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Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND AMONG
PROLOGIC MANAGEMENT SYSTEMS, INC.,
SRI ACQUISITION CO.
AND
SOLID SYSTEMS, INC.
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TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER......................................................................................... 1
Section 1.01 The Merger............................................................................. 1
Section 1.02 Consideration.......................................................................... 2
Section 1.03 Articles of Incorporation and Bylaws of the Surviving Corporation...................... 2
Section 1.04 Surrender and Exchange of Solid Common Stock........................................... 3
Section 1.05 Fractional Shares...................................................................... 4
Section 1.06 No Further Transfers................................................................... 4
Section 1.07 Effective Date; Application of Deposits................................................ 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SOLID............................................................ 5
Section 2.01 Organization; Qualification............................................................ 5
Section 2.02 Authority Relative to this Agreement................................................... 5
Section 2.03 Capitalization......................................................................... 5
Section 2.04 Subsidiaries; Absence of Certain Agreements............................................ 6
Section 2.05 Governmental Consents and Approvals.................................................... 7
Section 2.06 Consents, Authorizations............................................................... 7
Section 2.07 No Violations.......................................................................... 7
Section 2.08 Financial Statements................................................................... 7
Section 2.09 Title to and Condition of Assets and Property.......................................... 8
Section 2.10 Litigation............................................................................. 9
Section 2.11 Absence of Changes..................................................................... 9
Section 2.12 Undisclosed Liabilities; Commitments................................................... 9
Section 2.13 Environmental Matters.................................................................. 9
Section 2.14 Employee Benefit and Retirement Plans.................................................. 10
Section 2.15 Labor Matters.......................................................................... 11
Section 2.16 Information for Filings................................................................ 11
Section 2.17 Taxes.................................................................................. 12
Section 2.18 Inventory.............................................................................. 12
Section 2.19 Proprietary Rights..................................................................... 12
Section 2.20 Surety Obligations..................................................................... 13
Section 2.21 Records................................................................................ 13
Section 2.22 Compliance With Law; Conduct........................................................... 13
Section 2.23 Insurance.............................................................................. 14
Section 2.24 Receivables............................................................................ 14
Section 2.25 Merger Expenses........................................................................ 14
Section 2.26 Bank Accounts; Powers of Attorney...................................................... 14
Section 2.27 Product and Service Warranties......................................................... 14
Section 2.28 Transactions with Affiliates........................................................... 14
Section 2.29 Price and Customer Lists............................................................... 15
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Section 2.30 Corrupt Practices...................................................................... 15
Section 2.31 No Default............................................................................. 15
Section 2.32 Additional Items Reflected in the Solid Disclosure Schedule............................ 15
Section 2.33 Copies of Documents; Accuracy of Information Furnished................................. 16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PROLOGIC AND SRI................................................. 16
Section 3.01 Organization; Qualification............................................................ 16
Section 3.02 Authority Relative to this Agreement................................................... 16
Section 3.03 Capitalization......................................................................... 17
Section 3.04 Validity of Shares to be Issued........................................................ 17
Section 3.05 Authorization of Additional Common Stock............................................... 17
Section 3.06 Governmental Consents and Approvals.................................................... 17
Section 3.07 No Violations.......................................................................... 18
Section 3.08 Financial Statements; SEC Reports...................................................... 18
Section 3.09 Litigation............................................................................. 18
Section 3.10 Information of Filings................................................................. 19
Section 3.11 Copies of Documents; Accuracy of Information Furnished................................. 19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF OWNERS........................................................... 19
Section 4.01 Title to Shares........................................................................ 19
Section 4.02 Authority Relative to this Agreement................................................... 19
Section 4.03 Transfers to Solid..................................................................... 20
Section 4.04 Certain Transactions or Arrangements................................................... 20
Section 4.05 Investments in Competitors............................................................. 20
Section 4.06 Solid's Representations................................................................ 20
Section 4.07 Investment Representation.............................................................. 20
Section 4.08 Copies of Documents; Accuracy of Information Furnished................................. 21
Section 4.09 Liabilities of Advanced Mechtronic Services, Inc....................................... 21
ARTICLE 5 ADDITIONAL AGREEMENTS.............................................................................. 21
