Company, with respect to its properties and
businesses in such amounts and against such risks as are customary with
respect to properties and businesses comparable to those of the Company.
Schedule 4.14 hereto lists all insurance policies (including title
insurance) of the Company, showing (a) the issuer, (b) risk insured,
(c) expiration date, (d) annual premium, (e) dollar amount of coverage
and (f) dollar amount of deductible or retention. The insurance
coverage provided by such policies will not in any material respect be
affected by, and will not terminate or lapse by reason of, the
transactions contemplated by this Agreement. Except as set forth on
Schedule 4.14, at no time has the Company been denied any insurance or
indemnity bond coverage which it has requested or made any material
reduction in the scope or amount of, or paid a substantially increased
premium for, or substantially increased any deductible under, any of its
insurance coverage, and no insurance carrier has cancelled or reduced
any insurance coverage for the Company or given any notice or other
indication of its intention to do so.
4.15 Employee Benefit Plans. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not constitute a violation of, or give rise to
any liability under, Title I of the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA") or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"). Schedule 4.15 contains a complete and
correct list of all "employee benefit plans" as defined by Section 3(3)
of ERISA, all specified fringe benefit plans as defined in Section 6039D
of the Code, and all other bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock appreciation right,
stock bonus, stock purchase, employee stock ownership (including,
without limitation, the Tiburon, Inc. Employee Stock Ownership Plan),
savings, severance, change in control, supplemental unemployment,
layoff, salary continuation, retirement, pension, health, life
insurance, disability, accident, group insurance, vacation, holiday,
sick leave, fringe benefit or welfare plan, including any Section 125 or
so-called "cafeteria" plan, and any other employee compensation or
benefit plan, agreement, policy, practice, commitment, contract, or
understanding (whether qualified or nonqualified, currently effective or
terminated, written or unwritten), and any trust, escrow or other
agreement related thereto, that (i) is maintained or contributed to by
the Company or any other corporation or trade or business controlled by,
controlling, or under common control with the Company (within the
meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of
ERISA) (an "ERISA Affiliate") or has been maintained or contributed to
in the last six years by the Company or any ERISA Affiliate, or with
respect to which the Company or any ERISA Affiliate has or may have
any liability, and (ii) provides benefits, or describes policies or
procedures applicable to any current or former director, officer,
employee, or service provider of the Company or any ERISA Affiliate, or
the dependents of any thereof, regardless of how (or whether)
liabilities for the provision of benefits are accrued or assets are
acquired or dedicated with respect to the funding thereof (collectively
the "Employee Plans"). Schedule 4.15 identifies as such any Employee
Plan that is
a "Defined Benefit Plan" (as defined in Section 414(l) of the
Code),
a plan intended to meet the requirements of Section 401(a) of
the Code,
a "Multiemployer Plan" (as defined in Section 3(37) of
ERISA), or
a plan subject to Title IV of ERISA, other than a
Multiemployer Plan.
Also set forth in Schedule 4.15 is a complete and correct list of
all of the Company's ERISA Affiliates during the last six years. Except
as set forth on Schedule 4.15, no such plan, policy, practice,
agreement or arrangement has been previously maintained or contributed
to by the Company whose "date of termination" (within the meaning of
Section 4048 of ERISA) occurred after September 1, 1974.
To the extent necessary or appropriate for the proper operation and
administration of each of the Employee Plans, the participant and
beneficiary records of each plan accurately state the employment history
of each participant and beneficiary in connection with such plan and
accurately state the data from which there may be calculated the
benefits earned by and owed to each such person under such plan.
With respect to each of the Employee Plans, the Company has
delivered or has otherwise made available to Parent for inspection and
copying, a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and to the extent
applicable of: (i) the plan; (ii) any related trust agreement or other
funding instrument; (iii) the most recent determination letter, if
applicable; (iv) any summary plan description and other written
communications (or a description of any oral communications) by the
Company or its ERISA Affiliates to their employees concerning the extent
of the benefits provided under the Employee Plans; and (v) for the three
most recent years (A) the Form 5500 and attached schedules, (B) audited
financial statements, (C) actuarial valuation reports and (D) attorney
disclosures of "loss contingencies" in response to an auditor's request
for information.
Except as set forth in Schedule 4.15:
(a) None of the Employee Plans is a "multiemployer plan" as
that term is defined in Section 3(37) of ERISA or a "defined benefit
plan" as that term is defined in Section 3(35) of ERISA, no Employee
Plan provides retiree welfare benefits, and neither the Company nor its
ERISA Affiliates has any obligation to provide any retiree welfare
benefits except as required under Section 4980B of the Code or part 6
of Title I of ERISA.
(b) Neither any of the Employee Plans, nor any trust created
thereunder nor any trustee or administrator thereof, has engaged in a
transaction in connection with which any of the Employee Plans, any
such trust, or any trustee or administrator thereof, or any party
dealing with the Employee Plans or any such trust, could be subject
to either a civil penalty assessed pursuant to Section 502(i) of ERISA,
or a tax imposed by Section 4975 of the Code.
(c) Full payment has been made of all amounts which the
Company is required to pay under the terms of each of the Employee Plans
pursuant to applicable law and GAAP, consistently applied, as a
contribution to the Employee Plans as of the last day of the most recent
fiscal year of each of the Employee Plans ended prior to the date of
this Agreement and no accumulated funding deficiency or liquidity
shortfall (as those terms are defined in Section 302 of ERISA and
Section 412 of the Code) has been incurred with respect to any such
Employee Plan, whether or not waived. As to each of the Employee Plans
to which Section 4021(a) of the Code applies, the present value of the
assets of such plan equal or exceed the amount of all benefit
liabilities (determined on a plan termination basis using the actuarial
assumptions established by the PBGC as of the Closing Date) of such
Employee Plan.
(d) All reports, returns and disclosures relating to the
Employee Plans required to be filed or distributed to participants have
been timely filed or distributed in all material respects in compliance
with applicable law.
(e) Except as set forth on Schedule 4.15, other than claims
in the ordinary course for benefits under the Employee Plans, there is
no action, suit, claim or proceeding pending or to the knowledge of the
Company threatened, nor does there exist any basis therefor, which would
result in the imposition of any liability on any Employee Plan or on the
Company with respect to any such plan.
(f) Except as set forth on Schedule 4.15, each of the
Employee Plans is intended to be and has been written to comply with all
applicable laws, including but not limited to the Code and ERISA and has
been interpreted, administered and operated in all material respects in
accordance with the written Employee Plan documents, the respective
summaries thereof provided to the employees of the Company and is in
operational compliance in all material respects with all applicable laws
and regulations.
(g) Except as set forth on Schedule 4.15, as to each of the
Employee Plans to which Section 401(a) of the Code applies; the plan is
"qualified" within the meaning of Section 401 of the Code, each related
trust is exempt from tax under Section 501(a) of the Code, and an
application for a favorable determination letter for such plan as most
recently amended (a copy of which application is appended to Schedule
4.15 as an exhibit) has been made to the Internal Revenue Service. To
the knowledge of the Company, there are no factors which would adversely
affect the qualified status of any such Employee Plan.
(h) The Company has, at all times, complied, and currently
complies, in all material respects with the applicable continuation
requirements for its welfare benefit plans, including (1) Section 4980B
of the Code (as well as its predecessor provision, Section 162(k) of the
Code) and Sections 601 through 608, inclusive, of ERISA, which
provisions are hereinafter referred to collectively as "COBRA" and (2)
any applicable state statutes mandating health insurance continuation
coverage for employees.
(i) Except as set forth on Schedule 4.15, the consummation
of the transactions contemplated hereby will not create or accelerate
any right to receive benefits or the payment thereof under any Employee
Plan.
(j) Except as required under this Agreement or as set forth
on Schedule 4.15, during the period from June 30, 2000 through the date
hereof, there has not been (a) any acceleration, amendment or change of
the period of exercisability or vesting of any Company Stock Options
under the Option Plan (including any discretionary acceleration of the
exercise periods or vesting by the Board of Directors or any committee
thereof or any other persons administering an Option Plan) or
authorization of cash payments in exchange for any Company Stock Options
under such Option Plan, (b) any adoption or material amendment by the
Company or any of its subsidiaries of any Employee Plans, except as
required by law, or (c) any adoption of, or amendment to, or change in
employee participation or coverage under, any Employee Plans which would
increase materially the expense of maintaining such Employee Plans above
the level of the expense incurred in respect thereof for the fiscal year
ended on June 30, 2000. Except as expressly contemplated hereby, and
except as otherwise specified in employment agreements to which Merger
Sub is a party entered into in connection with the Merger and effective
at the Effective Time, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (either alone or in conjunction with any other event) result in, or
cause the accelerated vesting or delivery of, or increase the amount or
value of, any payment or benefit to any employee of the Company.
