AGREEMENT AND PLAN OF MERGER AMONG SYS, SHADOW II, INC. A WHOLLY-OWNED SUBSIDIARY OF SYS, LOGIC INNOVATIONS, INC. AND THE STOCKHOLDERS OF LOGIC INNOVATIONS, INC. NOVEMBER 7, 2005
AGREEMENT
AND PLAN OF MERGER
AMONG
SYS,
SHADOW
II, INC.
A
WHOLLY-OWNED SUBSIDIARY OF SYS,
LOGIC
INNOVATIONS, INC.
AND
THE STOCKHOLDERS OF
LOGIC
INNOVATIONS, INC.
NOVEMBER
7, 2005
TABLE OF CONTENTS
ARTICLE
I THE
MERGER
|
|
1.1
The Merger
|
1.2 Effective
Time
1.3 Effects
of the Merger
1.4 Articles
of Incorporation and Bylaws
ARTICLE
II CONVERSION
OF SECURITIES AND ESCROW
|
|
2.1
Merger Consideration; Conversion of Capital Stock
|
2.2 Earnout
Consideration
2.3 Subcorp
Stock
2.4 Fractional
Shares; Adjustments
2.5 Exchange
of Certificates
2.6 Escrow
Accounts
2.7 Internal
Revenue Code Election
ARTICLE
III REPRESENTATIONS
AND WARRANTIES OF SYS
|
|
3.1
Organization and Standing
|
3.2 Corporate
Power and Authority
3.3 Conflicts;
Consents and Approvals
3.4 Actions
3.5 Financial
Ability
3.6 Capitalization
of SYS
3.7 Brokerage
and Finders’ Fees
3.8 Board
Recommendation; Required Vote
3.9 SYS
SEC
Documents
3.10 Books
and
Records
3.11 No
Undisclosed Liabilities
3.12 No
Material Adverse Change
ARTICLE
IV REPRESENTATIONS
AND WARRANTIES OF STOCKHOLDERS
|
|
4.1
Organization and Standing
|
4.2 Subsidiaries
4.3 Power
and
Authority
4.4 Capitalization
of Logic
4.5 Conflicts;
Consents and Approvals
4.6 Brokerage
and Finders’ Fees
4.7 Books
and
Records; Financial Statements
4.8 Compliance
with Law
4.9 Actions
4.10 No
Material Adverse Change
4.11 Taxes
4.12 Intellectual
Property
4.13 Title
to
Assets and Properties
4.14 Employee
Benefit Plans
4.15 Contracts
4.16 Labor
Matters
4.17 Undisclosed
Liabilities
4.18 Operation
of Logic’s Business; Relationships
4.19 Permits
4.20 Real
Property
4.21 Environmental
Matters
4.22 Accounts
Receivable
4.23 Insurance
4.24 Product
or Service Warranty
4.25 Data
Protection Matters
4.26 Foreign
Corrupt Practices Act
4.27 Government
Contracts
4.28 Relations
with Governments
4.29 No
Existing Discussions
4.30 Review
of
SYS SEC Documents
4.31 Interested
Party Transactions
4.32 Board
Recommendation
4.33 Payments
to Stockholders and Others
4.34 Disclosure
ARTICLE
V COVENANTS
OF THE PARTIES
|
|
5.1
Mutual Covenants
|
5.2 Covenants
of SYS
5.3 Covenants
of Logic and the Stockholders
ARTICLE
VI CONDITIONS
|
|
6.1
Conditions to the Obligations of Each Party
|
6.2 Conditions
to Obligations of Logic and the Stockholders
6.3 Conditions
to Obligations of SYS and Subcorp
ARTICLE
VII TERMINATION
AND AMENDMENT
|
|
7.1
Termination
|
7.2 Effect
of
Termination
7.3 Return
of
Documents
ARTICLE
VIII GENERAL
SURVIVAL AND INDEMNIFICATION
|
|
8.1
Survival of Representations and Warranties
|
8.2 Indemnification
8.3 Limitations
ARTICLE
IX MISCELLANEOUS
|
|
9.1
Notices
|
9.2 Interpretation
9.3 Counterparts
9.4 Entire
Agreement
9.5 Third-Party
Beneficiaries
9.6 Governing
Law; Venue
9.7 Arbitration
9.8 Specific
Performance
9.9 Assignment
9.10 Expenses
9.11 Severability
9.12 Amendment
9.13 Attorneys’
Fees
EXHIBITS
|
Form
of Escrow Agreement
|
Exhibit A
|
|
Investment
Representation Certificate
|
Exhibit
B
|
|
Xyratex
Release
|
Exhibit
C
|
SCHEDULES
|
Logic
Disclosure Schedule
|
Attached
|
|
Schedule
2.1
|
Attached
|
AGREEMENT
AND PLAN OF MERGER
This
Agreement and Plan of Merger (this “Agreement”) is made and entered into as of
November 7, 2005 by and among SYS, a California corporation (“Buyer” or
“SYS”); Shadow II, Inc., a California corporation and a wholly-owned subsidiary
of SYS (“Subcorp”), Logic Innovations, Inc., a California corporation (“Logic”),
and the following persons, who constitute all of the shareholders of Logic
and
are referred to collectively herein as the “Stockholders,” the “Shareholders,”
or the “Logic Stockholders,” and individually as “Stockholder,”“Shareholder,”
or “Logic Stockholder:” ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
joint tenants and residents of the State of California; ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, joint tenants and residents of the State
of
California; ▇▇▇▇▇▇▇ ▇. England and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, joint tenants
and
residents of the State of California; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, an individual
and
resident in the State of California; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Dwityani ▇.
▇▇▇▇▇▇,
joint tenants and residents of the State of California; ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, joint tenants and residents of the State of
California; ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, joint tenants and residents
in the State of California; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇,
joint
tenants and residents of the State of California; ▇▇▇▇ ▇. ▇▇▇▇▇, an
individual and resident in the State of California; ▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, joint tenants and residents in the State of California;
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, joint tenants
and
residents of the State of California; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
and
resident of the State of Virginia; and ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, joint tenants and residents of the State of
California.
PRELIMINARY
STATEMENTS
WHEREAS,
the respective Boards of Directors of SYS, Subcorp and Logic have determined
that the merger of Logic with and into Subcorp, in the manner contemplated
herein (the “Merger”), is desirable and in the best interests of their
respective stockholders and, by resolutions duly adopted, have approved and
adopted this Agreement;
WHEREAS,
SYS, Subcorp, Logic, and the Stockholders desire to make certain
representations, warranties, covenants and agreements in connection with
the
Merger and also to prescribe various conditions to the Merger.
NOW,
THEREFORE, in consideration of these premises and their promises hereinafter
set
forth, the parties hereto agree as follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger.
Upon
the terms and subject to the conditions set forth in this Agreement, and
in
accordance with the California General Corporation Law (the “CGCL”), Logic shall
be merged with and into Subcorp at the Effective Time. As a result of the
Merger, the separate corporate existence of Logic shall cease and Subcorp
shall
continue its existence under the laws of the State of California as a
wholly-owned subsidiary of SYS. Subcorp, in its capacity as the corporation
surviving the Merger, is hereinafter sometimes referred to as the “Surviving
Corporation.”
1.2 Effective
Time.
On the
Closing Date, the parties shall cause the Merger to be consummated by filing
with the Secretary of State of the State of California (the “California
Secretary of State”) an Agreement of Merger and an officer’s certificate from
Logic and Subcorp (collectively, the “California Merger Documents”) in such form
as is required by, and executed in accordance with, the CGCL. The Merger
shall
become effective (the “Effective Time”) when the California Merger Documents
have been filed with the California Secretary of State or at such later time
as
shall be agreed upon by SYS and Logic and specified in the California Merger
Documents. Prior to the filings referred to in this Section 1.2, a
closing
(the “Closing”) shall be held at the offices of SYS’s counsel, ▇▇▇▇, Forward,
▇▇▇▇▇▇▇▇ & Scripps LLP (“▇▇▇▇ ▇▇▇▇▇▇▇”), ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place
as the
parties may agree on, as soon as practicable (but in any event within five
(5)
business days) following the date upon which all conditions set forth in
Article VI have been satisfied or waived, or at such other date as
SYS and
Logic may agree, provided that the conditions set forth in Article VI
have
been satisfied or waived on or prior to such date. The date on which the
Closing
takes place is referred to herein as the “Closing Date.” For all purposes, the
Closing shall be deemed to be effective as of 8:00 a.m., Pacific Standard
Time,
on November 7, 2005.
1.3 Effects
of the Merger.
At and
after the Effective Time, the separate existence of Logic will cease, and
Subcorp as the Surviving Corporation and successor shall succeed to all the
rights and property of Subcorp and Logic, and shall be subject to all the
debts
and liabilities of Subcorp and Logic except as otherwise expressly provided
in
Section 5.3.8 and 9.10 of this Agreement.
1.4 Articles
of Incorporation and Bylaws.
The
Articles of Incorporation of Subcorp, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation and the Bylaws of Subcorp, as in effect immediately prior to
the
Effective Time, shall be the Bylaws of the Surviving Corporation, in each
case
until amended in accordance with the CGCL.
ARTICLE
II
CONVERSION
OF SECURITIES
AND ESCROW
2.1 Merger
Consideration; Conversion of Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
SYS, Subcorp or Logic or their respective stockholders, each share of Logic
Capital Stock issued and outstanding immediately prior to the Effective Time
shall be converted into, and shall represent the right to receive, that portion
of the aggregate amount of $4,000,000 (such aggregate amount, the “Merger
Consideration”), to which such share is entitled, with $2,000,000 payable in
cash (the “Cash Consideration”), and $2,000,000, payable in the form of shares
of restricted SYS Common Stock (valued at $4.49 per share, which is the average
closing price of SYS Common Stock on the American Stock Exchange over the
thirty
(30) trading days immediately preceding and including November 4,
2005 (the
“Stock Consideration”). $400,000 of the Merger Consideration shall be paid to
Xyratex International, Inc. to secure the Release described in
Section 6.3.11 of this Agreement. The balance of the Merger Consideration
shall be paid and allocated and distributed among the Stockholders as set
forth
on Schedule 2.1.
2.2 Earnout
Consideration.
2.2.1 If
the
Net Revenues (defined in Section 2.2.9) of the Surviving Corporation
for
the twelve month period ending June 30, 2006 exceed $4,500,000 ($4,000,000
of which must be earned subsequent to the Effective Time), Buyer shall pay
the
Stockholders an additional $500,000 on October 15, 2006. Such payment
shall
consist of $250,000 in cash and $250,000 worth of the Common Stock of Buyer,
valued at the average closing price of SYS Common Stock on its principal
trading
market over the ten trading days immediately preceding June 30,
2006.
2.2.2 If
the
Earnings Before Income Tax, Depreciation and Amortization (“EBITDA”) of the
Surviving Corporation from the Effective Time through June 30, 2006
exceed
17% of the Net Revenues earned by the Surviving Corporation during such period,
then SYS shall pay such excess amount to the Stockholders on October 15,
2006.
2.2.3 If
the
EBITDA of the Surviving Corporation for the fiscal year ending June 30,
2007 exceed 19% of the Net Revenues earned by the Surviving Corporation during
such period, then SYS shall pay such excess amount to the Stockholders on
October 15, 2007.
2.2.4 If
the
EBITDA of the Surviving Corporation for the fiscal year ending June 30,
2008 exceed 20% of the Net Revenues earned by the Surviving Corporation during
such period, then SYS shall pay such excess amount to the Stockholders on
October 15, 2008.
2.2.5 For
purposes of Sections 2.2.2, 2.2.3, and 2.2.4, the determination of
EBITDA
shall be made as if the Surviving Corporation were a standalone business.
Accordingly, EBITDA shall be determined without regard to the negotiation,
documentation, and closing of the Merger, the general and administration
expense
charge customarily applied to the business units of SYS, nor shall any costs
related to Logic or the Surviving Corporation be paid or assumed by SYS.
Any
payment required by Sections 2.2.2, 2.2.3, or 2.2.4 may be in cash
and/or
SYS Common Stock at the discretion of SYS, provided that the cash component
shall be neither less than 20%, nor more than 50%, of such payment. SYS Common
Stock issued as part of any such payment shall be valued based on the average
closing price of SYS Common Stock on its principal trading market over the
last
ten trading days of the applicable fiscal year.
2.2.6 Payments
required by this Section 2.2 shall be referred to in this Agreement
as
Earnout Consideration and shall be allocated among the Stockholders in
proportion to the allocation of Merger Consideration set forth in Schedule 2.1.
2.2.7 For
the
purposes of this Section 2.2, “Net Revenues” means the gross amount
invoiced by the Surviving Corporation to third parties on all sales of products,
less all discounts and allowances, returns, sales, excise and value added
taxes,
shipping, freight and insurance. Net Revenues shall accrue in accordance
with
the revenue recognition policies of SYS and generally accepted accounting
principles. In the event the Surviving Corporation sells products to an
Affiliate, Net Revenues means the Net Revenues realized by the
Affiliate.
2.3 Subcorp
Stock.
Each
share of capital stock of Subcorp outstanding at the Effective Time shall
remain
issued and outstanding following the Effective Time.
2.4 Fractional
Shares; Adjustments.
2.4.1 No
certificates for fractional SYS Common Shares shall be issued as a result
of the
conversion provided for in Section 2.1, and such fractional share
interests
will not entitle the owner thereof to vote or have any rights of a holder
of SYS
Common Shares.
2.4.2 In
lieu
of any such fractional SYS Common Shares, the holder of a certificate or
certificates (the “Certificates”) that immediately prior to the Effective Time
represented outstanding shares of Logic Capital Stock whose shares were
converted into the right to receive the Merger Consideration pursuant to
Section 2.1, upon presentation of such fractional interest represented
by
an appropriate Certificate for Logic Capital Stock to SYS, shall be entitled
to
receive a cash payment therefore, in an amount equal to the value of such
fractional interest, with an SYS Common Share being valued for this purpose
as
described in Section 2.1. Such payment with respect to fractional
shares is
intended to avoid the expense and inconvenience of issuing fractional shares
and
to provide a mechanical rounding off of, and is not a separately bargained
for,
consideration. If more than one Certificate shall be surrendered for the
account
of the same holder, the number of shares of Logic Capital Stock for which
Certificates have been surrendered shall be appropriately adjusted to provide
to
the Stockholders the same economic effect as contemplated by this Agreement.
The
fractional share interests of each Stockholder will be aggregated, and no
Stockholder will receive cash in an amount greater than the value of one
full
SYS Common Share for such fractional share interest.
2.5 Exchange
of Certificates.
2.5.1 Exchange
at Closing and at the Effective Time and Possible Subsequent Delivery of
SYS
Shares.
At the
Closing, each Logic Stockholder shall deliver the Certificate or Certificates
representing such Logic Stockholder’s shares of Logic Capital Stock (or
affidavits of lost certificates in lieu thereof), duly endorsed in blank
or
accompanied by stock powers duly executed in blank and in exchange for such
delivery shall receive as soon as possible after the Effective Time (i) the
Cash Consideration to which such Logic Stockholder is entitled as set forth
on
Schedule 2.1,
and
(ii) the Stock Consideration to which such Logic Stockholder is entitled
as
set forth on Schedule 2.1.
On or
immediately subsequent to the Effective Time, SYS shall deliver to the
Stockholders and to Escrow such additional Stock Consideration and Cash
Consideration to which the Stockholders may be entitled pursuant to Schedule 2.1.
2.5.2 Distributions
with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to SYS
Common Shares having a record date after the Effective Time shall be paid
to the
holder of any unsurrendered Certificate, no cash payment as part of the Merger
Consideration and no cash payment of interest or in lieu of fractional shares
shall be paid to any such holder, until the holder shall surrender such
Certificate (or affidavit) as provided in this Section 2.5. Subject
to the
effect of all applicable constitutions, laws, statutes, treaties, orders,
rules,
regulations, ordinances, notices, approvals, policies or guidelines promulgated,
or judgments, decisions, decrees, or orders of any Governmental Authority
(collectively, “Applicable Laws”), following surrender of any such Certificate,
there shall be paid to the holder of the Merger Consideration issued in exchange
therefor, without interest, (i) at the time of such surrender, the
amount
of dividends or other distributions with a record date after the Effective
Time
theretofore payable with respect to such whole SYS Common Shares and not
paid,
less the amount of any withholding taxes that may be required thereon, and
(ii) at the appropriate payment date subsequent to surrender, the
amount of
dividends or other distributions with a record date after the Effective Time
but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole SYS Common Shares, less the amount of any withholding
taxes which may be required thereon.