Section 5.01 Conduct of Business of Solid........................................................... 21
Section 5.02 Forbearances by Solid.................................................................. 22
Section 5.03 No Solicitation........................................................................ 22
Section 5.04 Investigation of Business and Properties............................................... 23
Section 5.05 Confidentiality........................................................................ 23
Section 5.06 Public Announcements................................................................... 24
Section 5.07 Agreement to Consummate................................................................ 24
Section 5.08 Solid Shareholders' Approval........................................................... 24
Section 5.09 SRI Shareholder's Approval............................................................. 24
Section 5.10 Notice................................................................................. 24
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Section 5.11 Representation, Warranties, and Agreements; Survival................................... 25
Section 5.12 Indemnification........................................................................ 25
Section 5.13 Resolution of Disputed Claims under Section 5.12....................................... 26
Section 5.14 Tax Return Filings..................................................................... 27
Section 5.15 Delivery of Disclosure Schedules....................................................... 27
Section 5.16 Employee Matters....................................................................... 27
Section 5.17 Solid Employee Stock Option Plan....................................................... 27
ARTICLE 6 CONDITIONS PRECEDENT TO CLOSING AND POST-CLOSING COVENANTS......................................... 28
Section 6.01 General Conditions..................................................................... 28
Section 6.02 Conditions to Closing in Favor of Solid................................................ 29
Section 6.03 Conditions to Closing in Favor of Prologic............................................. 30
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER.................................................................. 32
Section 7.01 Termination............................................................................ 32
Section 7.02 Effect of Termination.................................................................. 32
Section 7.03 Amendment.............................................................................. 32
Section 7.04 Extension; Waiver...................................................................... 33
ARTICLE 8 GENERAL PROVISIONS................................................................................. 33
Section 8.01 Notices................................................................................ 33
Section 8.02 Fees and Expenses of the Transaction................................................... 34
Section 8.03 Interpretation......................................................................... 34
Section 8.04 Counterparts/Facsimile................................................................. 34
Section 8.05 Miscellaneous.......................................................................... 34
Section 8.06 Survival............................................................................... 35
Section 8.07 Mutual Cooperation..................................................................... 35
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LIST OF EXHIBITS
Page
Exhibit A Statement of Designations.....................................................................A-1
LIST OF SCHEDULES
Schedule A Solid Disclosure Schedule
Schedule B Prologic Disclosure Schedule
Schedule C Owners Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made as of September 15, 1999, by and among Prologic Management Systems, Inc.,
an Arizona corporation ("Prologic"), SRI Acquisition Co., a Texas corporation
and wholly-owned subsidiary of Prologic ("SRI" or "Surviving Corporation"),
Solid Systems, Inc., a Texas corporation ("Solid"), and the shareholders of
Solid whose names are set forth on the signature page of this Agreement
("Owners"). Prologic, SRI, Solid and the Owners will sometimes collectively be
referred to herein as the "Parties."
RECITALS OF THE PARTIES:
A. The respective Boards of Directors of Prologic, SRI and Solid have
approved the merger (the "Merger") of Solid with and into SRI in accordance with
the laws of the State of Texas and the provisions of this Agreement.
B. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
C. Prologic, SRI, Solid and Owners desire to make certain
representations, warranties and agreements in connection with, and to establish
various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
Section 1.01 The Merger. Pursuant to the terms and conditions of this
Agreement, Solid will be merged with and into SRI pursuant to the Texas Business
Corporation Act ("TBCA") in the manner and with the effect set forth herein.
Subject to the conditions contained in Article 6 of this Agreement, executed
Articles of Merger, in a form mutually agreed upon by the Parties, will be filed
with the Secretary of State of the State of Texas as soon as practical following
the time when the last of the conditions set forth in Article 6 of this
Agreement shall have been fulfilled or waived in writing in accordance with such
Article, or such earlier or later date as may be mutually agreed to by Prologic
and Solid (such filing date to be deemed the "Effective Date"). Upon the
Effective Date, the Merger will be deemed to have closed.
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Section 1.02 Consideration. The total merger consideration (the "Merger
Consideration") paid by Prologic will consist of cash and preferred stock,
proportioned 60% cash and 40% preferred stock. The Merger Consideration will be
based on Solid's earnings before taxes, interest, depreciation and amortization
("EBITDA") for the fiscal year ending September 30, 2000 multiplied by 7.2, as
adjusted ("Adjusted EBITDA") for non-recurring items between the Effective Date
and September 30, 2000, the nature of such adjustments to be agreed upon by the
Parties prior to the Effective Date. The minimum Merger Consideration shall be
$10,800,000, and the maximum Merger Consideration shall be $18,806,400. The
Merger Consideration shall be paid as follows:
(a) Conversion of Shares. On the Effective Date, each of the issued and
outstanding shares of common stock, no par value, of Solid (the "Solid Common
Stock"), subject to applicable statutory provisions with respect to appraisal
rights, any applicable withholding requirements and adjustment as herein
provided, shall be converted into (i) .35833 share of Prologic Series C 6%
Cumulative Convertible Preferred Stock (the "Prologic Series C Convertible
Preferred Stock"), plus (ii) cash in the amount of $6.50 per each such share.