4.16 Personnel. Schedule 4.16 lists, to the extent not listed on
Schedule 4.15, all plans, contracts, agreements, programs and policies,
whether written or oral, relating to, and all information referred to
in, the following items: (a) all employment, savings, bonus, profit
sharing, percentage compensation, deferred compensation, severance pay,
pension, employee benefit, welfare and retirement plans, contracts and
agreements in each such case with directors, officers or employees, all
stock purchase and option plans, contracts and agreements, all
consulting agreements, and all labor union and collective bargaining
agreements, to which the Company is a party or is subject; (b) the names
and current salaries of all directors, officers, and division managers
of the Company; (c) the wage rates for non-salaried and non-executive
salaried employees of the Company by classification; (d) any increase
since June 30, 2000 in the compensation payable or to become payable by
the Company, or any bonus, percentage compensation, service award or
other similar benefit granted, made or accrued to the credit of, any
officer, director, employee, agent or consultant thereof except for such
as are payable to employees (other than officers and directors) pursuant
to (i) regular compensation reviews in accordance with past practice
(but not across the board general salary increases) or (ii) employment
agreements in effect on June 30, 2000; (e) all group insurance programs
in effect for employees of the Company; and (f) since June 30, 2000, any
contribution to any profit sharing or other employee benefit plan. The
Company is not in default with respect to any of its obligations listed
above. Except as set forth in Schedule 4.16, the Company is not and
will not be, by reason of anything done in connection with (or within a
period of time measured from) the execution of this Agreement or the
consummation of the transactions contemplated hereby, liable to any
employees of the Company for any amount of severance pay or for any
other payments which are or become payable in an increased amount by
reason of the consummation of the transactions contemplated hereby.
Except as set forth on Schedule 4.16, no employee of the Company has
been paid compensation in any form or other amounts in any form where
the payment has been discretionary and not pursuant to a binding legal
obligation of the Company. To the knowledge of the Company, no officer,
director, agent, employee, consultant or contractor of the Company is
bound by any agreement that purports to limit the ability of such person
(i) to engage in or continue or perform any conduct, activity, duties or
practice relating to the business of the Company or (ii) to assign to
the Company or to any other person any rights to any invention,
improvement or discovery.
Except as set forth on Schedule 4.16, there are no accrued
liabilities under any plans, programs, policies or practices maintained
by the Company on behalf of any of its employees which are not provided
for on the books of the Company and reflected in the March 31, 2001
Balance Sheet or which have not been fully (on an actuarial basis, or
plan termination basis, where appropriate) provided for by insurance
contracts, premiums on which are currently paid in full, or by
contributions to one or more trusts established to fund the plan,
program, policy or practice in question.
The qualifications of each employee of the Company for employment
under applicable immigration laws have been reviewed, a properly
completed Form I-9 is on file with respect to each such employee, and the
Company is in compliance with the Immigration Reform and Control Act of
1986, as amended.
4.17 Governmental and Other Approvals. The Company's business has
been, and is being, conducted in compliance with all applicable laws,
ordinances, or other rules or regulations and all consents,
authorizations, licenses, permits, orders, certificates, registrations
or qualifications required under applicable law or regulation, federal,
state and local, necessary to the ownership of all of its assets and to
the operation of its business as presently conducted. ("Consent"). No
Consent by any federal, state or local government or any arbitral panel
or any court, tribunal, administrative or regulatory agency or
commission or other governmental authority, department, bureau,
commission or agency, domestic or foreign (a "Governmental Entity"), is
required by or with respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, except as set forth on Schedule 4.17 and except for
(i) the filing of the documents referred to in Section 1.2 in accordance
with the Nevada Corporation Law and the Virginia Corporation Law and
similar documents with the relevant authorities of other states in which
the Company is qualified to do business, (ii) the filing with the
Securities and Exchange Commission ("SEC") of an information statement
relating to the appraisal rights of Dissenting Stockholders (as amended
or supplemented from time to time, the "Information Statement") and
such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, and (iii) such
other Consents of Governmental Entities that are not "federal" (within
the meaning of the following sentence) as to which the failure to obtain
or make could not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, unless the context otherwise
requires any reference to "federal" includes any federal or national
government or multi-national organization or body, and any reference to
"state" includes any state or provincial government.
Each Consent is valid and in full force and effect. To the
Company's knowledge, no event has occurred or circumstance exists that
may constitute or result directly or indirectly in a violation of any
term or requirement of any Consent or in the revocation, withdrawal,
suspension, cancellation or termination of, or modification to, any
Consent. The Company has not received any notice or communication
regarding any violation or potential violation of any Consent or
regarding any actual or proposed revocation, withdrawal, suspension,
cancellation, termination of or modification to any Consent. All
applications required to have been filed for the renewal of each Consent
have been duly filed in a timely basis. The Company does not have any
expectation that, based upon the operations of the Company to date, any
customer, supplier or other person will not maintain its relationship
with the Company as previously maintained and conducted after
the date hereof and the Closing Date.
4.18 Accounts; Accounts Receivable. The Company's Costs and
Estimated Earnings in Excess of ▇▇▇▇▇▇▇▇ ("Costs in Excess") and
▇▇▇▇▇▇▇▇ in Excess of Costs and Estimated Earnings ("▇▇▇▇▇▇▇▇ in
Excess") as reflected on the March 31, 2001 balance sheet have been
properly calculated in accordance with GAAP and in a manner that is
consistent with prior practices. To the Company's knowledge, (i) the
underlying assumptions related to the cost to complete projects under
contract as of such date are reasonable and (ii) any estimates related
to the cost to complete projects under contract as of such date have
been prepared in a manner to properly reflect the total costs to
complete all such projects taken in the aggregate. Parent acknowledges
that material changes may occur in the estimates related to the cost to
complete projects under contract and that materially adverse changes in
such estimates have frequently occurred in connection with completed
projects. All of the accounts receivable of the Company arose in the
ordinary course of business and represent accounts validly due for goods
sold or services rendered and are validly incurred indebtedness on the
part of those obligated thereon and are not subject to counterclaim or
set-off other than with respect to credits which arose in the ordinary
course of business.
4.19 Brokerage. The Company has not dealt directly or indirectly
with any broker or finder in connection with the transactions
contemplated herein.
4.20 Labor Relations. There is no unfair labor practice complaint
pending or, to the knowledge of the Company, threatened against the
Company nor any basis therefor. There is no proceeding pending or, to
the knowledge of the Company, threatened before the National Labor
Relations Board that arises out of or pertains to the business of the
Company nor any basis therefor. The Company has not experienced any
work stoppage or other labor difficulty or any unionization attempt over
the last five years except as set forth in Schedule 4.20. Except as set
forth on Schedule 4.20, there is no discrimination charge (relating to
sex, age, race, national origin, handicap or veteran status) pending
before any federal or state agency or authority nor any basis therefor,
and there is no labor strike or similar dispute or labor arbitration
proceeding pending or to the knowledge of the Company or any Seller
threatened against or involving the Company nor any basis therefor that
arises out of or pertains to the business of the Company. There is no
outstanding demand for union representation of employees of the Company.
No representation question is pending before the National Labor
Relations Board involving any attempt to organize a bargaining unit
including any employees of the Company, and no labor grievance has been
filed within the past 12 months with the Company that arises out of or
pertains to its business. Except as set forth on Schedule 4.20, the
Company is not a party to any collective bargaining agreement and
is not currently negotiating a collective bargaining agreement with
respect to its employees.
4.21(a) Product Warranty. With the exception of breaches of
contracts or warranties that are correctable and normally encountered
in the ordinary course of business, each product and service licensed,
manufactured, sold, leased, or delivered to a customer of the Company in
connection with the Company's business has been provided in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Company has no liability (and has no knowledge of
any basis) for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand for replacement or
repair thereof or other damages in connection therewith. Except as set
forth on Schedule 4.21(a), no product or service licensed, manufactured,
sold, leased, or delivered in connection with the Company's business is
subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of license, sale or lease.
Schedule 4.21(a) sets forth the standard terms and conditions of
license, sale or lease, including warranties, pursuant to which the
Company licenses, sells or leases its products.
(b) Product Liability. The Company presently has no liability
(and, to the knowledge of the Company, there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any liability)
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased,
or delivered in connection with the Company's business.