2.5.3 No
Further Ownership Rights in Logic Capital Stock.
All
Merger Consideration issued and/or paid upon surrender of Certificates (or
affidavit) in accordance with the terms hereof (including any cash paid pursuant
to this Article II) shall be deemed to have been issued and/or paid
in full
satisfaction of all rights pertaining to such shares of Logic Capital Stock
represented thereby, and, as of the Closing, the stock transfer books of
Logic
shall be closed and there shall be no further registration of transfers on
the
stock transfer books of Logic of shares of Logic Capital Stock outstanding
immediately prior to the Closing. If, after the Closing, Certificates are
presented to Logic or the Surviving Corporation for any reason, they shall
be
cancelled.
2.5.4 No
Liability.
Neither
SYS nor the Surviving Corporation shall be liable to any person in respect
of
any Merger Consideration (on dividends, distributions, or interest with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered prior to seven years after the Effective Time or immediately
prior
to such earlier date on which any Merger Consideration (or any dividends,
distributions, or interest with respect thereto) would otherwise escheat
to or
become the property of any Governmental Authority, any such Merger Consideration
(or dividends, distributions, or interest with respect thereto) shall, to
the
extent permitted by Applicable Law, become the property of SYS, free and
clear
of all claims or interest of any person previously entitled thereto. For
purposes of this Agreement, “Governmental Authority” means any (A) nation,
region, state, county, city, town, village, district or other jurisdiction,
(B) federal, state, local, municipal, foreign or other government,
(C) federal, state, local municipal, foreign or multi-national court,
arbitral tribunal, administrative agency or commission, (D) other
governmental, quasi-governmental, public, or regulatory body, agency,
instrumentality or authority of any nature, (E) multi-national
organization, (F) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, policy, regulatory or taxing
authority or power of any nature or (G) official of any of the
foregoing.
2.5.5 Withholding
Rights.
Each of
the Surviving Corporation and SYS shall be entitled to deduct and withhold
from
the Cash Consideration otherwise payable pursuant to this Agreement to any
holder of shares of Logic Capital Stock, such amounts as it is required to
deduct and withhold with respect to the making of such payment or any other
payment by Logic, the Surviving Corporation or SYS, under the United States
Internal Revenue Code of 1986, as amended (the “Code”) or any provision of
state, local or foreign Tax law. To the extent that amounts are so withheld
by
the Surviving Corporation or SYS, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the
holder of the shares of Logic Capital Stock in respect of which such deduction
and withholding was made by the Surviving Corporation or SYS, as the case
may
be. Any Tax withheld by SYS or the Surviving Corporation shall be paid by
SYS or
the Surviving Corporation, as the case may be, to the appropriate Governmental
Authority when due in accordance with Applicable Law; and SYS or the Surviving
Corporation, as the case may be, shall within 30 days of the payment of such
Tax
deliver to the holder of the shares of Logic Capital Stock evidence reasonably
satisfactory to such holder that payment was duly remitted to the appropriate
Governmental Authority.
2.5.6 Restrictive
Legend.
Each
certificate evidencing SYS Common Shares issued pursuant to this Agreement
shall
bear the following legend in conspicuous type:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE
SECURITIES LAWS. THE SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR QUALIFICATION WITHOUT AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION OR QUALIFICATION IS
NOT
REQUIRED.
2.6 Escrow
Accounts.
2.6.1 Escrow
Agreement.
On or
prior to the Closing Date, SYS and the Stockholders shall establish an escrow
at
Union Bank of California, N.A. (the “Escrow Account”), by the execution and
delivery of an Escrow Agreement substantially in the form attached as
Exhibit A
hereto
(the “Escrow Agreement”).
2.6.2 Deposit
of Escrow Consideration.
As soon
as possible after the Effective Time, SYS shall deliver to the Escrow Agent,
for
immediate deposit into the Escrow Account, Two Hundred Thousand Dollars
($200,000) of the cash portion of the Merger Consideration. Such Deposit
shall
be referred to herein as the “Escrow Consideration,” and shall be allocated
among the Stockholders as set forth in Schedule 2.1.
2.6.3 Disbursement
of Escrow Consideration.
All of
the Escrow Consideration deposited in the Escrow Account shall be available,
in
accordance with this Agreement and the Escrow Agreement, to provide recourse
to
SYS for any breach of the representations and warranties of the Logic
Stockholders under Article IV hereof and pursuant to Article VIII
hereof, and shall be paid to the Logic Stockholders only in accordance with
and
subject to the terms and conditions set forth herein and in the Escrow
Agreement.
2.7 Internal
Revenue Code Election.
At its
option, following the Closing Date SYS may make an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended,
with
regard to the Merger. In the event such election is made, SYS shall pay to
each
of the Stockholders the dollar amount of each such Stockholder’s federal and
state tax, as determined by such Stockholder’s tax advisor(s), that results from
the election (the “Tax Consideration”), including any changes in past or future
federal and/or state tax amounts that result if the Tax Consideration payment
to
such Stockholder is deemed by the Internal Revenue Service or other applicable
taxing agency to be a part of the Merger Consideration or additional
consideration.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF SYS
In
order
to induce Logic and the Stockholders to enter into this Agreement, SYS hereby
represents and warrants to Logic and the Stockholders that the statements
contained in this Article III are true, correct and complete, except
as
otherwise expressly set forth in this Article III as of the date hereof
unless another date is expressly stated below.
3.1 Organization
and Standing.
SYS and
each subsidiary of SYS is a corporation duly organized, validly existing
and,
where applicable, in good standing under the laws of its state of incorporation
with corporate power and authority to own, lease, use and operate its properties
and to conduct its business as and where now owned, leased, used, operated
and
conducted. Each of SYS and each subsidiary of SYS is duly qualified to do
business and in good standing in each jurisdiction in which the nature of
the
business conducted by it or the property it owns, leases or operates, requires
it to so qualify, except where the failure to be so qualified or in good
standing in such jurisdiction would not have a Material Adverse Effect on
SYS
and its subsidiaries taken as a whole. SYS is not in default in the performance,
observance or fulfillment of any provision of the SYS Articles of
Incorporation, as amended (the “SYS Articles”), or the SYS Amended and Restated
Bylaws, as amended, as in effect on the date hereof (the “SYS Bylaws”). SYS has
heretofore furnished to the Stockholders complete and correct copies of the
SYS
Articles and the SYS Bylaws.
3.2 Corporate
Power and Authority.
Each of
SYS and Subcorp has all requisite corporate power and authority to enter
into
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution
and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by SYS and Subcorp have been duly authorized by all necessary corporate
action on the part of SYS and Subcorp. This Agreement has been duly executed
and
delivered by SYS and Subcorp and constitutes the legal, valid and binding
obligation of SYS and Subcorp enforceable against each of them in accordance
with its terms, except to the extent that such enforceability may be subject
to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws
affecting the enforcement of creditors’ rights generally or by general equitable
principles.
3.3 Conflicts;
Consents and Approvals.
Neither
the execution and delivery of this Agreement by SYS and Subcorp nor the
consummation of the transactions contemplated hereby or thereby will:
3.3.1 conflict
with, or result in a breach of any provision of, the SYS Articles or the
SYS
Bylaws or the governing documents of any subsidiary of SYS;
3.3.2 materially
violate, or conflict with, or result in a material breach of any provision
of,
or constitute a material default (or an event that, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a material default under, or result
in the
creation of any material Encumbrance upon any of the properties or assets
of SYS
or any of its subsidiaries under, any of the terms, conditions or provisions
of
any material note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
SYS or
any of its subsidiaries is a party (for purposes of this Agreement,
“Encumbrance” means any charge, claim, mortgage, servitude, easement, right of
way, equitable interest, lease or other possessory interest, conditional
sale or
other title retention arrangement, lien, pledge, security interest, preference,
priority, right of first refusal or similar restriction);
3.3.3 materially
violate any (i) order, writ, injunction, decree, statute, ruling,
assessment, or arbitration or award of any Governmental Authority or
(ii) Applicable Laws relating to SYS or any of its subsidiaries or
their
respective properties or assets; or
3.3.4 require
any action or consent or approval of, or review by, or registration or filing
by
SYS or any of its affiliates with, any third party or any Governmental
Authority, other than registrations or other actions required under federal
and
state securities laws as are contemplated by this Agreement.
3.4 Actions.
There
is no Action against SYS or Subcorp which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto. For purposes
of
this Agreement, “Action” means any action, arbitration, audit, examination,
suit, proceeding, hearing or litigation, whether formal or informal, and
whether
public or private, commenced, brought, conducted or heard by or before, pending
or threatened, or otherwise. Since July 1, 2001, neither SYS nor any
of its
subsidiaries has been subject to any order, writ, injunction or decree relating
to its method of doing business or its relationship with past, existing or
future users or purchasers of any goods or services.
3.5 Financial
Ability.
SYS
will have a sufficient number of SYS Common Shares and sufficient cash funds
to
pay the Merger Consideration.
3.6 Capitalization
of SYS.
3.6.1 The
authorized capital stock of SYS consists of 48,000,000 common shares (the
“SYS
Common Stock”), 250,000 preferred shares (the “SYS Preferred Stock”), and
2,000,000 preference shares (the “SYS Preference Stock”). At the date of this
Agreement, (i) 11,438,513 shares of SYS Common Stock are issued and
outstanding, (ii) 1,956,297 shares of SYS Common Stock are reserved
for
issuance upon the exercise or conversion of options, warrants or convertible
securities granted or issuable by SYS, not including SYS’s Stock Option and
Stock Purchase Plans, (iii) 2,498,100 shares of SYS Common Stock are
reserved for issuance under SYS’s Stock Option and Stock Purchase Plans,
(iv) no shares of SYS Preferred Stock are issued and outstanding,
and
(v) no shares of SYS Preference Stock are issued and outstanding.
The SYS
Common Stock, the SYS Preferred Stock, and the SYS Preference Stock are referred
to herein collectively as the “SYS Capital Stock.” Each outstanding share of SYS
Capital Stock is duly authorized and validly issued, fully paid and
nonassessable and has not been issued in violation of any preemptive or similar
rights. The issuance and sale of all of the shares of SYS Capital Stock
described in this Section 3.6.1 have been in compliance in all material
respects with applicable federal and state securities laws.
3.7 Brokerage
and Finders’ Fees.
Neither
SYS nor any stockholder, director, officer or employee thereof, has incurred
or
will incur on behalf of SYS or any of its affiliates, any brokerage, finders’ or
similar fee in connection with the transactions contemplated by this Agreement
other than to SmallCap Corporate Advisors, LLC.
3.8 Board
Recommendation; Required Vote.
The
board of directors of each of Subcorp and SYS, at a meeting duly called and
held, has by majority vote of those directors present and constituting a
quorum
of the directors then in office determined that this Agreement and the
transactions contemplated hereby, are fair to and in the best interests of
Subcorp, SYS, and the SYS Stockholders. No vote of any holder of SYS Capital
Stock is required under the SYS Articles, SYS Bylaws or Applicable Law with
respect to this Agreement or the transactions contemplated hereby.
3.9 SYS
SEC Documents.
SYS has
filed with the U.S. Securities and Exchange Commission (the “Commission”) all
forms, reports, schedules, statements and other documents (including exhibits
and other information incorporated therein) required to be filed by it since
July 1, 2003 under the Securities Act of 1933, as amended (the “Securities
Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
(such documents, as supplemented and amended since the time of filing,
collectively, the “SYS SEC Documents”). No subsidiary of SYS is required to file
any form, report, registration statement, prospectus or other document with
the
Commission. To the Knowledge of SYS, the SYS SEC Documents, including, without
limitation, any financial statements or schedules included in the SYS SEC
Documents, at the time filed (and, in the case of registration statements
and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any SYS SEC Document amended or superseded
by a
filing prior to the date of this Agreement, then on the date of such amending
or
superseding filing): (a) did not contain any untrue statement of a
material
fact or omit 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 and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of SYS (including the related
notes) included in the SYS SEC Documents at the time filed (and, in the case
of
registration statements and proxy statements, on the dates of effectiveness
and
the dates of mailing, respectively, and, in the case of any SYS SEC Document
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such amending or superseding filing) complied in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-QSB
of
the Commission), and fairly present (subject, in the case of unaudited
statements, to normal, recurring audit adjustments not material in amount)
in
all material respects the consolidated financial position of SYS and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. Since
July 1, 2003, SYS has maintained its books of account in accordance
in all
material respects with Applicable Law and all books and records are complete
and
correct in all material respects, fairly and accurately reflect the income,
expenses, assets and liabilities of SYS and its subsidiaries in all material
respects, including the nature thereof and the transactions giving rise thereto,
and provide a fair and accurate basis for the preparation of the financial
statements of SYS included in the SYS SEC Documents.
3.10 Books
and Records.
Since
July 1, 2003, SYS and its subsidiaries have, in all material respects,
maintained their minute books, stock books, stock ledgers, quota registers
and
other local equivalents in accordance in all material respects with Applicable
Law, sound business practices and the requirements of
Section 13(b)(2) of the Exchange Act, including the maintenance
of an
adequate system of internal controls. The minute books of SYS and its
subsidiaries contain accurate and complete records of all proceedings, consents
and meetings held of, and corporate action taken by, their stockholders,
the
boards of directors, and committees of the boards of directors, and other
governing bodies, as applicable, and no meeting of any such stockholders,
board
of directors, committee or other governing body has been held for which minutes
have not been prepared and are not contained in such minute books. The books
of
account of SYS and its subsidiaries are complete and correct in all material
respects, have been maintained in accordance with Applicable Law, fairly
and
accurately reflect the income, expenses, assets and liabilities of SYS and
its
subsidiaries, including the nature thereof and the transactions giving rise
thereto, and provide a fair and accurate basis for the preparation of the
SYS
financial statements set forth in the SYS SEC Documents. The signatures
appearing on all documents contained in such books of account are the true
signatures of the persons purporting to have signed the same.
3.11 No
Undisclosed Liabilities.
Except
(a) as and to the extent disclosed or reserved against on the audited
balance sheet of SYS as of June 30, 2005, or (b) as incurred
after the
date thereof in the ordinary course of business consistent with past practice,
SYS and its subsidiaries do not have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent, ▇▇▇▇▇▇,
inchoate or otherwise and whether due or to become due, that, individually
or in
the aggregate, have or would reasonably be expected to have a Material Adverse
Effect on SYS and its subsidiaries taken as a whole.
3.12 No
Material Adverse Change.
Since
June 30, 2005, there has been no material adverse change in the assets,
liabilities, results of operations, business prospects, or financial condition
of SYS or any event, occurrence or development that would reasonably be expected
to have a Material Adverse Effect on SYS and its subsidiaries taken as a
whole.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF STOCKHOLDERS
In
order
to induce SYS to enter into this Agreement, the Stockholders jointly, except
with respect to the warranties contained in Section 4.5.2 as they
relate to
each Stockholder’s Logic Capital Stock, and severally, except as limited by
Sections 8.2 and 8.3, represent and warrant to SYS that the statements
contained in this Article IV are true, correct, and complete, in each
case
except as otherwise expressly set forth in this Article IV or in the
disclosure schedule previously delivered by the Stockholders to SYS and
incorporated herein by reference (the “Logic Disclosure Schedule”), as of the
date hereof and as of the Closing Date unless another date is expressly stated
below or in the Logic Disclosure Schedule.
4.1 Organization
and Standing.
Logic
is a corporation duly organized and validly existing under the laws of the
State
of California with full corporate power and authority to own, lease, use
and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Logic is duly qualified or licensed
to do
business and is in good standing in each jurisdiction in which the nature
of the
business conducted by it or the property it owns, leases, uses, or operates
requires it to so qualify, be licensed or be in good standing except where
the
failure to be so qualified, licensed or in good standing in such jurisdiction
would not have a Material Adverse Effect on Logic or its business or properties
taken as a whole, and except as disclosed in Section 4.1 of the Logic
Disclosure Schedule. Logic is not in default in the performance, observance
or
fulfillment of any provision of its Articles of Incorporation (the “Logic
Articles”) or its Bylaws (the “Logic Bylaws”), as in effect on the date hereof.