Subject to the "Statement of Designations" attached hereto as Exhibit A, each
share of Prologic Series C Convertible Preferred Stock shall have a Stated Value
of $12.00, shall be convertible into three (3) shares of Prologic Common Stock,
and shall be duly authorized, validly issued, fully paid and nonassessable. Each
share of Solid Common Stock held in the treasury of Solid or by a wholly-owned
subsidiary of Solid shall be cancelled as of the Effective Date and no portion
of the Merger Consideration shall be payable with respect thereto.
(b) Adjustment of Merger Consideration.
(i) The Merger Consideration shall be reduced by the amount
otherwise payable or issuable to holders of Solid Common Stock, if any, who
exercise dissenters' rights in connection with the Merger based upon such
shareholders' ownership of Solid Common Stock outstanding on the Effective Date.
The Merger Consideration shall be subject to appropriate adjustment in the event
of a stock split, stock dividend or recapitalization subsequent to the date of
this Agreement applicable to shares of Prologic Common Stock or Solid Common
Stock held of record on or before the Effective Date.
(ii) After September 30, 2000 but before December 31, 2000,
the Merger Consideration shall be reviewed to see if an adjustment is required
based on Adjusted EBITDA of Solid at September 30, 2000 (the "Consideration
Adjustment"). The amount of the Consideration Adjustment will be the difference
between the number derived by multiplying Solid's Adjusted EBITDA for the year
ending September 30, 2000 by 7.2 and subtracting therefrom the sum of
$10,800,000. Any Consideration Adjustment due the Owners under this Section
1.02(b)(ii) shall be paid 60% in cash and 40% in Series C Convertible Preferred
Stock and shall be paid no later than January 31, 2001.
Section 1.03 Articles of Incorporation and Bylaws of the Surviving
Corporation. The Articles of Incorporation of SRI as in effect on the Effective
Date of the Merger shall be the Articles of Incorporation of the Surviving
Corporation until same shall be amended in accordance with law or the Articles
of Incorporation.
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The Bylaws of SRI as in effect on the Effective Date of the Merger
shall be the Bylaws of the Surviving Corporation until same shall thereafter be
altered, amended or repealed in accordance with law, the Articles of
Incorporation of the Surviving Corporation or said Bylaws.
The directors of the Surviving Corporation at the Effective Date of the
Merger shall be as follows: James M. Heim, Richard E. Metz, William E. Wallin,
John W. Olynick, William H. Cruise, III, Kenneth B. Cruise and John W.
Schauweker. The officers of the Surviving Corporation at the Effective Date of
the Merger shall be as follows: President, John W. Schauweker; Vice
President/General Manager, James S. Nichols; Secretary, William E. Wallin; and
Treasurer and Assistant Secretary, Virginia R. Gibson.
Section 1.04 Surrender and Exchange of Solid Common Stock.
(a) On the Effective Date, each holder of an outstanding certificate or
certificates theretofore representing shares of Solid Common Stock (the "Solid
Certificates") shall surrender such Solid Certificates to Prologic or to such
agent or agents (the "Transfer Agent") as may be designated by Prologic and
shall receive in exchange therefor certificates representing the number of whole
shares of Prologic Series C Convertible Preferred Stock (upon satisfaction of
customary delivery requirements and subject to applicable law with respect to
the exercise of appraisal rights), together with a check representing the cash
adjustments for fractional shares, if any.
(b) If any certificate evidencing shares of Solid Common Stock is to be
issued in a name other than that in which the Solid Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Solid Certificate so surrendered shall be properly endorsed and
otherwise be in proper form for transfer and that the person requesting such
exchange pay to the Transfer Agent any transfer or other taxes required by
reason of the issuance of a certificate for shares of Prologic Series C
Convertible Preferred Stock in any name other than that of the registered holder
of the Solid Certificate surrendered or establish to the satisfaction of the
Transfer Agent that such tax has been paid or is not payable.
(c) Until so surrendered and exchanged, each outstanding Solid
Certificate after the Effective Date shall be deemed for all corporate purposes
(other than voting and the payment of dividends or other distributions as
described below) to evidence the number of whole shares of Prologic Series C
Convertible Preferred Stock into which the shares of Solid Common Stock
represented by such Solid Certificates are to be converted plus the right to
receive the amount of cash per share pursuant to Section 1.02(a) of this
Agreement; provided, however, that no dividends or other distributions, if any,
in respect to such shares of Prologic Series C Convertible Preferred Stock,
declared after the Effective Date and payable to holders of record after the
Effective Date, shall be paid to the holders of any unsurrendered Solid
Certificates until such Solid Certificates are surrendered. Subject to the
effect, if any, of applicable law, after the surrender and exchange of Solid
Certificates, the record holders thereof on the date of exchange shall be
entitled to receive any such dividends or other distributions without interest
thereon, which theretofore have become payable with respect to the number of
whole shares of Prologic Series C Convertible Preferred Stock for which such
Solid Certificate was exchangeable.