(c) Product Defects. There is no defect in the design,
source codes, production or manufacture of the software and/or other
products currently manufactured or sold by the Company not correctable
and normally encountered in the ordinary course of the Company's
business which would or could reasonably be expected to adversely affect
the safety, performance or quality of such products. There is no defect
in the design, source codes, production or manufacture of the software
and/or other products sold by the Company prior to the Closing Date not
correctable and normally encountered in the ordinary course of the
Company's business which would or could reasonably be expected to
adversely affect the safety, performance or quality of such products.
Except as set forth on Schedule 4.21, there are no warranties concerning
the products sold by the Company either currently or prior to the
Closing Date.
4.22 Corporate Name. Except as disclosed on Schedule 4.22, (a) no
other person or business has received from the Company the right to use,
nor is there any person or business using, any corporate name of the
Company, any tradename set forth in Schedule 4.11, or any variant
thereof, singly or in combination with any other term, and (b) no person
or business has attempted to restrain the Company from using any such
name or any variant thereof, singly or in combination with any other
term.
4.23 Prepayment of Liabilities. Except as disclosed on Schedule
4.23, the Company has no liability for borrowed money which cannot be
prepaid at any time without penalty.
4.24 Compliance With the Foreign Corrupt Practices Act and
Export Control and Anti-Boycott Laws
(a) The Company and, to the knowledge of the Company, its
directors, officers, employees, agents, contractors and other
representatives have not, to obtain or retain business, directly or
indirectly made any illegal contribution, gift, bribe, rebate, payoff,
influence, payment, kickback, or other payment to:
(i) any person who is an official, officer, agent, employee
or representative of any governmental body, or of any existing or
prospective customer (whether government-owned or non-government-owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political party
office; or
(iv) any other individual or entity.
(b) Except as set forth on Schedule 4.25, the Company has
made all payments to third parties by check mailed to such third
parties' principal place of business or by wire transfer to a bank
located in the same jurisdiction as such party's principal place of
business.
(c) Each transaction is properly and accurately recorded on
the books and records of the Company, and each document on which entries
in the Company's books and records are based is complete and accurate in
all respects. The Company maintains a system of internal accounting
controls adequate to insure that the Company maintains no off-the-books
accounts and that the Company's assets are used only in accordance with
the Company's management directives.
(d) The Company has at all times been in compliance with all
statutes, regulations and other legal requirements relating to export
control and trade embargoes. No product sold or service provided by the
Company during the last five years has been, directly or indirectly, sold
to or performed on behalf of Cuba, Iraq, Iran, Libya, or North Korea.
(e) The Company has not violated the anti-boycott
prohibitions contained in 50 U.S.C. Section 2401 et seq. or taken any
action which can be penalized under Section 999 of the Internal Revenue
Code. Except as set forth in Schedule 4.25, during the last five years,
the Company has not been a party to, is not a beneficiary under, and has
not performed any service or sold any product under, any contract under
which a product has been sold to customers in Bahrain, Iraq, Jordan,
Kuwait, Lebanon, Libya, Oman, Quatar, Saudi Arabia, Sudan, Syria, United
Arab Emirates, or the Republic of Yemen.
4.25 Insider Interests. Except as disclosed on Schedule 4.25, to
the Company's knowledge no present or former officer or director or
"affiliate" or "associate" (as such terms are defined in Rule 405 under
the Securities Act) of the Company has (a) any interest in any property
used in or pertaining to the business of the Company, (b) any contract,
commitment, arrangement or understanding with the Company other than
those listed on Schedule 4.16 or (c) any equity interest (other than an
investment in a publicly held corporation not exceeding one percent (1%)
of the outstanding capital stock of such corporation) with any customer,
competitor or supplier of the Company.
4.26 Disclosure. No representation or warranty made by the
Company or either Principal in this Article 4, and no statement
contained elsewhere in this Agreement or in any schedule, exhibit,
certificate, instrument or agreement delivered or to be delivered by the
Company or either Principal to the Parent contains or will contain any
untrue statement of fact or omits or will omit to state a material fact
or any fact necessary to make the statements contained herein or therein
not materially misleading. All material facts known to the Company
relative to the business, operations, properties, assets, liabilities
(whether accrued, absolute, contingent or otherwise), financial
condition and prospects of the Company have been disclosed to the Parent
by the Company and the Sellers. Nothing in any Schedule to this
Agreement shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless such Schedule identifies
the exception with particularity and describes the relevant facts
in detail.
4.27 No Material Change. Since June 30, 2000, except as
disclosed in any schedule or Financial Statements delivered by the
Company to the Parent prior to the execution of this Agreement and
incorporated herein, the Company has not (a) suffered any damage,
destruction or loss (whether or not covered by insurance) exceeding
$50,000 in the aggregate, (b) had any Materially Adverse Change in its
condition (financial or other), operations, business, business outlook
or property (and no event has occurred that may result in such a
material adverse change) or (c) done anything which, if done between the
date hereof and the Effective Time, would violate any provision of
Section 7.5 hereof.
4.28 Conduct of Business. Except as set forth on Schedule 4.28 or
in any schedule or Financial Statements delivered by the Company to the
Parent prior to the execution of this Agreement and incorporated herein,
since June 30, 2000 the Company has not (i) incurred any indebtedness
for borrowed money; (ii) entered into any agreement requiring the
maintenance of a specified net worth; (iii) assumed, guaranteed,
endorsed or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other individual,
firm or corporation; (iv) made any loans, advances or capital
contributions to, or investments in, any other individual, firm or
corporation; (v) mortgaged, pledged or otherwise subjected to any
lien any of its assets or property; (vi) made any tax election or
settled or compromised any federal, state, local or foreign income tax
liability; (vii) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past
practices, of liabilities reflected or reserved against in the June 30,
2000 balance sheet or incurred in the ordinary course of business
consistent with past practices since the date thereof, (viii) cancelled,
compromised, waived or released any right or claim outside the ordinary
course of business or involving in the aggregate more than $25,000, (ix)
increased the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of compensation payable or
to become payable by the Company to, or made any other change in the
terms of employment of, or made any loan to, or entered into any other
transaction outside the ordinary course of business with, any of its
directors, officers or employees, (x) declared or paid any
dividend, declared payment, declared any split or made any other
distribution (whether in cash, stock, property or any combination
thereof) in respect of the Common Stock, or purchased, acquired or
redeemed any shares of the Common Stock, or (xi) issued any stock
options or warrants for the purchase of Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth on the disclosure letter delivered by the
Parent and Merger Sub to the Company prior to the execution of this
Agreement (the "Parent Disclosure Letter"), Parent and Merger Sub
represent and warrant to the Company as of the date hereof as follows.
All references to schedules in this Article V are intended as references
to Schedules of the Parent Disclosure Letter:
Section 5.1 Corporate Organization. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation.
Each of Parent and Merger Sub has full power and authority (corporate
and other) to own, operate and lease its respective properties and to
conduct its respective business in the manner in which and in the places
where such properties are owned, operated or leased and such business is
now conducted or proposed to be conducted. Each of Parent and Merger
Sub is not in breach of any provision of either of its respective
articles of incorporation or by-laws, complete and accurate copies of
which are attached as Exhibit 5.1. The minute books containing the
records of meetings of the shareholders, the board of directors and any
committees of the board of directors, the stock certificate books and
the stock record books of each of Parent and Merger Sub are correct and
complete.
Each of Parent and Merger Sub is duly qualified, licensed and
authorized to do business as a foreign corporation and is in good
standing as a foreign corporation in each jurisdiction listed on
Schedule 5.1, and there is no jurisdiction not so listed in which the
ownership of each of the Parent's or Merger Sub's properties or the
conduct of its respective business requires such qualification in which
the failure to so qualify would have a material adverse effect on the
Parent's or Merger Sub's business or results of operations. Neither of
the Parent or Merger Sub has received any written notice within the last
three years from the Secretary of State or comparable official of any
jurisdiction to the effect that the Parent or Merger Sub is required to
be qualified or otherwise authorized to do business therein, in which
jurisdiction the Parent or Merger Sub has not qualified or obtained such
authorization.
Section 5.2 Authority; Noncontravention.
(a) Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and, subject to the Parent
Stockholder Approval (as defined below) required in connection with
the consummation of the Merger, to consummate the transactions
contemplated by this Agreement. The Merger will (i) if Parent or
Company shareholders elect the issuance of sufficient shares of Parent
Common Stock as merger consideration such that the Parent will issue
shares of Parent Common Stock in number equal to or greater than twenty
percent (20%) of the number of shares of Parent Common Stock issued and
outstanding immediately prior to the Effective Time require the
affirmative vote of the holders of a majority of the outstanding shares
of Parent Common Stock, voting together as a single class (the "Parent
Stockholder Approval"), which is the only vote of the holders of any
class or series of the capital stock of the Parent necessary to approve
the Merger, this Agreement and the transactions contemplated thereby,
and (ii) require the approval of the Parent, as the holder of all of the
outstanding Merger Sub capital stock (the "Merger Sub Stockholder
Approval"), which is the only approval of the holder of the capital
stock of Merger Sub necessary to approve the Merger, this Agreement and
the transactions contemplated thereby. The Parent does not contemplate
seeking the Parent Stockholder Approval unless and until the Parent
elects to consummate the Merger and delivers to the Company the Parent's
Notice of Merger Election.