Logic has previously furnished to SYS complete and correct copies of the
Logic
Articles and the Logic Bylaws, each as in effect on the date hereof. Listed
in
Section 4.1 in the Logic Disclosure Schedule is each jurisdiction
in
which Logic is qualified or licensed to do business and whether Logic is
in good
standing in each applicable jurisdiction as of the date of the
Agreement.
4.2 Subsidiaries.
Logic
does not own, directly or indirectly, any equity or other ownership interest
in
any corporation, partnership, joint venture or other entity or enterprise.
Logic
is not subject to any obligation or requirement to provide funds to or make
any
investment (in the form of a loan, capital contribution or otherwise) in
any
person.
4.3 Power
and Authority.
Logic
has all requisite corporate power and authority to enter into and deliver
this
Agreement, to perform its obligations hereunder and, subject to approval
of the
Merger and the transactions contemplated hereby by the stockholders of Logic,
to
consummate the transactions contemplated by this Agreement. The execution
and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by Logic have been duly authorized by all necessary corporate action
on
the part of Logic, subject to approval of the Merger and the transactions
contemplated hereby by Logic’s board of directors and the requisite Logic
stockholders. This Agreement has been duly executed and delivered by Logic
and
the Stockholders and constitutes the legal, valid and binding obligation
of
Logic and the Stockholders, enforceable against each of them in accordance
with
its terms, except to the extent that such enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws
affecting the enforcement of creditors’ rights generally or by general equitable
principles.
4.4 Capitalization
of Logic.
The
authorized capital stock of Logic consists of 1,000,000 common shares (the
“Logic Common Stock”). At the date of this Agreement, (i) 11,271 shares of
Logic Common Stock are issued and outstanding, and (ii) no shares
of Logic
Common Stock are reserved for issuance upon the exercise or conversion of
options, warrants or convertible securities. The Logic Common Stock is also
referred to herein the “Logic Capital Stock.” Each outstanding share of Logic
Capital Stock is duly authorized and validly issued, fully paid and
nonassessable, and has not been issued in violation of any preemptive or
similar
rights.
4.4.1 As
of the
date hereof, other than as set forth in clause 4.4(ii) above, there
are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating
to
the issuance, sale, repurchase or transfer by Logic of any securities of
Logic,
nor are there outstanding any securities which are convertible into or
exchangeable for any shares of Logic Capital Stock, and Logic has no obligation
of any kind to issue any additional securities or to pay for or repurchase
any
securities of Logic or any predecessor. Set forth in Section 4.4.1
of the
Logic Disclosure Schedule is an accurate and complete list of the
names of
all holders of Logic Capital Stock, and the number and class of shares held
by
each such Logic stockholder. Set forth in Section 4.4.1 of the Logic
Disclosure Schedule is an accurate and complete list of the names
of all
holders of options, warrants or convertible instruments to purchase Logic
Capital Stock, the number of shares issuable to each such holder upon exercise
of such option or warrant, and the exercise price and vesting schedule with
respect thereto.
4.4.2 Logic
has
not agreed to register any securities of Logic under the Securities Act or
under
any applicable securities law or granted registration rights to any person
or
entity.
4.5 Conflicts;
Consents and Approvals.
Neither
the execution and delivery of this Agreement by Logic and the Stockholders,
nor
the consummation of the transactions contemplated hereby will:
4.5.1 conflict
with, or result in a breach of any provision of, the Logic Articles or the
Logic
Bylaws;
4.5.2 violate
or conflict with, or result in a breach of any provision of, or constitute
a
default (or an event that, with the giving of notice, the passage of time
or
otherwise, would constitute a default) under, or entitle any party (with
the
giving of notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the creation of any Encumbrance
upon any of the properties or assets of Logic under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which any Stockholder or Logic is a party, including without
limitation, any Contract;
4.5.3 to
the
Knowledge of the Stockholders, violate any (i) order, writ, injunction,
decree, ruling, assessment, arbitration, or award of any Governmental Authority
or arbitrator or (ii) Applicable Laws relating to any Stockholder
or to
Logic or any of its properties or assets; or
4.5.4 require
any action or consent or approval of, or review by, or registration or filing
by
any Stockholder or Logic or any of its affiliates with, any third party or
any
Governmental Authority, other than (i) approval of the Merger and
the
transactions contemplated hereby by the stockholders of Logic,
(ii) registrations or other actions required under federal and state
securities laws as are contemplated by this Agreement, and (iii) the
filing
of the California Merger Documents with the California Secretary of
State.
4.6 Brokerage
and Finders’ Fees.
Neither
Logic nor any stockholder, director, officer or employee thereof, has incurred
or will incur on behalf of Logic or any Stockholder, any brokerage, finders’ or
similar fee in connection with the transactions contemplated by this Agreement.
4.7 Books
and Records; Financial Statements.
4.7.1 From
its
date of incorporation, the minute books, stock books and stock ledgers of
Logic
(the “Books of Account”) have been maintained, in all respects, in accordance
with Applicable Law. The signatures of Logic personnel appearing on all
documents contained in such Books of Account are the true signatures of the
persons purporting to have signed the same, and complete and correct copies
of
such Books of Account have been provided to SYS, and complete and correct
copies
of such Books of Account have been provided to SYS.
4.7.2 Attached
to Section 4.7.2 of the Logic Disclosure Schedule, as previously delivered
to SYS, are complete and correct copies of (i) the unaudited balance
sheet
of Logic as of September 30, 2005, and the related statements of income
and
sources and uses of cash for the 9-month period then ended and (ii) the
unaudited balance sheets of Logic as of December 31, 2004 and
December 31, 2003, and the related statements of income and sources
and
uses of cash for the 12-month periods then ended (collectively, the “Logic
Financial Statements”). Except as provided in Section 4.7.2 of the Logic
Disclosure Schedule, the Logic Financial Statements (including the related
notes) were prepared in all material respects in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
(subject to normal, recurring audit adjustments not material in amount and
to
the absence of footnotes) the consolidated financial position of Logic and
its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
4.8 Compliance
with Law.
Except
with respect to Applicable Laws discussed elsewhere in this Article IV,
Logic is in compliance, in all respects, and at all times since its
incorporation has been in compliance, in all respects, with all Applicable
Laws
relating to Logic or its businesses or properties, except where the failure
to
be in compliance with such Applicable Laws (individually or in the aggregate)
would not have a Material Adverse Effect on Logic, or where such noncompliance
has been cured and is reasonably expected to have no material impact on the
future business or operations of Logic. Logic has received no written notice
of
any pending investigation or review by any Governmental Authority with respect
to Logic, and no such investigation or review is overtly threatened, nor
has any
Governmental Authority indicated to Logic an intention to conduct the same.
4.9 Actions.
Section 4.9 in the Logic Disclosure Schedule sets forth each
instance
in which Logic has filed, or received written notice of, an Action pending
and
each instance in which any Action has been overtly threatened against or
by
Logic. Since its incorporation, Logic has not been subject to any order,
writ,
injunction or decree relating to its method of doing business or its
relationship with past, existing or future users or purchasers of any goods
or
services.
4.10 No
Material Adverse Change.
Since
June 30, 2005, there has been no material adverse change in the assets,
liabilities, results of operations, business prospects, or financial condition
of Logic or any event, occurrence or development that would reasonably be
expected to have a Material Adverse Effect on Logic.
4.11 Taxes.
4.11.1 With
regard to federal and state taxes:
(i) Logic
has
filed all Tax Returns (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by Logic
prior to the date hereof;
(ii) All
such
Tax Returns referred to in clause 4.11.1(i) above were true and correct
(except for such inaccuracies which are individually, and in the aggregate,
not
material) and Logic and/or the Shareholders paid or, prior to the Closing
Date,
will pay within the time and manner prescribed by Applicable Law, all Taxes,
interest and penalties required to be paid in respect of the periods covered
by
such Tax Returns (whether or not shown any Tax Return) due to any federal,
state, foreign, local or other Tax authority;
(iii) Logic
has
no liability for Taxes that is in excess of the amount reserved on the Logic
Financial Statements;
(iv) Logic
has
not requested or filed any document having the effect of causing any extension
of time within which to file any Tax Returns in respect of any fiscal year
which
have not since been filed;
(v) Logic
has
not received written notice of any currently due and payable deficiency for
any
Tax from any Tax authority;
(vi) Logic
has
not received written notice that it is the subject of any currently ongoing
Tax
audit;
(vii) As
of the
date of this Agreement, Logic has not received written notice from any Tax
authority of any pending requests for waivers of the time to assess any Tax,
other than those made in the ordinary course and for which payment has been
made;
(viii) Logic
has
not expressly waived any statute of limitations in respect of Taxes or expressly
agreed to any extension of time with respect to a Tax assessment or
deficiency;
(ix) There
are
no recorded Encumbrances with respect to Taxes upon any of the properties
or
assets, real or personal, tangible or intangible of Logic (other than liens
for
Taxes not yet due and/or delinquent);
(x) No
written claim has ever been received by Logic from a Governmental Authority
in a
jurisdiction where Logic does not file Tax Returns that Logic is or may be
subject to taxation by that jurisdiction; and
(xi) Logic
(and any predecessor of Logic) has been a validly electing S corporation
within
the meaning of Internal Revenue Code Sections 1361 and 1362 at all times
during
its existence, and Logic will be an S corporation up to and including the
Closing Date.
4.11.2 Logic
is
not obligated by any Contract, agreement or other arrangement to indemnify
any
other person with respect to Taxes. Logic is not now or has ever been a party
to
or bound by any agreement or arrangement (whether or not written and including,
without limitation, any arrangement required or permitted by law) binding
Logic
that (i) requires Logic to make any Tax payment to or for the account
of
any other person, (ii) affords any other person the benefit of any
net
operating loss, net capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) of Logic, or (iii) requires or permits
the
transfer or assignment of income, revenues, receipts or gains to Logic, from
any
other person.
4.11.3 Except
as
set forth in Section 4.11.3 of the Logic Disclosure Schedule, Logic
has
withheld and paid over all Taxes required to have been withheld and paid
over in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
4.11.4 Logic
has
not agreed to make, or has received any written notice from the Internal
Revenue
Service proposing that Logic make, any adjustments pursuant to
Sections 263A or 481(a) of the Code or any similar provision
of state,
local or foreign law by reason of a change in accounting method initiated
by
Logic, and Logic has no application pending with any Governmental Authority
requesting permission for any changes in accounting methods that relate to
the
business or operations of Logic.
4.11.5 Logic
has
not requested any private letter ruling of the Internal Revenue Service or
comparable ruling of other Governmental Authorities.
4.11.6 The
Tax
Returns of Logic for the years ended 2003 and 2004, complete and correct
copies
of which are attached to Section 4.11.6 of the Logic Disclosure Schedule,
list all deductions giving rise to any current-year Tax loss set forth on
the
applicable Tax Returns and the amount of each such Tax loss in each
jurisdiction.
4.11.7 Except
for the group for which Logic is presently a member, if any, Logic has never
been a member of an affiliated group of corporations, within the meaning
of
Section 1504 of the Code, other than as a common parent corporation,
within
the meaning of Section 1504 of the Code (or any similar provision
of state
or local law), except where Logic was the common parent corporation of such
affiliated group.
4.11.8 Logic
has
no liability for the Taxes of any person other than Logic under Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign
law),
as a transferee or successor, by contract or otherwise.
4.11.9 All
elections with respect to the Tax Returns are reflected in the Tax Returns.
4.11.10 Logic
is
not and has not been a United States real property holding corporation (as
defined in section 897(c)(2) of the Code) during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code.
4.11.11 Logic
is
not and has not been a party to any joint venture, partnership, or other
agreement that would be treated as a partnership for U.S. federal income
tax
purposes.
4.11.12 Logic
has
not participated in an international boycott as defined in Section 999
of
the Code (or any similar provision of state, local or foreign law).
4.11.13 Logic
is
not a party to any agreement, contract, arrangement or plan that has resulted
or
would result, separately or in the aggregate, in the payment of any “excess
parachute payment” within the meaning of Internal Revenue Code Section 280G (or
any corresponding provision of state, local or foreign law).
4.11.14 Logic
is
not a party to or bound by any tax allocation or sharing agreement.
4.11.15 Logic
will not be required to include any item of income in, or exclude any item
of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any:
(i) “Closing
Agreement” as described in Internal Revenue Code Section 7121 (or any
corresponding or similar provision of state, local or foreign law) executed
on
or prior to the Closing Date;
(ii) Intercompany
transactions or any excess loss account described in Treasury Regulations
under
Internal Revenue Code Section 1502 (or any corresponding or similar
provision of state, local or foreign law);
(iii) Installment
sale or open transaction disposition made on or prior to the Closing Date;
or
(iv) Prepaid
amount received on or prior to the Closing Date.
4.11.16 Logic
has
not distributed stock of another corporation, or has had its stock distributed
by another corporation, in a transaction that was purported or intended to
be
governed in whole or in part by Internal Revenue Code
Section 355.
4.11.17 As
used
in this Agreement, “Tax Returns” means all federal, state, local and foreign Tax
returns, declarations, schedules, information returns, reports and forms,
and
any amendments to any of the foregoing relating to Taxes, required to be
filed
with any Governmental Authority responsible for the imposition or collection
of
Taxes.
4.11.18 As
used
in this Agreement, “Tax” or “Taxes” means (i) any federal, state, county,
local or foreign taxes, charges, fees, levies or other assessments, including
all net income, gross income, premium, sales and use, ad valorem, transfer,
gains, profit, windfall profits, excise, franchise, real and personal property,
gross receipts, capital stock, production, business and occupation, employment,
disability, payroll, license, estimated, customs duties, severance or
withholding taxes, other taxes or similar charges of any kind imposed by
a
Governmental Authority and includes any interest and penalties (civil or
criminal) on or additions to any such taxes or in respect of a failure to
comply
with any requirement relating to any Tax Return and any expenses incurred
in
connection with the determination, settlement or litigation of any tax
liability.
4.11.19 The
following provisions shall govern the allocation of responsibility as between
Logic and Buyer for certain tax matters following the Closing Date:
(i) Each
Shareholder shall (joint and separately) indemnify Logic, Subcorp and Buyer
and
hold them harmless from and against (a) all Taxes (or the nonpayment
thereof) of Logic for all taxable periods ending on or before the Closing
Date
and the portion through the end of the Closing Date for any taxable period
that
includes (but does not end on) the Closing Date (“Pre-closing Tax Period”),
(b) any and all Taxes of any member of any affiliated, consolidated,
combined, or unitary group of which Logic (or any predecessor) is or was
a
member on or prior to the Closing Date, and (c) any and all Taxes
of any
person (other than Logic) imposed on Logic as a transferee or successor,
by
contract or pursuant to any law, ruling or regulation which Taxes relate
to any
event or transaction occurring before the Closing; provided, however, that
in
the case of the amounts referenced in this paragraph, the Shareholders shall
be
liable only to the extent that such Taxes are in excess of the amount, if
any,
reserved for such Taxes (excluding any reserve for deferred Taxes established
to
reflect timing differences between book and Tax income) on the face of the
most
recent balance sheet (rather than any notes thereto), as such reserve is
adjusted for the passage of time through the Closing Date in accordance with
past custom and practice of Logic in filing its tax returns.
(ii) In
the
case of any taxable period that includes (but does not end on) the Closing
Date
(a “Straddle Period”), the amount of any Taxes for the Pre-closing Tax Period
shall be determined based on an interim closing of the books as of the close
of
business on the Closing Date (and for such purpose, the taxable period of
any
partnership or other pass-through entity in which Logic holds, a beneficial
interest shall be deemed to terminate at such time).
(iii) Any
Tax
refunds that are received by Subcorp or Logic and any amounts credited against
Taxes to which Subcorp or Logic become entitled, that relate to Tax periods
or
portions thereof ending on or before the Closing Date shall be for the account
of the Shareholders, and Subcorp shall pay over to the Shareholders any such
refund or the amount of any such credit within fifteen (15) days after receipt
of entitlement thereto. In addition, to the extent that a claim for refund
or a
proceeding results in a payment or credit against Taxes by a taxing authority
to
Subcorp or Logic of any amount accrued on the closing balance sheet, Subcorp
shall pay such amount to the Shareholders within fifteen (15) days after
receipt
or entitlement thereto.