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Holders of any unsurrendered Solid Certificates shall not be entitled to vote
until such unsurrendered Solid Certificates are exchanged pursuant to this
Section 1.04.
(d) Prologic may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the Merger, and
thereafter all exchanges, payments and notices provided for in this Agreement as
being made to or by the Transfer Agent shall be made to or by Prologic or its
transfer agent.
Section 1.05 Fractional Shares. No fractional share certificates of
Prologic Series C Convertible Preferred Stock shall be issued in connection with
the conversion of shares of Solid Common Stock in the Merger nor will any
outstanding fractional share interest entitle the owner thereof to vote, to
receive dividends or to exercise any other right of a stockholder of Prologic.
In lieu of any such fractional shares, any holder of Solid Common Stock shall,
upon surrender thereof, be paid in cash the value of each such fraction, which
for this purpose shall be the product of such fraction multiplied by the average
of the closing prices of Prologic Common Stock on the New York Stock Exchange on
the five previous trading dates before the date of this Agreement, subject to
appropriate adjustment in the event of a stock split, stock dividend or
recapitalization applicable to shares of Prologic Common Stock held of record on
or before the Effective Date to the extent not reflected in such closing price.
Section 1.06 No Further Transfers. On the Effective Date, the stock
transfer books of Solid shall be closed, and no further transfer of Solid Common
Stock shall thereafter be made.
Section 1.07 Effective Date; Application of Deposits. Prologic and
Solid anticipate that the Effective Date of the Merger will be no later than
October 15, 1999, which date may be extended as provided below. Prologic and
Solid acknowledge that Prologic has paid Solid a $50,000 good-faith deposit in
exchange for agreeing to the October 15, 1999 Effective Date (the "$50,000
Deposit"). Prologic and Solid further agree that the Effective Date may be
extended to November 15, 1999 if Prologic pays Solid an additional good-faith
deposit of $25,000 on or before October 15, 1999; provided, however, that the
$25,000 payment shall be required only if Solid and the Owners are prepared to
close the Merger on October 15, 1999 and the requested extension is necessary
through no fault of Solid or the Owners. On the Effective Date, the $50,000
Deposit shall be repaid to Prologic by Solid. If the Effective Date is extended,
any deposits paid by Prologic for such extension shall also be repaid to
Prologic by Solid on the Effective Date. If for any reason the Merger does not
close, the $50,000 Deposit and all subsequent deposits for any extension of the
Effective Date shall be deemed non-refundable.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SOLID
Except as expressly set forth in the disclosure schedule delivered to
Prologic by Solid pursuant to this Agreement (the "Solid Disclosure Schedule"),
for itself, and for each of its Subsidiaries, Solid hereby represents and
warrants to Prologic and SRI as follows, which representations and warranties
are made as of the date hereof and as of the Effective Date and shall survive
the Effective Date regardless of what investigations, if any, Prologic or SRI
shall have made prior hereto. Where any representation and warranty is qualified
as being "to the best knowledge of Solid," or with words of a similar affect,
such shall mean the actual knowledge of William H. Cruise, III, Chief Executive
Officer of Solid; Kenneth B. Cruise, President of Solid; and John W. Schauweker,
Vice President and Chief Financial Officer of Solid.
Section 2.01 Organization; Qualification. Solid is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Solid has full corporate power and authority to own and lease all of the
properties and assets it now owns and leases and to carry on its business as now
being conducted. Solid is duly qualified as a foreign corporation and is in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure so to qualify would not have a
material adverse effect on the condition (financial or otherwise), business,
assets, liabilities, capitalization, financial position, operations, results of
operations or prospects (a "Material Adverse Affect") on Solid. Solid has
heretofore delivered to Prologic complete and correct copies of its Articles of
Incorporation and Bylaws as such are currently in effect.
Section 2.02 Authority Relative to this Agreement. Solid has full
corporate power and authority to execute, deliver and perform this Agreement
and, subject to stockholder approval, to consummate the transactions
contemplated hereby. The execution and delivery by Solid of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly and
validly authorized by the Board of Directors of Solid and, except for approval
of the Merger by the shareholders of Solid, no other corporate proceedings on
the part of Solid are necessary with respect thereto. This Agreement has been
duly and validly executed and delivered by Solid and, subject to shareholder
approval, constitutes a legal, valid and binding obligation of Solid,
enforceable against it in accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general principles of equity.