(b) The execution and delivery of this Agreement have been
duly authorized by all necessary corporate action on the part of Parent
and Merger Sub except for the Parent Stockholder Approval and the Merger
Sub Stockholder Approval. This Agreement has been duly executed and
delivered by Parent and Merger Sub and, assuming this Agreement
constitutes a valid and binding agreement of the Company, constitutes a
valid and binding obligation of Parent and Merger Sub, enforceable
against them in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors rights generally, and general equitable principles.
(c) Except as set forth in Schedule 5.2 of the Parent
Disclosure Letter, the execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of
termination, cancellation, modification or acceleration of any
obligation or to a loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of Parent or
any of its subsidiaries under, (i) the certificate of incorporation or
bylaws of Parent or Merger Sub, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or any other contract, agreement,
instrument, permit, concession, franchise or license applicable to
Parent or Merger Sub or their respective properties or assets, or (iii)
subject to the governmental filings and other matters referred to in
Section 5.2(d), any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent, Merger Sub or any other
subsidiary of Parent or their respective properties or assets other
than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in
the aggregate would not (x) have a Material Adverse Effect, (y) impair
in any material respect the ability of Parent and Merger Sub to perform
their respective obligations under this Agreement or (z) prevent or
materially delay consummation of any of the transactions contemplated by
this Agreement.
(d) No Consent of any Governmental Entity is required by or
with respect to Parent, Merger Sub or any other subsidiary of Parent in
connection with the execution and delivery of this Agreement or the
consummation by Parent or Merger Sub, as the case may be, of any of the
transactions contemplated by this Agreement, except for (i) the filing
of the documents referred to in Section 1.2 hereof in accordance with
the Virginia Corporation Law and similar documents with the relevant
authorities of other states in which the Parent or Merger Sub is
qualified to do business, (ii) compliance with any applicable
requirements of the Securities Act and the Exchange Act and state
securities laws, including without limiting the generality of the
foregoing, the filing of a Registration Statement on Form S-4 in
compliance with the provisions of the Securities Act of 1933, as
amended, and the rules and regulations of the SEC, and (iii) such other
Consents as to which the failure to obtain or make would not have a
Material Adverse Effect.
Section 5.3 SEC Documents; Financial Statements; No Undisclosed
Liabilities.
(a) Parent has filed, and made available to the Company true
and complete copies of, all reports, schedules, forms, statements,
exhibits and other documents required to be filed with the SEC since
November 30, 2000 (the "Parent SEC Documents"). As of their respective
dates, the Parent SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case
may be, applicable to such Parent SEC Documents, and none of the Parent
SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. No event has
occurred since the filing of the most recent Parent SEC Document which
would have a Material Adverse Effect on Parent or as the result of which
the Parent will be required to file a report with the SEC.
(b) The financial statements of Parent included in the Parent
SEC Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
applicable to the Parent with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(c) Except as set forth in the Parent SEC Documents, Parent
has no liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and
obligations which, individually or in the aggregate, have had or would
have a Material Adverse Effect on Parent.
Section 5.4 Information Supplied. None of the information
supplied or to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in (i) the Form S-4, will (except to the
extent revised or superseded by amendments or supplements), at the time
the Form S-4 is filed with the SEC, or will, at the time it becomes
effective under the Securities Act, 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, and
(ii) the Information Statement will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at the
time the Information Statement is first mailed to stockholders of the
Company, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Form 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, except that no representation or
warranty is made by Parent or Merger Sub with respect to statements made
or incorporated by reference therein based on information supplied by
the Company for inclusion or incorporation by reference in the Form S-4.
Section 5.5 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents, during the period from December
31, 2000 through the date hereof, Parent has conducted its business only
in the ordinary course consistent with past practice, and there is not
and has not been since such date (i) any Material Adverse Change; (ii)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) with respect to Parent's capital stock or any repurchase,
redemption or other acquisition by Parent of any outstanding shares of
its capital stock except for repurchases from employees following their
termination of employment pursuant to the terms of their existing stock
option or purchase agreements; and except for repurchases in connection
with the Parent's ongoing stock buy back program and in connection with
the CompuDyne Employee Stock Purchase Plan, (iii) any adjustment split,
combination or reclassification of any of Parent's capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its capital
stock; (iv) any amendment, waiver or modification of any material term
of any outstanding capital stock of Parent; (v) any incurrence,
assumption or guarantee by Parent of any material indebtedness for
borrowed money or other material obligations, other than in the ordinary
course of business consistent with past practice; or (vii) any
condition, event or occurrence which, individually or in the aggregate,
would have a Material Adverse Effect.
Section 5.6 Interim Operations of Merger Sub. Merger Sub was
formed on May , 2001 solely for the purposes of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
Section 5.7 Capital Structure. The authorized capital stock of
Parent consists of 15,000,000 shares of Parent Common Stock and
2,000,000 shares of preferred stock. As of the date of this Agreement,
(i) five million three hundred seventeen thousand nine hundred thirty
nine (5,317,939) shares of Parent Common Stock are issued and
outstanding, (ii) no shares of preferred stock are issued and
outstanding, (iii) no shares of Parent Common Stock are reserved for
issuance upon conversion of the preferred stock, and (iv) one million
four hundred and two thousand three hundred thirty four (1,402,334)
shares of Parent Common Stock are reserved for issuance pursuant to
outstanding options and warrants to purchase Parent Common Stock. There
are no other authorized shares of any other class. All outstanding
shares of Capital Stock have been validly issued by the Parent and are
fully paid, non-assessable and free of preemptive rights. Except as set
forth in Schedule 5.7, no shares of Capital Stock have been reserved for
issuance for any purpose and there is no subscription, option, warrant,
call, right, contract, commitment, understanding or arrangement relating
to the issuance, sale or transfer by the Parent of any shares of Capital
Stock including any right of conversion or exchange under any
outstanding security or other instrument. The issuance and sale of all
shares of Capital Stock have been in full compliance with all applicable
federal and state securities laws. Merger Sub is a wholly-owned direct
subsidiary of Parent.
Section 5.8 Litigation. Except as set forth on Schedule 5.8,
there is no action, suit, claim, demand, investigation or proceeding
pending or, to the knowledge of the Parent or Merger Sub, threatened
against, relating to or affecting the Parent or Merger Sub or its
business or which would in any way affect the transactions contemplated
by this Agreement, and to the knowledge of the Parent or Merger Sub
there is no basis for any of the foregoing. No order, writ, injunction
or decree has been issued by or requested of any court or governmental
agency which might result in any adverse change in the business,
property or assets or in the condition, financial or otherwise, of the
Parent or Merger Sub or which might adversely affect the transactions
contemplated by this Agreement. Neither the Parent nor Merger Sub has
been subject to any bankruptcy or other insolvency proceedings.
Section 5.9 Compliance with Laws, Etc. The conduct by Parent and
its subsidiaries of their business is in compliance with all statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees,
applicable to their businesses or operations, except for instances of
possible noncompliance that individually or in the aggregate would not
have a Material Adverse Effect, impair in any material respect the
ability of Parent to perform its obligations under this Agreement or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
Section 5.10 [Intentionally Omitted.]
Section 5.11 Brokers. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made
by or on behalf of Parent or Merger Sub.
Section 5.12 Taxes.
(a) Except as disclosed on Schedule 5.12, the Parent has
filed all income, franchise, sales and other tax returns, declarations,
statements and reports of every nature, including any schedule or
attachment thereto and including any amendment thereof ("Parent Tax
Return") required to be filed by it accurately reflecting any and all
taxes owing to the United States or any other government or any
subdivision thereof, state or local, or any other taxing authority, and
has paid in full or made adequate provision as part of its current
liabilities in the financial statements included in the Parent SEC
Documents for the payment of all taxes with respect to all tax periods
ending on or before the Closing Date (including penalties and interest)
for which the Parent has or may have liability, whether or not shown on
any Parent Tax Return. The Parent has delivered or made available to
the Company copies of, and Schedule 5.12 contains a complete and
accurate list of, all Parent Tax Returns filed by the Parent since
December 31, 1999. Except as disclosed on Schedule 5.12, there is no
unassessed tax deficiency proposed or to the knowledge of the Parent
threatened against the Parent. There are, and will hereafter be, no
net tax deficiencies (including penalties and interest) of any kind
assessed against or relating to the Parent with respect to any of the
taxable periods ending on or before the Closing Date. The Parent is
not currently the beneficiary of any extension of time within which to
file any Tax Return. Except as disclosed on Schedule 5.12, no claim
has ever been made to the Parent by any authority in a jurisdiction
where the Parent does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction.