(iv) Buyer
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for Logic for all periods ending on or prior to the Closing Date
that
are filed after the Closing Date. Buyer shall permit the Shareholders to
review
and comment on each such Tax Return described in the preceding sentence prior
to
filing and shall make such revisions to such Tax Returns as are reasonably
requested by the Shareholders. To the extent permitted by applicable law,
the
Shareholders shall include any income, gain, loss, deduction or other tax
items
for such periods on their Tax Returns in a manner consistent with the Schedule
K-1s furnished by Logic to the Shareholders for such periods.
(v) Buyer,
Logic, and the Shareholders shall cooperate fully, as and to the extent
reasonably required by the other party, in connection with the filing of
Tax
Returns and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party’s
request) the provision of records and information reasonably relevant to
any
such audit, litigation, or other proceeding and making employees available
on a
mutually convenience basis to provide additional information and explanation
of
any material provided hereunder. Logic, the Shareholders, and Buyer agree
(A) to retain all books and records with respect to Tax matters pertinent
to Logic relating to any taxable period beginning before the Closing Date
until
expiration of the statute of limitations (and, to the extent notified by
Buyer
or the Shareholders, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written notice
prior
to transferring, destroying or discarding any such books and records and,
if the
other party so requests, Logic or the Shareholders, as the case may be, shall
allow the other party to take possession of such books and records.
(vi) Buyer
and
the Shareholders further agree, upon request, to use their best efforts to
obtain any certificate or other document from any governmental authority
or any
other person as may be necessary to mitigate, reduce or eliminate any Tax
that
could be imposed (including with respect to the transactions contemplated
hereby).
(vii) All
transfer, documentary, sales, use, stamp, registration and other such Taxes
and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be paid by the Shareholders when due, and the Shareholders
shall, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use,
stamp,
registration and other Taxes and fees, and, if required by applicable law,
Buyer
shall, join in the execution of any such Tax Returns and other
documentation.
4.12 Intellectual
Property.
4.12.1 Set
forth
in Section 4.12.1 of the Logic Disclosure Schedule is an accurate
and
complete list of (i) all foreign and domestic patents, patent applications,
invention disclosures, trademarks, service marks, trade names, internet domain
names (and any registrations or applications for registration for any of
the
foregoing trademarks, service marks, trade names and internet domain names)
and
all copyright applications and registrations and all other material Intellectual
Property rights owned by Logic, (ii) all agreements with respect to
which
Logic received gross revenue of at least $5,000 during the 18-month period
from
January 1, 2004 to June 30, 2005, which concern any of its
Intellectual Property, and (iii) all material non-customer agreements
to
which Logic is a party which concern any of its Intellectual
Property.
4.12.2 With
regard to Intellectual Property:
(i) Logic
owns the Intellectual Property free and clear of any Encumbrances, or has
sufficient rights to use the Intellectual Property as it is currently used
by
Logic and as it is proposed to be used by Logic;
(ii) No
written claim of invalidity or ownership with respect to the Intellectual
Property has been received by Logic from any third party, and no Intellectual
Property is the subject of any pending or overtly threatened
Action;
(iii) No
person
or entity has asserted that, with respect to any Intellectual Property, Logic
or
any licensee of Logic is infringing or has infringed any domestic or foreign
patent, trademark, service ▇▇▇▇, trade name, or copyright or design right,
or
has misappropriated or improperly used or disclosed any trade secret,
confidential information or know-how;
(iv) All
fees,
annuities, royalties, honoraria and other payments which are due from Logic
on
or before the date of this Agreement for any of the Intellectual Property
have
been paid;
(v) To
the
Knowledge of the Stockholders, except as limited by the terms of any license
relating thereto, the making, using, selling, manufacturing, marketing,
licensing, reproduction, distribution, disposal, modification, display,
transmission or publishing of any process, machine, manufacture, composition
of
matter, or material related to any part of the Intellectual Property, does
not
and will not infringe in any material respect any domestic or foreign patent,
trademark, service ▇▇▇▇, trade name, copyright, moral right or other
intellectual property right of any third party, and does not and will not
involve the misappropriation or improper use or disclosure of any trade secrets,
confidential information or know-how of any third party;
(vi) To
the
Knowledge of the Stockholders, no unexpired foreign or domestic patents or
patent applications exist which, if enforced, would have a Material Adverse
Effect on the business of Logic;
(vii) To
the
Knowledge of the Stockholders, there exists no (A) prior act of Logic
or
any third party that would void or invalidate any of the Intellectual Property
or (B) conduct or use by Logic or any third party that would void
or
invalidate any of the Intellectual Property; and
(viii) The
execution, delivery and performance of this Agreement by Logic and the
Stockholders, and the consummation of the transactions contemplated hereby,
will
not materially breach, violate or conflict with any instrument or agreement
relating to the Intellectual Property to which Logic is a party, will not
cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of any of the Intellectual Property or in any way impair the
right
of Logic, to make, use, sell, license or dispose of, distribute, modify,
display
or transmit or to bring any action for the infringement of, any Intellectual
Property.
4.12.3 Logic
has
taken commercially reasonable steps to safeguard and maintain the secrecy
and
confidentiality of (i) all trade secrets and (ii) to the extent
required by Applicable Law, patent applications and their related inventions
prior to the issuance of a patent registration contained in the Intellectual
Property.
4.12.4 As
used
in this Agreement, “Intellectual Property” means all domestic or foreign
patents, patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works,
apparatus, trade secrets, trademarks, logos, know-how, internet domain names,
copyrights, trademark registrations and applications, service marks, service
▇▇▇▇ registrations and applications, trade names, trade dress, copyright
registrations, customer lists, marketing and customer information, licenses,
technical information (whether confidential or otherwise), software, and
all
documentation thereof, in each case that is owned by, or licensed to Logic
(other than third-party “click wrap” or “shrink wrap” software licenses, as to
which Logic makes no representations or warranties) on the date
hereof.
4.13 Title
to Assets and Properties.
Logic
has good, valid, and marketable title to, or a valid leasehold interest in,
and
unrestricted possession (other than under the terms of relevant leases) of,
the
assets and properties used by Logic, located on its premises or shown on
the
Logic Financial Statements, free and clear of all Encumbrances, except for
assets and properties disposed of in the ordinary course of business since
July 1, 2005. Such assets and properties are sufficient to carry on
the
business of Logic as it is currently being conducted and as it is proposed
to be
conducted.
4.14 Employee
Benefit Plans.
4.14.1 With
respect to each Logic Plan, Logic has made available to SYS a correct and
substantially complete copy of the following (where applicable): (i) each
writing constituting a part of such Logic Plan, including without limitation
all
plan documents, benefit schedules, trust agreements, and insurance contracts
and
other funding vehicles; (ii) the three most recently filed Annual
Reports
(Form 5500 Series) and accompanying schedules, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial
report, if any; and (v) the most recent determination letter from
the
Internal Revenue Service, if any.
4.14.2 The
Internal Revenue Service has issued a favorable determination letter with
respect to each Logic Plan that is intended to be a Qualified Plan and, to
the
Knowledge of the Stockholders, there are no existing circumstances or any
events
that have occurred that could adversely affect the qualified status of any
Logic
Plan that is a Qualified Plan or the related trust.
4.14.3 All
contributions required to be made by Logic to any Logic Plan by Applicable
Laws
or by any Logic Plan document or other contractual undertaking, and all premiums
due or payable with respect to insurance policies funding any Logic Plan,
for
any period through the date hereof, have been made or paid in full.
4.14.4 To
the
Knowledge of the Stockholders, each Logic Plan has been maintained and
administered in compliance with its terms and Applicable Law, including ERISA
and the Code. To the Knowledge of the Stockholders, there is not now, and
there
are no existing circumstances that could reasonably be expected to give rise
to,
any requirement for the posting of security with respect to a Logic Plan
or the
imposition of any Encumbrance on the assets of Logic under ERISA or the Code
with respect to a Logic Plan.
4.14.5 Logic
has
not, at any time within six years before the date hereof, maintained,
contributed to or been obligated to contribute to any Multiemployer Plan
or
Multiple Employer Plan or any plan covered by Section 412 of the Code
or
Title IV of ERISA.
4.14.6 To
the
Knowledge of the Stockholders, there does not now exist, and there are no
existing circumstances that could reasonably be expected to result in, any
Controlled Group Liability that would be a liability of Logic following the
Closing. Without limiting the generality of the foregoing, Logic has not
engaged
in any transaction described in Section 4069 or Section 4204
of ERISA.
4.14.7 Except
for health continuation coverage as required by Section 4980B of the
Code
or Part 6 of Title I of ERISA (or other Applicable Law pertaining
to
COBRA or Cal-COBRA), Logic has no liability for life, health, medical or
other
welfare benefits to former employees or beneficiaries or dependents thereof
and
there has been no communication to employees of Logic that promises or
guarantees such employees retiree health or life insurance benefits or other
retiree death benefits.
4.14.8 Except
as
disclosed in Section 4.14.8 of the Logic Disclosure Schedule, neither
the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any payment or benefit
to
any employee, officer, director or consultant of Logic (other than the
acceleration of vesting of stock options which will, however, terminate upon
the
Closing). Without limiting the generality of the foregoing, no amount paid
or
payable by Logic in connection with the transactions contemplated hereby,
either
solely as a result thereof or as a result of such transactions in conjunction
with any other events, will be an “excess parachute payment” within the meaning
of Section 280G of the Code.
4.14.9 Logic
has
not received written notice of any pending, and there are no overtly threatened,
claims (other than claims for benefits in the ordinary course), lawsuits
or
arbitrations that have been asserted or instituted against the Logic Plans,
any
fiduciaries thereof with respect to their duties to the Logic Plans, or the
assets of any of the trusts under any of the Logic Plans that would reasonably
be expected to result in any material liability of Logic to the Pension Benefit
Guaranty Corporation, the US Department of Treasury, the US Department of
Labor
or any Multiemployer Plan.
4.14.10 Section 4.14.10
of the Logic Disclosure Schedule sets forth the names of all directors
and
officers of Logic, the names of each employee of Logic, and the total current
salary, bonus eligibility, and fringe benefits and perquisites in the aggregate
that all such directors, officers and employees are expected to receive in
the
fiscal year ending June 30, 2006, based on current compensation
arrangements. Section 4.14.10 of the Logic Disclosure Schedule also
sets forth the liability of Logic for deferred compensation under any deferred
compensation plan, excess plan or similar arrangement (other than pursuant
to
Qualified Plans) to each such director, officer and employee, together with
the
value, as of the date specified thereon, of the assets (if any) set aside
in any
grantor trust(s) to fund such liabilities. There are no other forms
of
compensation paid to any such director, officer or employee of Logic. No
officer, director, or employee of Logic, or any immediate family member of
any
of the foregoing, provides or causes to be provided to Logic any assets,
services or facilities and Logic does not provide or cause to be provided
to any
such officer, director, or employee, or any immediate family member of any
of
the foregoing, any assets, services or facilities.
4.14.11 As
used
in this Agreement, the following terms have the meanings given
below:
(i) “Benefit
Obligation” means Logic’s aggregate financial liability to provide all current,
projected and contingent benefits to an employee, or such employee’s
beneficiaries or dependents, as the case may be, under the terms of any of
the
Logic Plans, regardless of whether an amount less than such aggregate financial
liability is reflected on Logic’s financial statements under applicable
accounting rules.
(ii) “Controlled
Group Liability” means any and all liabilities (i) under Title IV of ERISA,
(ii) under section 302 of ERISA, (iii) under sections 412 and
4971 of
the Code, (iv) resulting from a violation of the continuation coverage
requirements of section 601 et seq. of ERISA and section 4980B of the Code
or
the group health plan requirements of Section 701 et seq. of ERISA,
and
(v) under corresponding or similar provisions of foreign laws or
regulations, in each case other than pursuant to the Logic Plans.
(iii) “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.
(iv) “ERISA
Affiliate” means, with respect to any entity, trade or business, any other
entity, trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity,
trade or
business, or that is a member of the same “controlled group” as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
As of
the date hereof, Logic has no ERISA Affiliates.
(v) “Logic
Employee” means a person who is, as of the Closing Date, an active or inactive
employee of Logic.
(vi) “Logic
Plans” means all employee benefit plans, programs and other arrangements
providing benefits to any current or former employee, officer, director or
consultant (or any beneficiary or dependent thereof) in respect of services
provided to Logic, and whether covering one person or more than one person,
sponsored or maintained by Logic or to which Logic contributes (or is obligated
to contribute) or has any liability. Without limiting the generality of the
foregoing, the term “Logic Plans” includes each “employee pension benefit plan”
as defined in Section 3(2) of ERISA, each “employee welfare benefit
plan” as defined in Section 3(1) of ERISA, and each agreement, plan,
program, fund, policy, contract or arrangement (whether written or unwritten)
providing compensation, benefits, pension, retirement, superannuation, profit
sharing, stock bonus, stock option, stock purchase, phantom or stock equivalent,
bonus, thirteenth month, incentive, deferred compensation, hospitalization,
medical, dental, vision, vacation, life insurance, death benefit, sick pay,
disability, severance, termination, indemnity, redundancy pay, educational
assistance, holiday pay, housing assistance, moving expense reimbursement,
fringe benefit or similar employee benefits covering any employee, former
employee, or the beneficiaries and dependents of any employee or former
employee, regardless of whether it is mandated under local law, voluntary,
private, funded, unfunded, financed by the purchase of insurance, contributory
or non-contributory.
(vii) “Multiemployer
Plan” means a “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA. As of the date hereof, Logic has
no
Multiemployer Plans.
(viii) “Multiple
Employer Plan” means a plan that has two or more contributing sponsors at least
two of whom are not under “common control” within the meaning of
Section 4063 of ERISA. As of the date hereof, Logic has no Multiple
Employer Plans.
(ix) “Qualified
Plan” means a “qualified plan” within the meaning of Section 401(a) of
the Code.
4.15 Contracts.
4.15.1 Section 4.15.1
of the Logic Disclosure Schedule lists each, and Logic has provided
SYS
with correct and complete copies of each, Contract (“Contract” means all written
or oral contracts, agreements, guarantees, licenses and executory commitments,
other than Logic Plans and real property leases) to which Logic is a party
as of
the date hereof and which falls within any one or more of the following
categories:
(i) Contracts
not entered into in the ordinary course of Logic’s business and that involve
expenditures or receipts by Logic of $5,000 per month;
(ii) joint
venture, partnership, strategic alliances and other Contracts (however named)
involving a sharing of profits, losses, costs or liabilities;
(iii) leases
for equipment or other personal property assets;
(iv) Contracts
with respect to which Logic received gross revenue of at least $5,000 from
the
date of its incorporation through September 30, 2005;
(v) Contracts
containing covenants purporting to limit the freedom of Logic to compete
in any
line of business or in any geographic area or to hire any individual or group
of
individuals (including without limitation any software license agreements
that
authorize or permit Logic to use the applicable software only in particular
business lines, languages or geographic areas);
(vi) Contracts
providing for the settlement of disputed claims (including disputed dollar
amounts) with third parties;
(vii) powers
of
attorney that are currently outstanding;
(viii) Contracts
entered into other than in the ordinary course of business that contain or
provide for an express undertaking to be responsible for consequential
damages;
(ix) Contracts
which contain minimum purchase conditions in excess of $10,000 or requirements
or other terms that restrict or limit the purchasing relationships of Logic;
(x) Contracts
relating to any outstanding commitment for capital expenditures in excess
of
$25,000;
(xi) Contracts
with any labor organization, union, employee representative or group of
employees;
(xii) indentures,
mortgages, promissory notes, loan agreements, guarantees of borrowed money,
letters of credit or other agreements, instruments or commitments for the
borrowing or the lending of money;
(xiii) Contracts
providing for the creation of any Encumbrance upon any of the assets of
Logic;
(xiv) Contracts
involving annual revenues to the business of Logic in excess of 2.5% of Logic’s
annual revenues during either of its past two fiscal years;
(xv) Contracts
providing for “earn-outs,”“savings guarantees,”“performance guarantees,” or
other contingent payments involving more than $10,000 per year or $50,000
over
the term of the Contract;
(xvi) Contracts
with or for the benefit of (A) any corporate affiliate of Logic or
(B) any immediate family member of any shareholder, director or officer
of
Logic;
(xvii) Contracts
involving payments by Logic of more than $5,000 in any one month during the
past
6 months;
(xviii) any
Contracts that purport to limit the ability of the directors, officers, agents
or employees of Logic to engage in or continue any conduct, activity or practice
relating to the business of Logic, or assign to Logic any rights to any
invention, improvement or discovery;
(xix) any
cost-sharing, tax-sharing or transfer pricing agreements between Logic and
any
related or unrelated party;
(xx) each
amendment, supplement and modification with respect to any of the foregoing;
and
(xxi) any
proposal to enter into any of the foregoing.
4.15.2 All
such
Contracts are valid, binding and enforceable obligations of Logic and each
other
party thereto.
4.15.3 Except
as
provided in Section 4.15.3 of the Logic Disclosure Schedule, neither
Logic
nor any other party thereto is in violation of or in default in respect of,
nor
has there occurred an event or condition which with the passage of time or
giving of notice (or both) would constitute a default under or permit the
termination of, any such Contract. Logic has not received a notice or other
communication claiming a breach on its part of any Contract or a right of
offset
against amounts due it under any Contract or a right of termination of any
Contract. To the Knowledge of the Stockholders, Logic is not currently
performing services under any Contract which is “at risk.” To the Knowledge of
the Stockholders, no employee of Logic has attempted to direct any Contract
to
any third party.
4.15.4 As
of the
date hereof, Logic is not engaged in any renegotiation of, and neither Logic
nor, to the Knowledge of the Stockholders, any third party thereto has any
outstanding rights to renegotiate, any material amounts to be paid or payable
under such Contracts.
4.16 Labor
Matters.
4.16.1 Logic
is
not a party to any collective bargaining agreement or labor union contract
and
is not required to consult or negotiate with any local works council, union,
labor board or any Governmental Authority concerning the transactions
contemplated by the Agreement.
4.16.2 Set
forth
in Section 4.16.2 of the Logic Disclosure Schedule is a list of each
agreement to which Logic is a party pursuant to which any individual employed
by
Logic or otherwise performing services primarily for Logic receives compensation
in excess of $20,000 per annum, and Logic has furnished or made available
to SYS
complete and correct copies of any such agreements in writing. Logic has
not
breached or otherwise failed to comply with any provisions of any agreement
set
forth therein and there are no asserted complaints or grievances outstanding
thereunder. There is no labor strike, dispute or stoppage pending or overtly
threatened against Logic. No campaign or other attempt for recognition is
pending by any labor organization or employee with respect to employees of
Logic.
4.16.3 Logic
is
in compliance with Applicable Laws and its own policies respecting employment
and employment practices, terms and conditions of employment, wages and hours,
equal opportunity, equal pay, civil rights, labor relations, immigration,
occupational health and safety, and payroll and wage taxes.
4.16.4 As
of the
date of this Agreement and except as required by Applicable Law, (i) Logic
is not a party to any outstanding employment agreements or contracts with
officers, managers and directors (or foreign equivalents) or Logic Employees
that are not terminable at will, or that provide for the payment of any bonus
or
commission; and (ii) Logic is not a party to any agreement, policy
or
practice that will require it to pay termination or severance pay to salaried,
non-exempt or hourly Logic Employees after the Closing.
4.16.5 Except
as
disclosed in Section 4.16.5 of the Logic Disclosure Schedule, to the
Knowledge of the Stockholders, no employee of Logic currently intends to
terminate his employment with Logic.
4.17 Undisclosed
Liabilities.
Logic
has no liabilities or obligations of any nature, whether absolute, accrued,
contingent, ▇▇▇▇▇▇, inchoate or otherwise and whether due or to become due,
other than (a) liabilities disclosed to SYS in the Logic Financial
Statements, including footnotes thereto, and (b) liabilities contemplated
by this Agreement and/or set forth in the Logic Disclosure
Schedule.
4.18 Operation
of Logic’s Business; Relationships.
4.18.1 Since
the
date of its incorporation, Logic has not, except in the ordinary course of
business consistent with past practice, engaged in any transaction which,
if
done after execution of this Agreement, would violate in any material respects
Section 5.3.1.
4.18.2 Since
January 1, 2005, no customer of Logic has expressly indicated to Logic
that
such customer will stop or decrease purchasing materials, products or services
from Logic and no supplier of Logic has expressly indicated to Logic that
such
supplier will stop or decrease the supply of materials, products or services
to
Logic.
4.19 Permits.
Logic
is in possession of all licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders legally required in each
jurisdiction to own, lease and operate its properties and to carry on its
business as currently conducted, including under any applicable Environmental
Laws (collectively, the “Permits”) except where the failure to have a Permit
would not have a material Adverse Effect on Logic as a whole. Logic has not
received notice of any Action pending, and no Action is overtly threatened,
regarding any of the Permits which, if successful, would reasonably be expected
to have a Material Adverse Effect on Logic. Logic is not in conflict with,
or in
default or violation of, any of the Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Logic.
4.20 Real
Property.
4.20.1 Logic
does not own any real property.
4.20.2 Section 4.20.2
in the Logic Disclosure Schedule lists each lease for real property
to
which Logic is a party (each a “Lease”). Except as provided in
Section 4.20.2 of the Logic Disclosure Schedule, Logic does not sublease
any real property. Logic has delivered to SYS a substantially correct and
complete copy of each Lease. With respect to each Lease:
(i) the
Lease
is legal, valid, binding, enforceable, and in full force and effect with
respect
to Logic, and, to the Knowledge of Stockholders, with respect to the other
party
thereto, the Lease is legal, binding, enforceable, and in full force and
effect;
(ii) no
party
to the Lease is in breach or default thereunder, and no event has occurred
which, with notice or lapse of time, would constitute a breach or default
or
permit termination, modification, or acceleration thereunder;
(iii) Logic
has
not, and to the Knowledge of the Stockholders no other party thereto has,
repudiated any provision thereof;
(iv) Logic
has
not received written notice of any disputes with respect thereto, and Logic
is
not party to any oral agreements or forbearance programs in effect as to
the
Lease;
(v) Logic
has
not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold; and
(vi) to
the
Knowledge of the Stockholders, the facility leased under the Lease has received
all approvals of Governmental Authorities (including Permits) required to
be
received by Logic in connection with the operation thereof and have been
operated and maintained by Logic in accordance with Applicable
Laws.
4.21 Environmental
Matters.
With
regard to environmental matters:
4.21.1 The
properties, operations and activities of Logic are in compliance in all material
respects with all applicable Environmental Laws and all past noncompliance
of
Logic with any applicable Environmental Laws has been resolved without any
pending, ongoing or future obligation, cost or liability;
4.21.2 Logic
has
not received notice of any pending Action by or before any court or Governmental
Authority under any Environmental Law, and to the Knowledge of the Stockholders
no such Action is pending or threatened and there is no basis for any present
or
future Action against it that may reasonably be likely to lead to any
liability;
4.21.3 There
has
been no release, discharge or emission of any Hazardous Material into the
environment in material violation of applicable Environmental Laws by Logic
in
connection with its currently leased or formerly leased properties or operations
that would be reasonably likely to have a Material Adverse Effect on Logic;
and
4.21.4 There
has
been no material exposure in violation of applicable Environmental Laws of
any
person or property to any Hazardous Material in connection with the properties,
operations and activities of Logic that would be reasonably likely to have
a
Material Adverse Effect on Logic.
4.21.5 For
purposes of this Agreement, the term “Environmental Laws” means all federal,
state, local or foreign laws relating to pollution or protection of human
health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
Hazardous Materials into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices, orders, permits, plans or regulations issued, entered, promulgated
or
approved thereunder.
4.21.6 For
purposes of this Agreement, the term “Hazardous Materials” means chemicals,
pollutants, contaminants, or industrial, toxic or hazardous substances or
wastes
as those terms are defined or identified in any Environmental Law or regulated
by any Permit required by applicable Environmental Law, including but not
limited to petroleum products or by-products, asbestos, and polychlorinated
materials.
4.22 Accounts
Receivable.
Except
as disclosed in Section 4.22 of the Logic Disclosure Schedule, the
accounts
and notes receivable reflected in the Logic Financial Statements (i) arose
from bona fide sales transactions in the ordinary course of business and
are
payable on ordinary trade terms, (ii) are legal, valid and binding
obligations of the respective debtors enforceable in accordance with their
terms, (iii) are not subject to valid set-off or counterclaim, and
(iv) are collectible in the ordinary course of business consistent
with
past practice in the aggregate recorded amounts thereof.
4.23 Insurance.
Section 4.23 of the Logic Disclosure Schedule lists all insurance
policies pursuant to which Logic is presently insured and during each of
the
past three calendar years has been insured (each, an “Insurance Policy” and,
collectively, the “Insurance Policies”). Except as disclosed in
Section 4.23 of the Logic Disclosure Schedule, each Insurance Policy
is, in
all material respects, in full force and effect in accordance with its terms
and
all premiums reflected on invoices received by Logic to date have been paid
in
full. No written notice of cancellation with respect to any Insurance Policy
has
been received by Logic and there is no existing default or event which, with
the
giving of notice or lapse of time or both, would constitute a default
thereunder. Logic is a “named insured” or an “insured” under each Insurance
Policy. Logic has not been refused any insurance, nor has the coverage of
Logic
been limited, by any insurance carrier to which it has applied for insurance
or
with which it has carried insurance during the past three years. The Insurance
Policies are of the type and in the amounts that would reasonably be expected
to
be maintained in the ordinary course of business for similarly situated
companies in the same or a similar industry. Set forth in Section 4.23
in
the Logic Disclosure Schedule is (a) with respect to each Policy
under
which the annual premium amount is fixed, the current amount of such premium,
and (b) with respect to each Policy under which the periodic or annual
premium amount is variable, the amount of the most recent periodic payment
made
and the calculation formula with respect to such premium.
4.24 Product
or Service Warranty.
Within
the three years prior to the date hereof: (a) each product or service
sold
or delivered by Logic has been in material conformity with any applicable
express and implied warranties, (b) Logic has no current liability
for
damages in connection with any such warranty (and there is no basis for any
present or future Action against it that may reasonably be likely to lead
to any
liability) and (c) no product or service sold or delivered by Logic
is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale given by Logic, if any, or as required
by
Applicable Law.
4.25 Data
Protection Matters.
4.25.1 Logic
has
not received notice of any existing or pending or overtly threatened, Action
against Logic by or before any court or Governmental Authority under any
Data
Protection Law. Logic has never instituted a policy with respect to, or taken
steps to comply with or protect Personal Data as required under, any Data
Protection Law.
4.25.2 As
used
in this Agreement, the term “Data Protection Laws” means all federal, state,
local or foreign laws, statutes, orders, rules, regulations, policies or
guidelines, or judgments, decisions or orders entered by any Governmental
Authority, relating to Personal Data.
4.25.3 As
used
in this Agreement, the term “Personal Data” means any and all information that
Logic maintains or otherwise processes that relates to an identified or
identifiable natural person, including employees, stockholders, customers,
customers of customers, vendors, contractors, and other business partners
of
Logic, and any employees of or contractors to any of the foregoing.
4.26 Foreign
Corrupt Practices Act.
4.26.1 Logic
has
not, to secure any improper advantage in order to obtain or retain business,
directly or indirectly offered, paid, given, or promised to pay, or authorized
the payment of, any money, offer, gift, or other thing of value,
to:
(i) an
officer or employee of any Governmental Authority, or any person acting in
an
official capacity for or on behalf of any Governmental Authority;
(ii) any
political party or official thereof;
(iii) any
candidate for political or political party office; or
(iv) any
other
individual or entity;
while
knowing or having reason to believe that all or any portion of such money
or
thing of value would be offered, given, or promised, directly or indirectly,
to
any person or entity listed in clauses (i) - (iii) above.
4.26.2 Logic
maintains a system of internal accounting controls adequate to insure that
it
maintains no off-the-books accounts and that its assets are used only in
accordance with its management’s directives.
4.26.3 No
product sold or service provided by Logic has been directly or indirectly
sold
to or performed on behalf of Cuba, Iraq, Iran, Libya, or Sudan.
4.27 Government
Contracts.
With
respect to any Governmental Authority Contracts, whether entered into by
Logic
as a prime contractor or as a subcontractor, there is, as of the date of
this
Agreement, no (a) civil fraud or criminal investigation by any Governmental
Authority that, individually or in the aggregate, has had or would reasonably
be
expected to have a Material Adverse Effect on Logic, (b) suspension
or
debarment proceeding (or equivalent proceeding) that, individually or in
the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on Logic, (c) request by a Governmental Authority for a contract
price adjustment based on a claimed disallowance by the Defense Contract
Audit
Agency (or other applicable Governmental Authority) or claim of defective
pricing, (d) dispute between Logic or any prime contractor of Logic
and a
Governmental Authority which, since December 31, 2000, has resulted
in a
government contracting officer’s final decision where the amount in controversy
exceeds or is expected to exceed $50,000, (e) claim or request for
equitable adjustment by Logic or any prime contractor of Logic against a
Governmental Authority in excess of $50,000, or (f) any claim or assertion
by a Governmental Authority that Logic or any prime contractor of Logic may
have
violated applicable rules regarding conflicts of interest or statutes, rules
or
regulations regarding the integrity of the purchase process.
4.28 Relations
with Governments.
Neither
Logic, nor any director, officer, agent or employee of Logic, has (a) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to political activity, (b) made any unlawful payment
or
offered anything of value to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns,
(c) made any other unlawful payment, or (d) violated any applicable
export control, money laundering or anti-terrorism law or
regulation.
4.29 No
Existing Discussions.
As of
the date of this Agreement, Logic is not engaged, directly or indirectly,
in any
negotiations or discussions with any other party with respect to an acquisition
of a controlling interest in Logic or the assets of Logic.
4.30 Review
of SYS SEC Documents.
Each
Stockholder has reviewed the SYS SEC Documents and has received from SYS
any
additional information which he or she has requested in connection with the
execution, delivery, and performance of this Agreement. Each Stockholder,
by
reason of his or her business or financial experience, has the capacity to
protect his or her own interests in connection with the transactions described
in this Agreement.
4.31 Interested
Party Transactions.
Except
as disclosed in Section 4.31 of the Logic Disclosure Schedule, no
officer
of director of Logic (nor any person related by blood or marriage or other
person in which any such person has or has had an interest) has or has had,
directly or indirectly (i) any interest in any entity that furnished
or
sold, or furnishes or sells, services or products that Logic furnishes or
sells,
or proposes to furnish or sell, or (ii) any interest in any entity
that
purchases from or sells or furnishes to Logic any goods or services, or
(iii) any beneficial interest in any contract, agreement, or commitment
of
Logic; provided, however, that ownership of no more than 2.5% of the outstanding
voting stock of a publicly traded corporation and no more than 5% of the
outstanding equity of any other entity shall not be deemed an “interest in any
entity” for purposes of this Section 4.31. Schedule 4.31 of the Logic
Disclosure Schedule contains a description of all indebtedness which currently
exists, and any transactions which have occurred since the incorporation
of
Logic, between Logic and any stockholder, director, or officer of
Logic.
4.32 Board
Recommendation.
The
board of directors of Logic, at a meeting duly called and held, has by majority
vote of those directors present, whether in person or telephonically, and
constituting a quorum of the directors then in office, (i) determined
that
this Agreement and the transactions contemplated thereby, including the Merger,
are fair to and in the best interests of the stockholders of Logic, and
(ii) resolved to recommend to the stockholders of Logic that such
holders
approve this Agreement and the transactions contemplated herein, including
the
Merger (the “Logic Board Recommendation”).
4.33 Payments
to Stockholders and Others.
Since
June 30, 2005, Logic has not paid any bonus or made any other payment
(other than customary payments of salary, directors’ fees and business expense
reimbursements in the ordinary course of business) to any officer or director
of
Logic. Since June 30, 2005, Logic has not made any distribution to
or for
the benefit of any shareholder of Logic.
4.34 Disclosure.
This
Article IV, as modified by the Logic Disclosure Schedule, does not
contain
a material misstatement of fact or omit to state of fact necessary to make
the
facts which are stated herein not misleading.