(b) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state,
local or foreign tax return of the Parent for any period. The federal
income tax returns of the Parent were last audited by the Internal
Revenue Service for the fiscal year ended December 31, 1984. To the
Parent's knowledge, no state, local or foreign taxing authority has ever
audited any tax return or report filed therewith by the Parent Proper
amounts have been withheld by the Parent from its employees, independent
contractors and other third parties in compliance with the tax
withholding provisions of all applicable federal, state, local, foreign
and other laws, and timely deposits have been made of all payroll taxes
due. Payment has been timely made by the Parent of all estimated income
taxes and other taxes of any kind due.
The Parent has not filed any consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. The Parent has not made any payments, is not
obligated to make any payments and will not be so obligated by reason of
the transactions contemplated hereby, and is not a party to any
agreement that under certain circumstances could obligate it to make
any payments, that will not be deductible under Section 280G of the
Code. The Parent has disclosed on its federal income tax returns all
positions taken therein that could give rise to an underpayment of
federal income tax to which Section 6662 of the Code applies. The
Parent is not a party to any tax allocation or sharing agreement. The
Parent has never been a member of an Affiliated Group within the meaning
set forth in Section 1504(a) of the Code.
Section 5.13 Environmental, Health and Safety Matters
Except as disclosed in Schedule 5.13:
(a) The Parent is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. The Parent has no basis to expect, nor
has it received, any actual or threatened order, notice, or other
communication from (i) any governmental authority or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by the Parent, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(b) There are no pending or, to the knowledge of the Parent,
threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any Facility.
(c) The Parent has no knowledge of or any basis to expect,
nor has it received, any citation, directive, inquiry, notice, order,
summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any
Facility, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used,
or processed by the Parent have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(d) The Parent has no Environmental, Health, and Safety
Liabilities with respect to any Facility or, to the knowledge of the
Parent, with respect to (i) any Facility, or (ii) any property
geologically or hydrologically adjoining any Facility.
(e) There are no Hazardous Materials present on or in the
Environment at any Facility or to the Parent's knowledge, at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether movable or
fixed) or other containers, either temporary or permanent, and deposited
or located in land, water, sumps, or any other part of the Facility or
such adjoining property, or incorporated into any structure therein or
thereon. Neither the Parent nor, to the knowledge of the Parent, any
other person, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to any Facility except in full
compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge of the
Parent, Threat of Release, of any Hazardous Materials at or from any
Facility, or to the knowledge of the Parent any geologically or
hydrologically adjoining property, whether by the Parent or any other
person.
(g) The Parent has delivered to the Company true and complete
copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Parent pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance, by the Parent or any other person for whose
conduct it is or may be held responsible, with Environmental Laws.
Section 5.14 Disclosure. No representation or warranty made by
the Parent in this Article 5, and no statement contained elsewhere in
this Agreement or in any schedule, exhibit, certificate, instrument or
agreement delivered or to be delivered by the Parent to the Company
contains or will contain any untrue statement of fact or omits or will
omit to state a material fact or any fact necessary to make the
statements contained herein or therein not materially misleading. All
material facts known to the Parent relative to the business, operations,
properties, assets, liabilities (whether accrued, absolute, contingent
or otherwise), financial condition and prospects of the Parent have been
disclosed to the Company. Nothing in any Schedule to this Agreement
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless such Schedule identifies the exception with
particularity and describes the relevant facts in detail.
ARTICLE VI
COVENANTS
As set forth hereafter in sections 6.1 through 6.8 hereof, the
Company agrees that:
Section 6.1 Conduct of Business. During the period from the date
of this Agreement to the earlier of the termination of this Agreement or
the Effective Time, the Company shall, and shall cause its subsidiaries
to, carry on their business in the ordinary course of business in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, endeavor in good faith to preserve intact their
current business organizations, keep available the services of their
current officers and employees (as a group) and preserve their
relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them. Without
limiting the generality of the foregoing, other than as set forth in
Schedule 6.1 of the Company Disclosure Letter, during the period from
the date of this Agreement to the Effective Time, the Company agrees,
except as otherwise consented to or approved by an authorized officer of
Parent in writing or as required by this Agreement, that:
(a) The business, operations, activities and practices of the
Company shall be conducted only in the ordinary course and consistent
with past practice and prudent business practice and in full compliance
with applicable law;
(b) No change shall be made in the charter or by-laws of the
Company, except as required for the issuance of the 7.5% Cumulative
Preferred;
(c) No change shall be made in the number of shares of
authorized or issued capital stock of the Company, with the exception of
the issuance of the 7.5% Cumulative Preferred, nor shall any option,
warrant, call, right, commitment or agreement of any character be
granted or made by the Company relating to its authorized or issued
capital stock; nor shall the Company issue, grant or sell any securities
or obligations convertible into shares of capital stock of the Company;
(d) Neither the Company nor any of its officers, directors or
agents will, directly or indirectly, through any representative or
otherwise, solicit or entertain offers from, negotiate with or in any
manner encourage, discuss, accept, or consider any proposal of any other
person relating to the acquisition of Company Common Stock, assets or
business, in whole or in part, whether directly or indirectly, through
purchase, merger, consolidation, or otherwise (other than sales of
inventory in the normal course)(any such transaction referred to
hereinafter as an "Acquisition"); provided however, that the Company's
Board of Directors may, to the extent reasonably necessary in the
exercise of its fiduciary duties, entertain bona fide offers relating
to an Acquisition (where bona fide offers include only offers of
Acquisition for a stated amount with respect to which the potential
acquirer has demonstrated financial capacity to consummate the offer).
The Company will immediately notify the Parent regarding any contact
between the Company or its representatives and any other person
regarding any such offer or proposal or any related inquiry;
(e) the Company will not (i) incur any indebtedness for
borrowed money, other than the current line of credit with Civic Bank;
(ii) enter into any agreement requiring the maintenance of a specified
net worth, other than under the current line of credit with Civic Bank;
(iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other individual, firm or corporation; (iv) make any
loans, advances or capital contributions to, or investments in, any
other individual, firm or corporation; (v) mortgage, pledge or otherwise
subject to any lien any of its assets or property; (vi) make any tax
election; (vii) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past
practices, of liabilities reflected or reserved against in the March 31,
2001 balance sheet or incurred in the ordinary course of business
consistent with past practices since the date thereof, (viii) cancel,
compromise, waive or release any right or claim outside the ordinary
course of business or involving in the aggregate more than $25,000, (ix)
increase the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of compensation payable
or to become payable by the Company to, or make any other change in the
terms of employment of, or make any loan to, or enter into any other
transaction outside the ordinary course of business with, any of its
directors, officers or employees, or (x) declare or pay any dividend or
declare payment or make any other distribution (whether in cash, stock,
property or any combination thereof) in respect of Company Common Stock,
or purchase, acquire or redeem any shares of the Common Stock;
(f) the Company will use its best efforts to preserve its
business organization intact, to keep available to itself the present
services of its employees, and to preserve for itself the goodwill of
its suppliers, customers and others with whom business relationships
exist;
(g) the Company will not make or amend or cancel any
contracts of the nature required to be disclosed in writing pursuant to
Article IV hereof other than in the ordinary course of business,
consistent with past practice;
(h) the Company will notify the Parent as soon as practicable
after the receipt of any notice that it has not performed all the
current and past obligations involving $25,000 or more to be performed
by it under any contract, agreement, commitment or instrument to which
it is a party;
(i) the Company will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to be done
anything in the conduct of its business, or otherwise, which would be
contrary to or in breach of any of the terms or provisions of this
Agreement, or (except as otherwise contemplated by this Agreement
including by this Section 6.1) which would cause any of the
representations or warranties of the Company contained herein to be or
become untrue or which would require any amendment or supplement to any
Schedule; and
Section 6.2 Action by Company Stockholders.