ARTICLE
V
COVENANTS
OF THE PARTIES
5.1 Mutual
Covenants.
5.1.1 Reasonable
Efforts; Notification
(i) Each
of
the parties agrees to use all commercially reasonable 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 transactions contemplated by this Agreement, including
(A) the obtaining of all other necessary actions or nonactions, waivers,
consents, licenses, permits, authorizations, orders and approvals from
Governmental Authorities and the making of all other necessary registrations
and
filings (including other filings with Governmental Authorities, if any),
(B) the obtaining of all consents, approvals or waivers from third
parties
set forth in Schedule 4.5 of the Logic Disclosure Schedule, and
(C) the execution and delivery of any additional instruments necessary
to
consummate the transaction contemplated by this Agreement.
(ii) Notwithstanding
anything to the contrary in this Agreement, (A) neither SYS nor any
of its
subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or assets, or
to take
or agree to take any action or agree to any limitation that could reasonably
be
expected to have a Material Adverse Effect on SYS after the Closing,
(B) prior to the Closing, Logic shall not be required to hold separate
(including by trust or otherwise) or to divest any of their respective
businesses or assets, or to take or agree to take any other action or agree
to
any limitation that could reasonably be expected to have a Material Adverse
Effect on Logic, (C) no party shall be required to take any action
that
would reasonably be expected to substantially impair the benefits expected,
as
of the date hereof, to be realized by such party from consummation of the
Merger
and (D) no party shall be required to waive any of the conditions
to the
Closing set forth in Article VI as they apply to such party.
5.1.2 Public
Announcements.
The
initial press release concerning the transactions contemplated hereby shall
be a
joint press release and shall be issued, upon the mutual agreement of Logic
and
SYS, on or after the date of this Agreement. SYS and Logic shall consult
with
each other before issuing, and give each other the opportunity to review
and
comment upon, any other press release or public statements with respect to
the
transactions contemplated by this Agreement, 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 of SYS with any national securities exchange or national
securities quotation system.
5.1.3 Notices
of Certain Events.
Each
party hereto shall promptly notify the other parties in writing of:
(i) the
receipt by such party of any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) subject
to any applicable legal restrictions, the receipt by such party of any notice
or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement;
(iii) such
party’s obtaining knowledge of any Actions commenced or threatened against,
relating to or involving or otherwise affecting the other party hereto, as
the
case may be, which relate to the consummation of the transactions contemplated
by this Agreement; and
(iv) such
party’s obtaining knowledge of the occurrence, or failure to occur, of any event
which occurrence or failure to occur will be likely to cause the conditions
set
forth in Article VI not to be satisfied; provided,
however,
that no
such notification shall affect the representations, warranties or obligations
of
the parties or the conditions to the obligations of the parties hereunder,
or
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
5.1.4 Notification.
Between
the date of this Agreement and the Closing Date, each party hereto shall
promptly notify the other parties hereto in writing if such party becomes
aware
of any fact or condition that causes or constitutes a breach in any of its
representations and warranties as of the date of this Agreement or any other
date applicable to a representation or warranty as set forth herein. Should
any
such fact or condition require any change in the Logic Disclosure Schedule,
the
Stockholders shall promptly deliver to SYS a written statement specifying
such
change. Such delivery will not affect any rights of any party under any other
provision of this Agreement. During the same period, each party shall promptly
notify the other parties in writing if such party becomes aware of the
occurrence of any breach of any covenant of such party in this Agreement
or the
occurrence of any event that may make the satisfaction of the conditions
in
Article 6 impossible or unlikely.
5.2 Covenants
of SYS.
5.2.1 Employees
and Employee Benefits.
From
and after the Closing, each continuing Logic employee shall be entitled to
participate in all SYS employee benefit plans in a manner and to the extent
consistent with their position. From and after the Closing, SYS shall exercise
its best efforts to treat all service by Logic Employees with Logic (or any
predecessor thereto) prior to the Closing for all purposes as service with
SYS,
including but not limited to for purposes of vacation accrual (except for
purposes of benefit accrual under defined benefit pension plans or to the
extent
such treatment would result in duplicative accrual on or after the Closing
Date
of benefits for the same period of service), and, with respect to any medical
or
dental benefit plan in which Logic Employees participate after the Closing
Date,
SYS shall exercise its best efforts to waive or cause to be waived any
pre-existing condition exclusions and actively-at-work requirements
(provided,
however,
that no
such waiver shall apply to a pre-existing condition of any Logic Employee
who
was, as of the Closing, excluded from participation in a Logic Plan by virtue
of
such pre-existing condition), and shall exercise its best efforts to provide
that any covered expenses incurred on or before the Closing during the plan
year
of the applicable Logic Plan in which the Closing Date occurs
by
a Logic Employee or a Logic Employee’s covered dependent shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Closing Date to
the
same extent as such expenses are taken into account for the benefit of similarly
situated employees of SYS and subsidiaries of SYS.
5.2.2 Registration.
(i) SYS
shall
use its best efforts to prepare and, within at least twelve (12) months after
the Closing Date, file with the SEC a Registration Statement covering the
resale
of all the SYS shares issued or issuable pursuant hereto as part of the Merger
Consideration (the “Registrable Securities”). SYS shall use its best efforts to
have the Registration Statement declared effective by the SEC as soon as
practicable. SYS shall submit to the SEC, within three (3) business days
after
SYS learns that no review of such Registration Statement will be made by
the
staff of the SEC or that the staff of the SEC has no further comments on
such
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later
than
three (3) business days after the submission of such request. SYS shall keep
such Registration Statement effective pursuant to Rule 415 at all
times
until the earlier of (i) the date as of which the Logic Stockholders
may
sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144 (or successor thereto) promulgated
under the 1933 Act or (ii) the date on which the Logic Stockholders
have
sold all the Registrable Securities covered by such Registration Statement.
To
the extent that the registration statement or the prospectus which is a part
thereof requires amendment or supplement under the Securities Act of 1933
and
the rules adopted thereunder, SYS shall exercise best efforts to expeditiously
amend or supplement such registration statement, including the prospectus
which
is a part thereof.
(ii) At
any
time that (i) SYS determines to register any of its SYS Common Shares,
or
to amend any filed registration which is not yet effective, either for its
own
account or for the account of a holder of SYS Common Shares or as a result
of a
holder of SYS Common Shares exercising demand registration rights, other
than a
registration (A) relating solely to SYS Common Shares registered on
Form S-4 or Form S-8 (or any successor forms), or (B) with
respect to which the SYS Common Shares held by the Logic Stockholders would
not
be legally permitted to be included, and (ii) SYS Common Shares issued
pursuant to this Agreement and held by one more Logic Shareholders are not
then
the subject of a filed registration statement or salable under Rule 144
of
the SEC, then SYS shall:
(A) at
least
15 days prior to the filing of a registration statement, other than as set
forth
in (ii)(A) or (B) above, promptly give each Logic Stockholder holding such
SYS
Common Stock (each, an “Eligible Stockholder”) written notice thereof by
registered or certified mail, courier or personal delivery; provided that
no
such notice shall be required in a non-underwritten registration, and all
of
such stock shall be registered thereon; and
(B) use
its
best efforts to include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all of the Registrable Securities held by such Eligible Stockholder
specified in a written request or requests, made within ten (10) days after
receipt of such written notice from SYS by any Eligible Stockholder but only
to
the extent that such inclusion does not diminish the number of securities
included by a holder of SYS Common Shares who has demanded such
registration.
(iii) If
the
registration of which SYS gives notice is for a registered public offering
involving an underwriting, SYS will so advise the Eligible Stockholders as
part
of the written notice given pursuant to subsection (ii)(A) above.
In such
event the right of any Eligible Stockholder to registration pursuant to
subsection (ii) above shall be conditioned upon such Eligible Stockholder’s
participation in such underwriting and the inclusion of such Eligible
Stockholder’s Registrable Securities in the underwriting to the extent provided
herein. The Eligible Stockholders proposing to distribute their Registrable
Securities through such underwriting shall (together with SYS and the other
holders of SYS Common Shares distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with
the
managing underwriter selected for such underwriting by SYS (or by the holders
of
SYS Common Shares who have demanded such registration). Notwithstanding any
other provision of this Section 5.2.2, if the managing underwriter
determines that marketing factors require a limitation of the number of SYS
Common Shares to be underwritten, the managing underwriter may limit the
number
of SYS Common Shares to be included in such registration. SYS will so advise
the
Eligible Stockholders and any other holder of SYS Common Shares distributing
their SYS Common Shares through the underwriting pursuant to registration
rights, and the number of SYS Common Shares to be registered and other
securities that may be included in the registration and underwriting shall
be
allocated among all stockholders in proportion, as nearly as practicable,
to the
respective amounts of registrable securities held by such stockholders and
other
securities held by other holders at the time of filing the registration
statement. If any Eligible Stockholder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice
to SYS
and the managing underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from registration, and shall not
be
transferred in a public distribution prior to ninety (90) days after the
effective date of the registration statement relating to the underwritten
offering.
(iv) SYS
shall
provide to each Eligible Stockholder a suitable number of prospectuses, and
supplements thereto, as soon as possible following the effectiveness of the
registration or the filing of the supplement, as the case may be.
(v) SYS
shall
have the right to terminate or withdraw any registration initiated by it
under
Section 5.2.2(iii) prior to the effectiveness of such registration,
but
without prejudice to its obligation pursuant to this
Section 5.2.2.
(vi) SYS
shall
bear the expenses associated with the registration of Registrable Securities
pursuant to this Section 5.2.2 exclusive of underwriters’ and brokers’
discounts and commissions and expenses of the Logic Stockholders’ legal
counsel.
(vii) SYS
will,
and hereby does, indemnify, hold harmless and defend each of the Logic
Stockholders (each an “Indemnified Person”), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys’ fees, amount paid in settlement or expenses, joint or several
(collectively, “Claims”), incurred investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from
the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether
or
not an indemnified party is nor may be a party thereto (“Indemnified Damages”),
to which any of them may become subject insofar as such Claims (or actions
or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement
or
a material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any
untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
SYS files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary
to
make the statements made therein, in the light of the circumstances under
which
the statements therein were made, not misleading, or (iii) any violation
or
alleged violation by SYS of the 1933 Act, the 1934 Act, or any other law,
including, without limitation, any state securities law, or any rule or
regulation therein relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement (the matters in the foregoing clauses
(i)
through (iii) being, collectively, “Violations”). SYS shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them
in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 5.2.2(vii): (i) shall not apply to
a Claim
by an Indemnified Person arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in writing
to SYS
by such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto; and (ii) shall not be available to the extent such claim
is based
upon a failure of the Logic Stockholder to deliver or to cause to be delivered
the prospectus made available by SYS.
(viii) With
a
view to making available to the Logic Stockholders the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of
the
SEC that may at any time permit the Logic Stockholder to sell securities
of SYS
to the public without registration (“Rule 144”), SYS agrees to use
reasonable commercial efforts to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144; and
(b) file
with
the SEC in a timely manner all reports and other documents required of SYS
under
the 1933 Act and the 1934 Act so long as SYS remains subject to such
requirements and the filing of such reports and other documents is required
for
the applicable provisions of Rule 144.
5.3 Covenants
of Logic and the Stockholders.
Logic
and the Stockholders jointly and severally agree and warrant that:
5.3.1 Conduct
of Logic’s Operations.
During
the period from the date of this Agreement to the Closing Date, or the date,
if
any, on which this Agreement is earlier terminated pursuant to Section 7.1,
and except as may otherwise be agreed in writing by the parties, Logic shall
conduct its operations in the ordinary course of business consistent with
past
practice, except as expressly contemplated by this Agreement, and shall use
its
commercially reasonable efforts to maintain and preserve its business
organization and its rights and franchises and to retain the services of
its
officers and key employees and maintain relationships with customers, suppliers,
lessees, licensees and other third parties, and to maintain all of its operating
assets in their current condition (normal wear and tear excepted). Without
limiting the generality of the foregoing, during the period from the date
of
this Agreement to the Closing Date, or the date, if any, on which this Agreement
is earlier terminated pursuant to Section 7.1, Logic shall not, except
as
otherwise expressly contemplated by this Agreement and the transactions
contemplated hereby or with the prior written consent of SYS:
(i) do
or
effect any of the following actions with respect to its securities:
(A) adjust, split, combine or reclassify its capital stock, (B) make,
declare or pay any dividend or distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital stock or
any
securities or obligations convertible into or exchangeable for any shares
of its
capital stock, (C) grant any person any right or option to acquire
any
shares of its capital stock, (D) issue, deliver or sell or agree to
issue,
deliver or sell any additional shares of its capital stock or any securities
or
obligations convertible into or exchangeable or exercisable for any shares
of
its capital stock or such securities (except pursuant to the exercise of
Logic
options that are outstanding as of the date hereof), (E) enter into
any
agreement, understanding or arrangement with respect to the sale, voting,
registration or repurchase of its capital stock, provided,
however,
that
Logic is hereby expressly permitted to take all lawful actions necessary
in
order to (x) cause all outstanding options to be exercised or cancelled,
(y) cause all outstanding warrants to be exercised or cancelled and
(z) cause any outstanding convertible debt instruments to become
non-convertible;
(ii) directly
or indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets other than in the ordinary course
of
business consistent with past practice;
(iii) adopt
or
propose any changes in the Logic Articles or the Logic Bylaws;
(iv) merge
or
consolidate with any other person;
(v) acquire
a
material amount of assets or capital stock of any other person outside of
the
ordinary course of business consistent with past practice;
(vi) make
any
borrowings, incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an
accommodation become responsible or liable for the obligations of any other
individual, corporation or other entity, other than in the ordinary course
of
business, consistent with past practice;
(vii) create
any subsidiaries;
(viii) enter
into or modify any employment, severance, termination or similar agreements
or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or employee other than
pursuant to Applicable Law or contractual commitments existing as of the
date
hereof in the ordinary course of business consistent with past practice
(provided past practices shall not be deemed to include actions taken in
connection with the Merger) or grant any increase in the compensation or
benefits of directors, officers, employees, consultants or agents of Logic
or
grant, re-price, or accelerate the exercise or payment of any Logic options
or
warrants or other equity-based awards other than increases in the ordinary
course of business consistent with past practice;
(ix) enter
into, adopt or amend any Logic Plan, except as may be required by Applicable
Law;
(x) take
any
action that could give rise to severance benefits payable to any officer
or
director of Logic as a result of consummation of the transactions contemplated
by this Agreement;
(xi) change
any method or principle of accounting in a manner that is inconsistent with
past
practice except to the extent required by generally accepted accounting
principles as advised by Logic’s regular independent accountants;
(xii) settle
any Actions, whether now pending or hereafter made or brought involving,
individually or in the aggregate, an amount in excess of $25,000 other than
settlement in the ordinary course of business or in accordance with their
terms,
of liabilities disclosed, reflected or reserved against in the most recent
Logic
financial statements (or the notes thereto) or incurred since the date of
such
financial statements in the ordinary course of business;
(xiii) modify,
extend, amend or terminate, or waive, release or assign any rights or claims
with respect to, any Contract set forth in Section 4.15 in the Logic
Disclosure Schedule;
(xiv) enter
into any confidentiality agreements or arrangements other than in the ordinary
course of business consistent with past practice;
(xv) write
up,
write down or write off the book value of any assets, individually or in
the
aggregate, in excess of $20,000 except for depreciation and amortization
in
accordance with generally accepted accounting principles consistently applied;
(xvi) incur
or
commit to any capital expenditures in excess of $25,000 in the aggregate
without
the prior written consent of SYS which shall not be unreasonably withheld;
(xvii) make
any
payments in respect of policies of directors’ and officers’ liability insurance
(premiums or otherwise) other than premiums paid in respect of its current
or
renewed or replacement policies;
(xviii) take
any
other action that could likely result in the representations and warranties
set
forth in Article IV becoming false or inaccurate in any material respect;
(xix) enter
into or carry out any other transaction other than in the ordinary and usual
course of business;
(xx) permit
or
cause any Subsidiary to do any of the foregoing or agree or commit to do
any of
the foregoing;
(xxi) make
or
revoke any Tax election, file any amended Tax Return, or settle any audit
or
other proceeding with any Tax authority;
(xxii) enter
into any agreement to purchase, or to lease for a term in excess of one year,
any real property, provided that Logic (A) may, as a tenant, or a
landlord,
renew any existing lease for a term not to exceed eighteen months and
(B) nothing herein shall prevent Logic, in its capacity as landlord,
from
renewing any lease pursuant to an option granted prior to the date
hereof;
(xxiii) make
any
distribution to or for the benefit of its shareholders; or
(xxiv) agree
in
writing or otherwise to take any of the foregoing actions.