(a) Promptly following the execution of this Agreement,
subject to the approval of an amendment to the Company's Articles of
Incorporation to provide for stockholder action as permitted by Section
13.1-657 A.2 of the Virginia Corporation Law, the Company will, through
its Board of Directors, recommend approval and adoption of this
Agreement and the Merger by the Company's stockholders and submit this
Agreement and the Merger to the Major Stockholders and the holders of
the Company Preferred Stock for approval by written consent. If the
Agreement and Merger are approved, except as permitted under Section 9.1
the Company may not abandon the Agreement and Merger except upon the
affirmative vote of Company stockholders holding shares which would be
sufficient to approve a merger under the Virginia Corporation Law.
(b) If the Parent elects to consummate the Merger and deliver
to the Company a Parent's Notice of Merger Election, the Company will
make stock transfer records relating to the Company available to the
extent reasonably necessary to effectuate the intent of this Agreement,
and otherwise will render reasonable assistance to Parent in connection
with the Merger.
Section 6.3 Letter of the Company's Accountants. If the Parent
elects to consummate the Merger and deliver to the Company a Parent's
Notice of Merger Election, the Company shall use its commercially
reasonable efforts to cause to be delivered to Parent a letter of
PricewaterhouseCoopers, the Company's independent public accountants,
dated a date within two business days before the date on which the Form
S-4 shall become effective and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
Section 6.4 Access to Information. From the date hereof until the
Effective Time or the termination of this Agreement, the Company will
give Parent, its counsel, financial advisors, auditors and other
authorized representatives reasonable access (during normal business
hours and upon reasonable notice) to the offices, properties, officers,
employees, accountants, auditors, counsel and other representatives,
customers and suppliers, and books and records of the Company and its
subsidiaries (including to perform any environmental studies), will
furnish to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial, operating and property
related data and other information as such persons may request, will
furnish promptly to Parent a copy of each report, schedule, registration
statement and other document filed by the Company during such period
pursuant to the requirements of federal or state securities laws and
will instruct the Company's and its subsidiaries employees, counsel and
financial advisors to cooperate with Parent in its investigation of the
business of the Company and the subsidiaries, including, without
limitation, in connection with Parent's obtaining title reports,
surveys, environmental reports and similar reports or studies with
respect to properties owned or leased by the Company or its
subsidiaries, and will exercise all reasonable efforts to obtain from
landlords such estoppel certificates as Parent may request.
Section 6.5 [Intentionally Omitted].
Section 6.6 Cooperation in Arrangements with Lenders. The Company
shall, and shall cause its subsidiaries to cooperate with and assist
Parent and its professionals and advisors in arranging for the
prepayment at the Effective Time of all indebtedness of the Company and
its subsidiaries that Parent identifies to the Company it elects to
prepay and otherwise ensuring that no "Default" or "Event of Default"
(under and as defined in the Credit Agreement dated as of November 30,
1998 among Parent and certain of its subsidiaries and LaSalle Bank,
N.A., (f/k/a as LaSalle National Bank) as lender) shall occur by virtue
of the Surviving Corporation becoming a wholly-owned subsidiary of
Parent at the Effective Time, and shall provide whatever other
assistance and cooperation Parent and its professionals and advisors
might reasonably request in connection with any of the foregoing.
Section 6.7 [Intentionally Omitted].
Section 6.8 Confidentiality. Prior to the Effective Time and
after any termination of this Agreement, the Company will hold, and will
use its reasonable commercial efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to
hold, any and all information received from Parent, directly or
indirectly, in confidence in accordance with the non-disclosure
agreement entered into between the Parent and Company dated July 23,
1998 (the "Confidentiality Agreement").
As set forth hereafter in sections 6.9 through 6.18, Parent agrees
that:
Section 6.9. Access to Information. From the date of any
issuance by the Parent of the Parent's Notification of Merger Election
until the Effective Time, Parent will give the Company, its counsel,
financial advisors, auditors and other authorized representatives
reasonable access (during normal business hours and upon reasonable
notice) to the officers, accountants, auditors, counsel and other
representatives of Parent and its subsidiaries, will furnish to the
Company, its counsel, financial advisors, auditors and other authorized
representatives such financial, operating and property related data and
other information as such persons may reasonably request under the
circumstances, will furnish promptly to the Company a copy of each
report, schedule, registration statement and other document filed by
Parent during such period pursuant to the requirements of federal or
state securities laws and will instruct Parent's and its subsidiaries
counsel and financial advisors to cooperate with the Company in its
investigation of the business of Parent and the subsidiaries.
Notwithstanding the foregoing, the Company shall not be entitled to (a)
non-public information that Parent reasonably concludes can not or
should not be disclosed to the Company for competitive reasons or
applicable securities laws, (b) obtain title reports, surveys,
environmental reports or similar reports or studies with respect to
properties owned or leased by Parent or its subsidiaries (but the
Company shall have the right to review any such reports in the
possession of Parent) or (c) access to non-officer employees or
customers or suppliers of Parent or its subsidiaries.
Section 6.10 Confidentiality. Prior to the Effective Time and
after any termination of this Agreement, Parent will hold, and will use
its reasonable commercial efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to
hold, any and all information received from the Company, directly or
indirectly, in confidence in accordance with the Confidentiality
Agreement.
Section 6.11 Obligations of Merger Sub. As of the Effective Time,
Merger Sub will be a wholly-owned direct subsidiary of Parent. If the
Parent elects to consummate the Merger and delivers to the Company a
Parent's Notice of Merger Election, Parent will take all action, and
provide all financing, necessary to cause Merger Sub to perform its
obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
Section 6.12 [Intentionally Omitted]
Section 6.13 Letter of Parent's Accountants. Parent shall use its
commercially reasonable efforts to cause to be delivered to the Company
a letter of Deloitte & Touche, Parent's independent public accountants,
dated a date within two business days before the date on which the Form
S-4 shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
Section 6.14 [Intentionally Omitted].
Section 6.15 Director and Officer Liability.
(a) From and after the consummation of the Merger, Parent
will, and will cause the Surviving Corporation to, fulfill and honor in
all respects the obligations of the Company pursuant to (i) each
indemnification agreement in effect between the Company and each person
who is or was a director or officer of the Company at or prior to the
Effective Time (copies of which have been made available to Parent) and
(ii) any indemnification provisions under the Company's Second Amended
and Restated Articles of Incorporation or Amended and Restated By-laws
as each is in effect on the date hereof (the persons to be indemnified
pursuant to the agreements or provisions referred to in clauses (i) and
(ii) of this Section 6.15, together with their heirs, shall be referred
to as, individually, the "Indemnified Party"). The Second Amended and
Restated Articles of Incorporation and Amended and Restated By-laws of
the Surviving Corporation shall contain the provisions with respect to
indemnification and exculpation from liability set forth in the
Company's Second Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a
period of three years after the Effective Time in any manner that would
adversely affect the rights thereunder of any Indemnified Party.
(b) Notwithstanding anything to the contrary contained in
this Agreement, from and after the date hereof, except to the extent
that Parent reasonably objects, the Company may enter into
indemnification agreements, or amend existing indemnification
agreements, with current directors and officers of the Company providing
for such provisions as are customary under Virginia law.
(c) The Indemnified Parties are intended third party
beneficiaries of this Section to the extent such provisions benefit any
such Indemnified Party, but the foregoing shall not limit the right of
the Company and Parent to agree to any amendment or modification of such
provisions prior to the Effective Time without the consent of any
Indemnified Party.
Section 6.16 Current Reporting Company. During the period
commencing at the Effective Time and ending on the third anniversary
thereof, Parent shall maintain current public information (as defined in
SEC Rule 144(c)) with respect to Parent unless Parent shall cease to be
a reporting company under the Exchange Act.
Section 6.17 Registration Rights Agreements. Parent shall enter
into Registration Rights Agreements with the Company and certain of the
stockholders of the Company the form of which will be substantially as
set forth in Exhibits 6.17a and 6.17b attached hereto.
Section 6.18 Representation on Parent Board of Directors. After
the consummation of the Merger, the Parent will nominate, and ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and, if permitted to do so without violating any
fiduciary duties to its constituent partners, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Mezzanine
Capital II, L.P., shall vote their respective shares of Parent Common
Stock for election to Parent's Board of Directors, representatives of,
and proposed by, the Company's Board of Directors. (the persons to be
nominated hereinafter referred to as the "Tiburon Nominees"), in such
numbers such that those representatives shall constitute approximately
the same percentage of Parent's Board of Directors as the percentage of
total outstanding Parent Common Stock held by the former Company
shareholders at the Effective Time. It is understood that the members
of the Parent's Board of Directors are, under Parent's by-laws, elected
for staggered, three-year terms, and the Tiburon Nominees will be
nominated for full, three-year terms.