5.3.2 Access
to Information; Confidentiality.
Upon
reasonable notice, the Stockholders shall cause Logic to afford to the officers,
employees, accountants, counsel, financial advisors and other representatives
of
SYS reasonable access during normal business hours, during the period prior
to
the Closing Date, to such of its properties, books, contracts, commitments,
records, all other information and data, officers and employees as SYS may
reasonably request and, during such period, Logic shall furnish promptly
to SYS
(a) a copy of each report, schedule, and other document filed, published,
announced or received by it during such period pursuant to the requirements
of
Applicable Laws (other than documents which such party is not permitted to
disclose under Applicable Laws), and (b) consistent with its legal
obligations, all other information concerning it and its business, properties
and personnel as SYS may reasonably request; provided,
however,
that
Logic may restrict the foregoing access to the extent that it reasonably
concludes, after consultation with outside legal counsel, that (i) any
Applicable Law requires Logic to restrict access to any properties or
information, (ii) providing such access would result in the loss of
the
attorney-client privilege, (iii) such documents discuss the pricing
or
dollar value of the transactions contemplated by this Agreement, (iv) such
documents contain competitively sensitive information, the sharing of which
could constitute a violation of any applicable antitrust laws or (v) such
disclosure is reasonably likely to result in a breach of or default under
any
contract or agreement to which Logic is a party. Each party shall make all
commercially reasonable efforts to minimize disruption to the business of
the
other party and its subsidiaries which may result from the requests for data
and
information hereunder. All requests for access and information shall be
coordinated through senior executives of the parties to be designated. The
terms
and provisions of the Reciprocal Non-Disclosure Agreement between Logic and
SYS
dated July 19, 2004 shall apply to any information provided pursuant
to
this section.
5.3.3 No
Solicitation.
Until
the Effective Time or the termination of this Agreement:
(i) Logic
and
the Stockholders will not, and will not permit or cause any Subsidiary or
any of
the directors or officers of Logic or any Subsidiary, and will direct Logic’s
employees, agents and representatives not to, directly or indirectly, solicit,
initiate, encourage, or furnish or disclose non-public information in
furtherance of, or otherwise facilitate any inquiries that may be reasonably
expected to lead to, the making of any proposal or offer with respect to
a
merger, reorganization, share exchange, consolidation, or similar transaction
involving, or any purchase of 10% or more of the assets or any equity of,
Logic
or any Subsidiary or any other business combination other than the transactions
contemplated by this Agreement (any such proposal or offer, an “Acquisition
Proposal”).
(ii) Logic
and
the Stockholders will not, and will not permit or cause any Subsidiary or
any of
the officers or directors of it or any Subsidiary to, and shall direct its
and
such Subsidiary’s employees, agents and representatives not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating
to an
Acquisition Proposal, whether such Acquisition Proposal arises or has arisen
before or after the date of this Agreement, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal.
(iii) Logic
and
the Stockholders will immediately cease all existing activities, discussions
and
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal and request the return of all confidential information
regarding such party provided to any such parties prior to the date hereof
pursuant to the terms of any confidentiality agreements or otherwise. Logic
and
the Stockholders will notify SYS immediately if any such inquiries, proposals,
or offers are received by, any such information is requested from, or any
such
discussions or negotiations are sought to be initiated or continued with,
any of
its representatives indicating, in connection with such notice, the name
of such
person and the material terms and conditions of any proposals or offers and
thereafter shall keep SYS informed, on a reasonably current basis, on the
status
and terms of any such proposals or offers and the status of any such
negotiations or discussions.
5.3.4 Release.
Each
Stockholder (who for purposes of this Section 5.3.4 shall be referred
to as
a “Releasor” on behalf of Releasor and Releasor’s successors, heirs, and
assigns, hereby fully and forever releases and discharges Logic and SYS and
their respective successors, heirs, and assigns, and their respective officers,
directors, agents, representatives, employees and attorneys from any and
all
claims, demands, actions, agreements, suits, causes of action, obligations,
controversies, debts, costs, attorneys’ fees, expenses, damages, judgments,
orders and liabilities of whatever kind or nature in law, equity or otherwise,
past, present or future, known or unknown, suspected or unsuspected, from
the
beginning of time through execution of this Agreement, excepting only any
claims
arising out of this Agreement and enforcement thereof (collectively, the
“Claims”).
Each
Releasor acknowledges that there is a possibility that subsequent to the
execution of this Agreement, he or she will discover facts or incur or suffer
claims that were unknown or unsuspected at the time this Agreement was executed,
and which if known by such Releasor at that time may have materially affected
such Releasor’s decision to execute this Agreement. Each Releasor acknowledges
and agrees that by reason of this Section 5.3.4, he or she is assuming
any
risk of such unknown facts and such unknown and unsuspected claims.
Each
Releasor has been advised of the existence of Section 1542 of the
California Civil Code (“Section 1542”), which provides:
A
GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Notwithstanding
such provisions, this Section 5.3.4 shall constitute a full release
in
accordance with its terms. Each Releasor hereby knowingly and voluntarily
waives
the provisions of Section 1542, as well as any other statute, law
or rule
of similar effect.
5.3.5 Unfair
Competition.
For a
period of two (2) years after the date of the Closing of the Merger, each
Stockholder agrees that he or she will not, directly or indirectly (whether
on
his or her own behalf or as an owner, parent, stockholder, partner, joint
venturer, investor, member, officer, director, agent, independent contractor,
associate, executive, consultant or licensor) compete with SYS or its
subsidiaries and affiliates anywhere within California and all other states
in
which SYS has offices or customers as of the date of the Merger (the
“Territory”) by carrying on, being engaged in, or taking part in the business of
providing digital broadcast equipment used to distribute IP data over MPEG-2
based satellite and terrestrial based networks (the “Business”) in any
manner.
(i) For
a
period of two (2) years after the date of Closing of the Merger, each
Stockholder agrees that he or she will not, directly or indirectly (whether
on
his or her own behalf or as an owner, parent, stockholder, partner, joint
venturer, investor, member, officer, director, agent, independent contractor,
associate, executive, consultant or licensor) (1) accept Business,
whether
solicited or not, from any current or future customer or client of SYS or
its
subsidiaries and affiliates, and (2) solicit, divert, take away, or
attempt
to solicit, divert, take away, any prospective or current customer, client,
supplier, or distributor of SYS or its subsidiaries and affiliates, with
whom he
had material business contact, for the purpose of competing in the Business
with
SYS or its subsidiaries and affiliates.
(ii) For
a
period of two (2) years after the date of Closing of the Merger, each
Stockholder agrees that he or she will not, directly or indirectly (whether
on
his or her own behalf or as an owner, parent, stockholder, partner, joint
venturer, investor, member, officer, director, agent, independent contractor,
associate, executive, consultant or licensor) solicit or encourage to leave
the
employ of SYS or its subsidiaries any employee or independent contractor
of SYS
or its subsidiaries and affiliates.
(iii) Each
Stockholder acknowledges that the restrictions and covenants set forth above
are
reasonably necessary to protect the goodwill and other legitimate business
interests of SYS and its subsidiaries, including the goodwill acquired by
SYS as
a consequence of the closing of the Merger described in this Agreement, and
are
not overbroad, overlong, or unfair (including in duration and scope). Each
Stockholder also acknowledges that any breach of these covenants would cause
SYS
serious, irreparable injury or loss.
(iv) Each
Stockholder agrees that SYS (or its subsidiaries or affiliates) will be entitled
to immediate injunctive relief for any breach or threatened breach of this
Section 5.3.5, and that a restraining order and/or an injunction may
be
issued against each Stockholder, in addition to any other rights or remedies
at
law SYS (or its subsidiaries or affiliates) may have.
5.3.6 Logic
Stockholders Meeting.
Logic
shall take all actions required by the CGCL, the Logic Articles and the Logic
Bylaws to duly call, give notice of, convene and hold a special meeting of
the
stockholders of Logic (the “Logic Stockholders Meeting”) on the earliest
practicable date, to consider and vote upon approval of (i) the Merger,
(ii) this Agreement, and (iii) the other transactions contemplated
hereby to the extent the approval of such other transactions by the stockholders
of Logic is required.
5.3.7 Investment
Representations by Logic Stockholders.
Logic
shall use commercially reasonable efforts to cause each stockholder of Logic
who
notifies Logic or SYS of such stockholder’s intention to exchange his or her
Certificates for certificates evidencing SYS Common Shares to deliver to
Logic,
on or prior to the Closing Date, a signed certificate, substantially in the
form
attached as Exhibit C (the “Investment Representation Certificate”), and
Logic shall deliver to SYS, at the Closing, all such Investment Representation
Certificates received by Logic; provided,
however,
that
Logic’s failure to receive any such Investment Representation Certificate
despite commercially reasonable efforts in such regard shall not constitute
a
breach of this Agreement.
5.3.8 Merger
Expenses.
Logic
shall not incur more than $100,000 in legal and accounting fees and costs
in
connection with the Merger.
ARTICLE
VI
CONDITIONS
6.1 Conditions
to the Obligations of Each Party.
The
obligations of SYS, Subcorp, Logic, and the Stockholders to consummate this
Agreement shall be subject to the satisfaction or waiver of the following
conditions:
6.1.1 No
provision of any Applicable Law or regulation and no judgment, injunction,
order, decree, ruling, assessment or arbitration award of any Governmental
Authority or arbitrator and any Contract with any Governmental Authority
pertaining to compliance with Applicable Law shall prohibit or enjoin the
consummation of the transactions contemplated by this Agreement or limit
the
ownership or operation by SYS, Logic or any of their respective subsidiaries
of
any material portion of the businesses or assets of SYS or Logic.
6.1.2 There
shall not be pending any Action (i) challenging or seeking to restrain
or
prohibit the consummation of transactions contemplated by this Agreement,
(ii) seeking to prohibit or limit the ownership or operation by SYS,
Logic
or any of their respective subsidiaries of, or to compel SYS, Logic or any
of
their respective subsidiaries to dispose of or hold separate, any material
portion of the business or assets of SYS, Logic or any of their respective
subsidiaries, as a result of the transactions contemplated by this Agreement,
(iii) seeking to impose limitations on the ability of SYS to acquire
or
hold, or exercise full rights of ownership of, any shares of capital stock
of
Logic or (iv) seeking to prohibit SYS or any Subsidiary of SYS from
effectively controlling in any material respect the business or operations
of
SYS or the subsidiaries of SYS.
6.2 Conditions
to Obligations of Logic and the Stockholders.
The
obligations of Logic and the Stockholders to consummate the transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by Logic:
6.2.1 Each
of
the representations and warranties of SYS contained in this Agreement shall
be
true and correct in all material respects (but without regard to any materiality
qualifications or references to Material Adverse Effect contained in any
specific representation or warranty), in each case on the date of this Agreement
and on and as of the Closing Date as though made on and as of the Closing
Date
(except for representations and warranties made as of some other specified
date,
in which case as of such specified date), except where any such failure of
the
representations and warranties to be true and correct, individually or in
the
aggregate, could not reasonably be expected to have a Material Adverse Effect
on
SYS, Logic or the transactions contemplated by this Agreement.
6.2.2 SYS
(i) shall have performed or complied in all material respects with
all
agreements and covenants required to be performed by it under this Agreement
at
or prior to the Closing Date that are qualified as to Material Adverse Effect
and (ii) shall have performed or complied in all material respects
with all
agreements and covenants required to be performed by it under this Agreement
at
or prior to the Closing that are not qualified as to Material Adverse Effect
except where such non-performance or non-compliance individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect
on
SYS.
6.2.3 SYS
shall
have furnished the Stockholders with a certificate dated the Closing Date
signed
on behalf of it by the Chairman, President or any Vice President to the effect
that the conditions set forth in Sections 6.2.1 and 6.2.2 have been
satisfied.
6.2.4 Logic
and
the Stockholders shall have obtained a release from Xyratex International,
Inc.
(“Xyratex”), either substantially in the form and substance attached as
Exhibit C, or on such other terms and conditions as are reasonably
satisfactory to Logic and the Stockholders, effective as of the Closing Date
and
the payoff of Xyratex.
6.3 Conditions
to Obligations of SYS
and
Subcorp.
The
obligations of SYS and Subcorp to consummate the transactions contemplated
hereby shall be subject to the fulfillment of the following conditions unless
waived by SYS:
6.3.1 Each
of
the representations and warranties of the Stockholders contained in this
Agreement shall be true and correct in all material respects (but without
regard
to any materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty), in each case, on the
date
of this Agreement and on and as of the Closing Date as though made on and
as of
the Closing Date (except for representations and warranties made as of some
other specified date, in which case, as of such specified date), except where
any such failure of the representations and warranties to be true and correct
would not reasonably be expected to have a Material Adverse Effect on Logic,
SYS
or the transactions contemplated by this Agreement.
6.3.2 Logic
and
the Stockholders (i) shall have performed or complied in all material
respects with all agreements and covenants required to be performed by each
of
them under this Agreement at or prior to the Closing that are qualified as
to
Material Adverse Effect, (ii) shall have performed or complied in
all
material respects with all agreements and covenants required to be performed
by
them under this Agreement at or prior to the Closing that are not qualified
as
to Material Adverse Effect except where such non-performance or non-compliance
would not reasonably be expected to have a Material Adverse Effect on Logic,
and
(iii) the Board of Directors of Logic and the Stockholders shall have
unanimously approved the execution, delivery, and performance of this
Agreement.
6.3.3 Logic
and
the Stockholders shall have furnished SYS with a certificate dated the Closing
Date to the effect that the conditions set forth in Sections 6.3.1
and
6.3.2 have been satisfied.
6.3.4 Since
the
date of this Agreement, except as set forth in Section 4.10 of the
Logic
Disclosure Schedule delivered as of such date, there shall not have been
any
change in the assets, liabilities, business prospects, results of operations
or
financial condition of Logic that would constitute a Material Adverse Effect
on
Logic as of the Closing Date.
6.3.5 All
consents, approvals, and waivers set forth in Section 4.5 of the Logic
Disclosure Schedule shall have been obtained by Logic or waived by
SYS.
6.3.6 Each
outstanding option or warrant to acquire, and each issued note or other security
convertible into, Logic Capital Stock, whether or not exercisable, vested
or
converted, shall have been exercised or cancelled so that as of the Closing
Date
no person shall have any options, warrants, or other rights to buy, or convert
into, any securities of Logic.
6.3.7 The
Surviving Corporation shall have entered into an employment agreement with
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, which shall be satisfactory in form and substance
to SYS.
6.3.8 Completion
and delivery to SYS of audits of Logic’s financial statements covering the
fiscal years ended December 31, 2004 and December 31, 2003,
which
audits shall be appropriate and adequate for use in preparing reports and
registration statements to be filed with the Securities and Exchange
Commission.
6.3.9 Logic
and
the Stockholders shall have furnished SYS with a release from Xyratex, either
substantially in the form and substance attached as Exhibit C, or
on such
other terms and conditions as are satisfactory to SYS in its discretion,
effective as of the Closing Date and the payoff of Xyratex.
ARTICLE
VII
TERMINATION
AND AMENDMENT
7.1 Termination.
This
Agreement may be terminated prior to the Effective Time:
7.1.1 by
mutual
written consent of SYS, Subcorp, Logic, and the Stockholders;
7.1.2 by
SYS or
Stockholders:
(i) if
there
shall be any law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited, or if any judgment,
injunction, order or decree of a court or other competent Governmental Authority
enjoining SYS or the Stockholders from consummating the transactions
contemplated hereby shall have been entered and such judgment, injunction,
order
or decree shall have become final and nonappealable;
(ii) if
the
transactions contemplated hereby shall not have been consummated before
November 30, 2005; provided, however, that the right to terminate
this
Agreement under this Section 7.1.2 shall not be available to any party
whose failure to perform any material covenant or obligation under this
Agreement has been the cause of or resulted in the failure of the transactions
contemplated hereby to occur on or before such date; or
7.1.3 by
SYS if
any Stockholder has breached any of his or her representations and warranties
in
Article IV of this Agreement and as a result thereof, the condition
set
forth in Section 6.3.1 could not be satisfied;
7.1.4 by
SYS if
there has been any change in the assets, liabilities, business prospects,
results of operations or financial condition of Logic that would constitute
a
Material Adverse Effect on Logic;
7.1.5 by
the
Stockholders if SYS shall have breached any of its representations and
warranties in Article III of this Agreement and as a result thereof,
the
condition set forth in Section 6.2.1 could not be satisfied; or
7.1.6 by
the
Stockholders if there has been any change in the assets, liabilities, business
prospects, results of operations or financial condition of SYS that would
constitute a Material Adverse Effect on SYS.
7.2 Effect
of Termination.
In the
event of the termination of this Agreement pursuant to Section 7.1,
this
Agreement, except for the second sentence of Section 5.1.2 and
Section 5.3.2, shall become void and have no effect, without any liability
on the part of any party or such party’s directors, officers or stockholders.
Notwithstanding the foregoing, nothing in this Section 7.2 shall relieve
any party to this Agreement of liability for a material breach of any provision
of this Agreement. Further, if either SYS or Logic decides that it will not
proceed to close the Merger, and such decision is not based on either (i) a
material change in either party’s business or results of operations or
(ii) information discovered in the course of due diligence, then the
party
who decides that it will not proceed to closing shall pay the other party
$25,000.
7.3 Return
of Documents.
In the
event this Agreement is terminated for any reason, SYS shall, within fifteen
(15) calendar days following such termination, deliver to Logic all documents
and materials previously delivered to SYS by Logic.
ARTICLE
VIII
GENERAL
SURVIVAL
AND INDEMNIFICATION
8.1 Survival
of Representations and Warranties.
8.1.1 The
representations, warranties, covenants and agreements made herein by the
Stockholders shall survive, irrespective of any different survival period
under
any applicable statute of limitation, until December 31, 2006 (the
“Cut-Off
Date”).
8.1.2 Irrespective
of any different survival period under any applicable statute of limitations,
the representations, warranties, covenants and agreements made herein by
SYS
shall survive until the Cut-Off Date.
8.1.3 This
Section 8.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Closing or
after
the termination of this Agreement.
8.1.4 Notwithstanding
any right of SYS to investigate the affairs of Logic or of the Stockholders
to
investigate the affairs of SYS, SYS shall have the right to rely fully upon
the
representations, warranties, covenants and agreements contained in this
Agreement, or in any instrument required to be delivered pursuant to this
Agreement, and the Stockholders shall have the right to rely fully upon the
representations, warranties, covenants, and agreements of SYS contained in
this
Agreement or in any such instrument. No information or knowledge obtained
by a
party hereto in an investigation conducted by such party shall affect or
be
deemed to modify any representation or warranty of any other party contained
herein or the conditions to the obligations of the parties to consummate
the
transactions contemplated by this Agreement. The right to any remedy based
on a
breach of the representations, warranties, covenants, and obligations of
another
party, will not be affected by any investigation conducted by a party with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement
or
the Closing Date, about an accuracy or inaccuracy of or compliance with,
any
representation, warranty, covenant or obligation of any other
party.
8.2 Indemnification.
From
and after the Closing, the Stockholders, jointly and severally, shall indemnify,
defend (with counsel reasonably acceptable to SYS) and hold SYS and its
subsidiaries and their respective officers, directors, shareholders, affiliates,
employees, agents and other representatives (the “SYS Indemnified Parties”),
harmless from and against any and all claims, demands, suits, actions, causes
of
actions, losses, damages, obligations, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees and court costs)
(collectively, the “Losses”)
arising as a result of or incurred in connection with (i) any breach
by
Logic and/or Stockholders of any of their representations or warranties set
forth in this Agreement and (ii) any failure by Logic and/or the
Stockholders to perform any of their covenants or agreements set forth in
this
Agreement; provided, however, that, except in the case of the commission
of
fraud by the Stockholder from whom indemnity is sought, the obligations of
each
Stockholder under this Section 8.2 shall be limited to the amounts
received
by the Stockholder under this Agreement. The first recourse of the SYS
Indemnified Parties for Losses shall be from the Escrow Consideration and
pursuant to the Escrow Agreement. Any Losses remaining thereafter may be
obtained jointly and severally from the Stockholders subject to the limitations
stated above. Any Loss that results from a settlement of a third party claim
against an SYS Indemnified Party shall be the subject of indemnification
hereunder only if the settlement has been approved by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇. The Stockholders may not settle any such claim unless the
settlement provides for a full and complete release of the SYS Indemnified
Parties and does not include equitable relief against, or payment from, any
SYS
Indemnified Party.
8.3 Limitations.
8.3.1 Notwithstanding
any provision of this Agreement to the contrary, except as set forth in the
next
sentence of this Section 8.3, an SYS Indemnified Party may not recover
any
Losses under Section 8.2 unless and until the aggregate amount of
Losses
exceeds Thirty Thousand Dollars ($30,000) (the “Threshold Amount”), in which
case the SYS Indemnified Party shall be entitled to recover all Losses without
regard to the Threshold Amount from the first dollar of such Losses.
Notwithstanding the foregoing, an SYS Indemnified Party shall be entitled
to
recover for, and the Threshold Amount shall not apply as a threshold to,
any and
all claims or payments made with respect to Losses arising from fraud, willful
misconduct or intentional misrepresentation.
8.3.2 Notwithstanding
anything to the contrary contained in this Article VIII, in order
for an
indemnity claim to be made for an indemnity obligation under Section 8.2,
the claim must have arisen by the Cut-Off Date and be asserted in writing
and
delivered to the indemnifying party on or before February 15,
2007.
8.3.3 Notwithstanding
anything to the contrary contained in this Article VIII, the indemnity
contained in Section 8.2 shall be several with respect to those warrants
that are made severally.
ARTICLE
IX
MISCELLANEOUS
9.1 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed given if delivered personally, sent by facsimile (with written
confirmation of successful delivery) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at
such
other address for a party as shall be specified by like notice from such
party
to the other parties hereto):
9.1.1 if
to
SYS:
SYS
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
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Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Secretary
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇,
Forward, ▇▇▇▇▇▇▇▇ & Scripps LLP
▇▇▇
▇▇▇▇
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▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
9.1.2 if
to
Logic and the Stockholders:
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with
a
copy to:
▇▇▇▇▇▇▇▇,
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
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Attention:
▇▇▇▇ ▇. ▇’▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
9.2 Interpretation.
9.2.1 When
a
reference is made in this Agreement to an Article or Section, such
reference shall be to an Article or Section of this Agreement
unless
otherwise indicated. The headings, the table of contents and the index of
defined terms 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.”
9.2.2 For
the
purposes of any provision of this Agreement, a “Material Adverse Effect” with
respect to any party shall be deemed to occur if any event, change or effect
has
occurred which has a material adverse effect on the business, assets (including
intangible assets), liabilities (contingent or otherwise), results of
operations, business prospects, or financial condition of such party taken
as a
whole, or a material adverse effect on the ability of such party to timely
perform its obligations under this Agreement and the other transaction documents
contemplated hereby; provided,
however,
none of
the following shall be deemed in themselves, either alone or in combination,
to
constitute, and none of the following shall be taken into account in determining
whether there has been, a Material Adverse Effect:
(i) with
respect to any party, any change in or effect upon the assets (including
intangible assets), liabilities (contingent or otherwise), financial condition,
business prospects, or results of operations of such party directly or
indirectly arising out of or attributable to any decrease in the market price
of
SYS Common Shares (but not any change or effect underlying such decrease
to the
extent such change or effect would otherwise constitute a Material Adverse
Effect on SYS);
(ii) with
respect to any party, any change in or effect upon the assets (including
intangible assets), liabilities (contingent or otherwise), financial condition,
business prospects, or results of operations of such party directly or
indirectly arising out of or attributable to (A) conditions, events,
or
circumstances generally affecting the economy of the United States, or
(B) the general state of industries and market sectors in which such
party
operates; and
(iii) with
respect to Logic, any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or results
of operations of Logic directly or indirectly arising out of or attributable
to
the loss by Logic of any of its business prospects or customers (including
business of such business prospects or customers), suppliers or employees
(including, without limitation, any financial consequence of such loss of
customers (including business of such customers), suppliers or employees)
due
primarily to the transactions contemplated hereby or the public announcement
of
this Agreement, in each case arising after the date of this
Agreement.
9.2.3 For
purposes of this Agreement, a “Subsidiary” when used with respect to any party
means any individual partnership, firm, corporation, association, trust,
unincorporated organization (including any representative office or branch)
or
other entity under the laws of any jurisdiction, (i) of which such
party or
another subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or the Subsidiary
of such party do not have 50% or more of the voting interests in such
partnership) or (ii) 50% or more of the securities or other interests
of
which having by their terms ordinary voting power to elect at least 50% of
the
board of directors or others performing similar functions with respect to
such
corporation or other organization is directly or indirectly owned or controlled
by such party or one or more of its subsidiaries (or if there are no such
voting
securities or interests, 50% or more of the equity interests of which is
directly or indirectly owned or controlled by such party or one or more of
its
subsidiaries).
9.2.4 For
purposes of this Agreement, “Affiliate” means a person that directly, or
indirectly through one or more intermediaries, controls, is controlled by
or is
under common control with another person or beneficially owns or has the
power
to vote or direct the vote of 10% of more of the voting stock (or of any
other
form of general partnership, limited partnership or voting equity interest
in
the case of a person that is not a corporation) of such other person. For
purposes of this definition, “control,” including the terms “controlling and
“controlled” means through the ownership of voting securities, by contract or
credit arrangement, as trustee, partner or executor or otherwise.
9.2.5 For
purposes of this Agreement, “Knowledge” means with respect to SYS, the actual
knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Lake and ▇▇▇ ▇▇▇▇▇▇▇;
with
respect to Logic, the actual knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
and with
respect to the Stockholders, the actual knowledge of each
Stockholder.
9.3 Counterparts.
This
Agreement may be executed in counterparts, which together shall constitute
one
and the same Agreement. The parties may execute more than one copy of the
Agreement, each of which shall constitute an original.
9.4 Entire
Agreement.
This
Agreement (including the documents and the instruments referred to herein)
constitute the entire agreement among the parties and supersede all prior
agreements and understandings, agreements or representations by or among
the
parties, written and oral, with respect to the subject matter hereof and
thereof; provided, however, that the parties’ nondisclosure/nonuse agreement
shall survive, and shall also survive any termination of this
Agreement.
9.5 Third-Party
Beneficiaries.
Nothing
in this Agreement, express or implied, is intended or shall be construed
to
create any third-party beneficiaries.
9.6 Governing
Law; Venue.
9.6.1 This
Agreement shall be governed by the laws of the State of California without
regard to its conflict of laws rules, and any action arising out of or in
connection with this Agreement or the Merger shall be brought only in San
Diego
County, California. Each of the parties hereto agrees that a final judgment
in
any action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.
9.6.2 Each
of
the parties hereto irrevocably consents to the service of any summons and
complaint and any other process in any other action or proceeding relating
to
this Agreement, on behalf of itself or its property, by the personal delivery
of
copies of such process to such party. Nothing in this Section 9.6
shall
affect the right of any party hereto to serve legal process in any other
manner
permitted by law.
9.7 Arbitration.
The
parties to this Agreement shall submit to binding arbitration before a single,
neutral arbitrator of any dispute, controversy or claim arising out of, or
relating to, the transactions contemplated by this Agreement or any breach
hereof, provided,
however,
that
the parties retain their right to, and shall not be prohibited, limited or
in
any other way restricted from, seeking or obtaining equitable relief from
a
court having jurisdiction over the parties. Such arbitration shall be governed
by and conducted through the American Arbitration Association in accordance
with
the Commercial Dispute Resolution Procedures. The arbitration hearing shall
be
held in San Diego, California at a place to be designated by the parties
or, in the absence of their agreement, by the arbitrator.
9.8 Specific
Performance.
The
transactions contemplated by this Agreement are unique. Accordingly, each
of the
parties acknowledges and agrees that, in addition to all other remedies to
which
it may be entitled, each of the parties hereto is entitled to a decree of
specific performance, provided such party is not in material default hereunder.
The party prevailing in any proceeding seeking such a decree shall be entitled
to payment of all reasonable legal fees and expenses by the non-prevailing
party.
9.9 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and
assigns. Additionally, notwithstanding the foregoing or anything to the contrary
contained in this Agreement, SYS is specifically permitted to adopt a holding
company structure pursuant to Section 251(g) of the Delaware
General
Corporation Law and assign this Agreement to the holding company or consummate
SYS’s previously approved reincorporation into the State of Delaware, in which
case the references herein to receipt and registration of actual and underlying
SYS shares shall instead refer to the equivalent shares of the Delaware
corporation.
9.10 Expenses.
All
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses; provided, however, that if the Effective Time occurs
prior to November 30, 2006, SYS will, as a consequence of the Merger,
assume up to $100,000 of Logic’s legal and accounting fees directly related to
the negotiation and closing of the Merger.
9.11 Severability.
The
invalidity or unenforceability in whole or in part of any covenant, promise
or
undertaking, or any section, subsection, sentence, clause, phrase, word,
or any
of the provisions of this Agreement will not affect the validity or
enforceability of the remaining portions of this Agreement. If for any reason,
any provision is determined to be invalid or in conflict with any existing,
or
future law or regulation by a court or agency having valid jurisdiction,
such
will not impair the operation or have any other effect upon such other
provisions of this Agreement as may remain otherwise valid, and the latter
will
continue to be given full force and effect and bind the parties
hereto.
9.12 Amendment.
This
Agreement may be amended prior to the Effective Time only by agreement in
writing executed by all of the parties hereto; provided,
however,
that
SYS and Logic shall be entitled to provide written statements regarding new
information as to the Logic Disclosure Schedule, respectively, without the
written consent of the other parties hereto.
9.13 Attorneys’
Fees.
If any
action or arbitration is commenced to enforce or interpret any provision
of this
Agreement, the prevailing party shall be entitled to recover from the other
party actual attorneys’ fees and costs incurred in connection with such action,
in addition to all other proper relief. Attorneys’ fees incurred in enforcing
any judgment are recoverable as a separate item, and this provision for
post-judgment attorneys’ fees shall survive any judgment and shall not be deemed
merged into the judgment.
[Signature
Page Follows]
IN
WITNESS WHEREOF,
SYS,
Shadow and the Stockholders have signed this Agreement as of the date first
written above.
SYS
By: ____________________________________
Name: ▇▇▇▇▇▇
▇.
Lake
Title:
Chief Financial Officer
SHADOW
II, INC.
By: ____________________________________
Name: ▇▇▇▇▇▇
▇.
Lake
Title:
Chief Financial Officer
LOGIC
INNOVATIONS, INC.
By: ____________________________________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇
Title:
President
STOCKHOLDERS
__________________________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇
▇.
▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇
▇.
▇▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, an Individual
[Signature
Page to Agreement and Plan of Merger]
__________________________________________
▇▇▇▇▇▇▇
▇. England, an Individual
__________________________________________
▇▇▇▇
▇.
▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇, an Individual
__________________________________________
Dwityani
▇. ▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇
▇.
▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇
▇.
▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇
▇.
▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇
▇.
▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇
▇.
▇▇▇▇▇, an Individual
[Signature
Page to Agreement and Plan of Merger]
__________________________________________
▇▇▇▇
▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇
▇.
▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, an Individual
__________________________________________
▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, an Individual
[Signature
Page to Agreement and Plan of Merger]
SYS
By: ____________________________________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Title: President
SYS
By: ____________________________________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇
Title: Secretary
SHADOW
II, INC.
By: ____________________________________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Title: President
SHADOW
II, INC.
By: ____________________________________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇
Title: Secretary
[Signature
Page to Agreement and Plan of Merger]
EXHIBIT A
Escrow
Agreement
EXHIBIT B
Investment
Representation Certificate
EXHIBIT C
Xyratex
Release