As set forth hereafter in Section 6.19, the Company and the Parent
agree:
Section 6.19 Arbitration. If at the time of the delivery to the
Company of the Parent's Notice of Merger Election there remains any
Disputed Amount of Unindemnified Common Stock Purchase Agreement Loss,
Parent shall so notify Company in a writing delivered within two days
after the delivery of the Notice of Merger Election, and Parent shall
simultaneously file a Demand for Arbitration of such claim with the
American Arbitration Association. Binding arbitration of the claim
shall be conducted on an expedited basis by a single arbitrator,
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association (except such scheduling rules as are inconsistent with the
provisions of this paragraph). Company shall submit its response to
Parent's Demand for Arbitration within two days of receipt, and the
parties shall select an arbitrator within seven days of the filing of
the Demand for Arbitration; if the parties have not been able to agree
upon an arbitrator within seven days, the American Arbitration
Association shall select the arbitrator. All arbitration proceedings
shall be held in the San Francisco Bay area. The arbitrator upon
his/her appointment shall consult with the parties, in person or by
telephone, and shall schedule such submissions as are deemed necessary
and appropriate, but in any event the arbitrator shall render his/her
award upon the claim within 30 days after the selection of the
arbitrator. The arbitrator's award shall be final with respect to the
amount of such Disputed Amount (if any) to be included in the
Unindemnified Common Stock Purchase Agreement Loss for purposes of
calculating the amount of the Consideration for Company Common Stock.
All costs, fees, expenses of arbitration shall be borne as directed by
the arbitrator in his/her award, and judgment on the arbitrator's
award may be entered in any court having jurisdiction thereof.
ARTICLE VII
COVENANTS OF PARENT, MERGER SUB AND THE COMPANY
The parties hereto agree that, if the Parent shall have elected to
consummate the Merger and shall have delivered to Company the Parent's
Notice of Merger Election:
Section 7.1 Preparation of Form S-4 and the Information Statement.
Prior to or promptly following the date of such Notice of Merger
Election, Parent shall prepare and file with the SEC the Form S-4, in
which the Information Statement will be included as a prospectus. Each
of the Company and Parent shall use its reasonable commercial efforts to
have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. The Company will use its
reasonable commercial efforts to cause the Information Statement to be
mailed to the Company's stockholders as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Parent
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken
under any applicable state securities laws in connection with the
issuance of shares of Parent Common Stock in the Merger.
Section 7.2 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, including, without limitation, Sections 6.1(d) and 6.2,
if the Parent shall have elected to consummate the Merger and shall have
delivered to the Company the Parent's Notice of Merger Election, each of
the parties agrees to use reasonable commercial efforts to take, or
cause to be taken, all actions and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable the Merger and the other
transactions contemplated by this Agreement, including using reasonable
commercial efforts (i) to obtain all other necessary waivers, consents
and approvals from Governmental Entities and to make all other necessary
registrations and filings (including other filings with Governmental
Entities, if any), (ii) to obtain all necessary consents, approvals or
waivers from third parties, (iii) to prepare the Form S-4 and the
Information Statement and (iv) to repay, with funds of the Surviving
Corporation, all of the Company's indebtedness contemplated by Section
6.6 at the Effective Time.
(b) Notwithstanding anything to the contrary in Section
7.2(a), (i) neither Parent nor any of its subsidiaries shall be required
to divest, or cause or permit the Company or its subsidiaries or
affiliates to divest, any material portion of their respective
businesses, product lines or assets; (ii) none of Parent, Merger Sub
or the Company shall be required to waive any of the conditions to the
Merger set forth in Article VIII; and (iii) none of the Parent, Merger
Sub or the Company shall be required to take any action that would
cause a condition to the Merger in Article VIII to fail to be satisfied.
Section 7.3 Public Announcements. Parent and Merger Sub, on the
one hand, and the Company, on the other hand, will consult with each
other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including
the Merger, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required
by applicable law, court process or by obligations pursuant to any
listing agreement with the Nasdaq National Market. The parties agree
that the initial press release to be issued with respect to the
transactions contemplated by this Agreement will be in the form
previously agreed to by the parties.
Section 7.4 [Intentionally Omitted]
Section 7.5. Stock Exchange Listing. Prior to the Closing Date,
Parent shall cause the shares of Parent Common Stock to be issued in the
Merger, other than the shares to be issued to shareholders of the
Company who are not "insiders" as defined in SEC Proposed Rule 159 under
the Securities Act but who are "Major Shareholders" who executed the
Stockholders Agreement, to be approved for listing on the NASDAQ
National Market, subject to notice of issuance.
Section 7.6 Takeover Statutes. If any "fair price", "moratorium",
"control share acquisition" or other form of antitakeover statute or
regulation shall become applicable to the transactions contemplated
hereby, the Company and the members of the Board of Directors of the
Company shall grant such approvals and take such actions as are
reasonably necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of such statute
or regulation on the transactions contemplated hereby.
Section 7.7 Tax Consequences. The parties intend that the Merger
shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a)
of the United States Treasury Regulations. The parties shall not take
a position on any tax return inconsistent with this Section 7.7. Each
of the parties agrees not to take any action either prior to or after
the Effective Time that would cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) the Company Stockholder Approval, the Merger Sub
Stockholder Approval, and, if required, the Parent Stockholder Approval
shall have been obtained;
(b) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or statute, rule or regulation (collectively, "Restraints") preventing
the consummation of the Merger shall be in effect;
(c) the shares of Parent Common Stock issuable to the holders
of the Company Common Stock, other than the shares to be issued to
shareholders of the Company who are not "affiliates" as contemplated in
Section 7.4 but who are "Major Shareholders" who executed the
Stockholders Agreement in the Merger, shall have been approved for
listing on the NASDAQ National Market, subject to official notice of
issuance; and
(d) the Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and any other federal and material
"blue sky" and other state securities laws applicable to the issuance of
the shares of Parent Common Stock shall have been complied with.
(e) any Disputed Amount of any Unindemnified Common Stock
Purchase Agreement Loss shall have been resolved by an arbitration award
in accordance with the provisions of Section 6.19 hereof.
(f) the consent of the holders of Company Preferred Stock to
the transactions described in Section 2.6(b), the consent of the holders
of Tiburon Justice Systems, Inc. Series A Preferred Stock to the
transactions described in Section 2.6(c), and the consent of the holders
of warrants to purchase Company Common Stock to the transactions
described in Section 2.6(d) shall have been obtained.
(g) There shall not be pending any action by any Governmental
Entity or any statute, rule or regulation of any Governmental Entity of
competent jurisdiction (i) challenging or seeking to make, or having the
effect of making, illegal or to restrain or prohibit the consummation by
Parent, Company, or Merger Sub of the Merger, seeking to obtain material
damages or imposing any material adverse conditions in connection
therewith, (ii) seeking to restrain or prohibit, or having the effect of
restraining or prohibiting, Parent's or Merger Sub's ownership or
operation (or that of their respective subsidiaries or affiliates) of
all or any material portion of the business or assets of the Company and
its subsidiaries, or, in connection with the Merger, of Parent and its
subsidiaries or affiliates, or to compel Parent or any of its
subsidiaries or affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and its
subsidiaries, or, in connection with the Merger, of Parent and its
subsidiaries and affiliates, (iii) seeking to impose, or having the
effect of imposing, material limitations on the ability of Parent or any
of its subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares (excluding statutes, rules or regulations, such
as securities laws, pertaining to limitations on the acquisition,
holding or disposition of securities generally), including, without
limitation, the right to vote any Shares acquired or owned by Parent or
any of its subsidiaries or affiliates on all matters properly presented
to the Company's stockholders, (iv) seeking to require, or having the
effect of requiring, divestiture by Parent or any of its subsidiaries or
affiliates of any Shares, or (v) seeking to prohibit, or having the
effect of prohibiting, Parent or any of its subsidiaries from
effectively controlling in any material respect the business and
operations of the Company; and
(h) closing under both the Common Stock Purchase Agreement and
the Preferred Stock Purchase Agreement shall have occurred.
Section 8.2 Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate the Merger
are further subject to the satisfaction of the following conditions:
(a) Parent shall, in the exercise of its sole and absolute
discretion, have elected to consummate the Merger and shall have
delivered to the Company the Parent's Notice of Merger Election.
(b) The Company shall have performed in all material respects
all material obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.
(c) Parent shall have received the agreements referred to in
Section 7.4.
(d) The Parent and Merger Sub shall have been furnished with
the opinions of Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
counsel to the Company and the Sellers ("Counsel for the Sellers"), dated
the Closing Date, in the form attached hereto as Exhibit 8.2.
Section 8.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
further satisfaction of the following conditions:
(a) Parent shall have performed in all material respects all
material obligations required to be performed by it under this Agreement
at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer
and the chief financial officer of Parent to such effect.
(b) Since the date of this Agreement, there has not been a
Material Adverse Change in Parent.
(c) The Company and Counsel for the Sellers shall have been
furnished with the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel to the
Parent and Merger Sub, dated the Closing Date, in the form attached
hereto as Exhibit 8.3.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may (and, as provided
in Section 9.16(b), shall) be terminated and the Merger abandoned at any
time prior to the Effective Time (notwithstanding any approval of this
Agreement by the stockholders of the Company):
(a) by the Parent at its election in its sole discretion;
(b) by the Company with the written consent of the Parent or
automatically without any action by the Company if the Parent has not
delivered to the Company the Parent's Notice of Merger Election on or
before September 30, 2002;
(c) by either Parent or the Company:
(i) if the Merger shall not have been consummated within
180 days from the delivery to the Company of the Parent's Notice of
Merger Election for any reason; provided, however, that the right to
terminate this agreement under this Section 9.1 (c)(i) shall not be
available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur
on or before such date and such action or failure to act constitutes a
material breach of this Agreement; or
(ii) if any Restraint having any of the effects set
forth in Section 8.1(b) shall be in effect and shall have become final
and nonappealable.
(iii) if the Company Stockholder Approval shall not
have been obtained, or, if obtained, shall have been rescinded and this
Agreement and the Merger abandoned as contemplated in Section 6.2(a) of
this Agreement; provided, that the Company shall have no right to
terminate this Agreement if the Company has materially breached the
provisions of Section 6.2 of this Agreement.
Section 9.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become void and
of no effect with no liability on the part of any party hereto or their
respective officers and directors, except as set forth in the next
sentence and except that the agreements contained in Sections 6.2, 9.2,
9.3 and Article X shall survive the termination hereof. No such
termination shall relieve any of the Company, Parent or Merger Sub, as
the case may be, from liability for damages arising (a) from any
willful or intentional breach of this Agreement or (b) from their
obligations under this Section 9.2, Section 9.3 and Article X. If this
Agreement is terminated as provided herein, each party (the
"Redelivering Party") upon request therefor shall redeliver all
documents, work papers and other materials obtained (whether before or
after execution of this Agreement) by the Redelivering Party from
the requesting party in connection with the transaction contemplated
hereby, together with all copies thereof in the possession of the
Redelivering Party.
Section 9.3 Fees and Expenses.
(a) Except as specifically provided in this Section 9.3, all
costs and expenses incurred in connection with this Agreement shall be
paid by the party incurring such cost or expense.
(b) Parent and the Company shall each pay one-half of all
printing costs and SEC filing fees for the Information Statement and the
Form S-4; provided that if the Merger is not consummated under
circumstances (other than those described in Section 9.1(c)(iii)) which
would permit the Parent to terminate this Agreement, Parent shall pay
all of such expenses.
ARTICLE X
MISCELLANEOUS
Section 10.1 Definitions. For all purposes of this Agreement,
"Material Adverse Change" or "Material Adverse Effect" means, when used
in connection with the Company or Parent, as the case may be, a material
adverse effect on the business, financial condition, results of
operations, or assets of such entity, including subsidiaries thereof,
taken as a whole; except that, as used on Section 8.3(b), Material
Adverse Effect means any change or effect, as the case may be, which has
a catastrophic effect on the Parent, and its respective subsidiaries
taken as a whole. This definition shall have no relevance to the
interpretation of any usage in this Agreement of the term "material"
other than in the two phrases defined in this Section.
Section 10.2 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to Parent or Merger Sub, to:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
with a copy to:
Tyler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
CityPlace-35th Floor, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
if to the Company, to:
Tiburon, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or telecopy number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each
such notice, request or other communication shall be effective when
delivered at the address specified in this Section.
Section 10.3 Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate
or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement, except that the
Parent's representations and warranties shall survive until three months
after the later of (i) the Effective Time or (ii) the filing of the
Parent's Form 10-K for the period which includes the date of this
Agreement.
Section 10.4 Indemnification
(a) The Parent agrees to indemnify and hold harmless each
recipient of (i) Consideration for Company Common Stock, and (ii) the
right to receive Consideration for Company Common Stock (an
"indemnified party"), from and against any and all loss, costs, damages
and expenses (including court costs and attorneys' fees and expenses)
which such recipient may sustain resulting from, arising out of,
relating to or caused by (i) any breach by the Parent of any covenant or
other agreement of the Company contained herein and to be performed on
or before the Closing, or (ii) any breach of any representation or
warranty made by the Company herein or in any certificate delivered
pursuant to this Agreement.
No indemnified party shall be deemed to waive any claim for
indemnification hereunder by reason of its knowledge or reason to know,
prior to the occurrence of the Closing, of any such non-compliance,
non-performance, inaccuracy or breach.
(b) If an indemnified party under this Section 10.4 receives
notice of the assertion by a person who is not a party to this Agreement
of any claim or of the commencement by any such person of any action or
proceeding which may give rise to an obligation of the Parent to
indemnify such indemnified party (a "Third Party Claim"), such
indemnified party shall give the Parent reasonably prompt written notice
thereof but in any event not later than 60 days after becoming aware of
such Third Party Claim; provided, that a notice of a Third Party Claim
may be given jointly by multiple indemnified parties, and only one
notice to Parent shall be required with respect to any single Third
Party Claim. Such notice shall describe the Third Party Claim in
reasonable detail, and shall indicate the estimated amount, if
practicable, of the indemnifiable loss that has been or may be sustained
by such indemnified party or parties. The Parent may elect to assume
the defense of any Third Party Claim, at the Parent's own expense
and by the Parent's own counsel and such indemnified party shall
cooperate in good faith in such defense and the Parent shall fully
inform and consult with such indemnified party. If the Parent
has assumed the defense of a Third Party Claim, the indemnified party
shall agree to any settlement of such Third Party Claim recommended by
the Parent which settlement by its terms discharges the indemnified
party from any liability with respect to such Third Party Claim.
Section 10.5 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is
in writing and signed, by the party to be charged therewith; provided,
that, after the approval of the matters presented in connection with the
Merger by the stockholders of the Company, no amendment or waiver shall
be made without stockholder approval.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
Section 10.6 Successors and Assigns; Parties in Interest. The
provisions of this Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and
assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without
the consent of the other parties hereto except that Merger Sub may
transfer or assign, in whole or from time to time in part, to one or
more of Parent or any wholly-owned subsidiary of Parent, any or all of
its rights or obligations, but any such transfer or assignment will not
relieve Merger Sub of its obligations under this Agreement. Except as
set forth herein, nothing in this Agreement, express or implied,
is intended to or shall confer upon any person not a party hereto any
right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement, including to confer third party beneficiary rights.
Section 10.7 Governing Law; Submission to Jurisdiction. This
Agreement shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Virginia without regard to its conflicts of
laws principles thereof that would call for the application of the
laws of any jurisdiction. Each party hereto hereby (a) irrevocably and
unconditionally submits in any legal action or proceeding relating to
this Agreement, or for recognition and enforcement of any judgment in
respect thereof, to the general jurisdiction of the state and federal
courts in the Commonwealth of Virginia, and appellate courts thereof and
(b) consents that any action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action
or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same.
Section 10.8 Specific Performance. THE PARTIES AGREE THAT
IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS
OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC
TERMS OR WERE OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE
PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT
BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND
PROVISIONS OF THIS AGREEMENT IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA TO THE EXTENT SUCH COURT WOULD HAVE SUBJECT
MATTER JURISDICTION WITH RESPECT TO SUCH DISPUTE, AND THE COURTS OF THE
COMMONWEALTH OF VIRGINIA, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
Section 10.9 Counterparts; Effectiveness; Interpretation. This
Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto. When a reference is
made in this Agreement to a Section, such reference shall be to a
Section of 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."
Section 10.10 Knowledge Qualifiers. Knowledge of the Company,
Parent or Merger Sub shall be deemed, for purposes of Articles IV and V
of this Agreement, to include the knowledge (including matters such
person, in the exercise of his responsibilities, had a duty to inquire
about) of officers, directors and other representatives of the Company
set forth on Schedule 10.10 hereof, and of the officers and directors of
Parent or Merger Sub on the date hereof and on any other date, including
the Closing Date, on which a representation or warranty is given
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the
day and year first above written.
TIBURON, INC.
By: _________________________
Name: _______________________
Its: ________________________
COMPUDYNE CORPORATION
By: _________________________
Name: _______________________
Its: ________________________
NEW TIBURON, INC.
By: _________________________
Name: _______________________
Its: ________________________