Section 2.03 Capitalization. The authorized capital stock of Solid
consists of 1,000,000 shares of Solid Common Stock, of which, as of the date
hereof, 1,000,000 shares of Solid Common Stock are validly issued and
outstanding, fully paid and nonassessable. As of the date of this Agreement
there are no shares of Solid Common Stock held in the treasury of Solid and
there are no other shares of the capital stock of Solid. As of the date hereof,
except as disclosed in the Solid Disclosure Schedule, there are no outstanding
options, warrants, rights or other commitments to issue or sell any shares of
capital stock or any securities or obligations convertible into or exchangeable
for, or giving any person any right to acquire from Solid, any
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shares of its capital stock. No shares of Solid's capital stock have been issued
in violation of any preemptive rights or applicable federal or state securities
laws. Except pursuant to the TBCA, there are no restrictions, including but not
limited to self-imposed restrictions, on the retained earnings of Solid or on
the ability of Solid to declare and pay dividends. There are no outstanding
obligations of Solid to repurchase, redeem or otherwise acquire any capital
stock or other securities of Solid.
Section 2.04 Subsidiaries; Absence of Certain Agreements. The Solid
Disclosure Schedule identifies all Solid Subsidiaries, and sets forth a true and
complete listing of the authorized, issued and outstanding capital stock of each
Subsidiary and the ownership of the capital stock of each Subsidiary. Each of
such Subsidiaries has full corporate power and authority to own and lease all of
the properties and assets it now owns and leases and to carry on its business as
now being conducted. Each is duly qualified as a foreign corporation and is in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
qualification necessary, except where failure to so quality, would not have a
Material Adverse Affect on such Subsidiary. Except as set forth in the Solid
Disclosure Schedule, (a) Solid has good and valid title to its equity interests
in the Subsidiaries, respectively, in each case free and clear of all liens, (b)
there are no outstanding subscriptions, warrants or other rights to purchase or
otherwise acquire any equity securities of any Subsidiary, (c) there are no
securities of Solid or any of its affiliates convertible into or exchangeable
for equity securities of or voting securities of any Subsidiary, and (d) there
are no obligations of Solid or any of its affiliates to issue, deliver or sell
any capital stock, voting securities or securities convertible into or
exchangeable for equity securities of or voting securities of any Subsidiary.
The outstanding equity securities of each Subsidiary are validly issued, fully
paid and non-assessable. As used in this Agreement, "Subsidiary" or
"Subsidiaries," with respect to any corporation, shall mean any other
corporation, limited liability company or partnership (collectively, "entity")
of which at least a majority of the securities having by their terms ordinary
voting power to elect a majority of the Board of Directors or managers of such
other entity is at the time directly or indirectly owned or controlled by such
first corporation, or by such first corporation and one or more of its
Subsidiaries.
Except as set forth on the Solid Disclosure Schedule, Solid does not
own or hold any securities of, or any interest in, any other person or entity
nor is Solid subject to any joint venture, partnership or other arrangement that
is created as a partnership for federal income tax purposes. Except as set forth
in the Solid Disclosure Schedule, there are no voting trusts or other agreements
by and between or among Solid, or any or all of its shareholders, whether or not
Solid is a party thereto, imposing any restrictions upon the transfer or voting
of or otherwise pertaining to the securities of Solid (including, but not
limited to the Solid Common Stock) or the ownership thereof. Any and all such
restrictions set forth in the Solid Disclosure Schedule shall be duly complied
with or effectively waived as of the Effective Date.
Section 2.05 Governmental Consents and Approvals. Except as disclosed
on the Solid Disclosure Schedule, the execution, delivery and performance by
Solid of this Agreement and the consummation of the transactions contemplated
hereby require no consent, approval, order or authorization of, action by or in
respect of, or registration or filing with, any federal, state, municipal,
foreign or other governmental department, commission, board, bureau, agency,
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instrumentality, court, or authority ("Governmental Body"), other than (a) the
filing of the Articles of Merger with the Secretary of State of the State of
Texas, (b) any applicable filings with and consents and/or approvals of state
security commissions under state securities laws or similar laws and (c) such
other consents, approvals, permits, authorizations, notifications or filings,
the failure of which to obtain or make would have a Material Adverse Affect on
Solid or materially adversely affect the ability of Solid to perform its
obligations set forth herein or to consummate the transactions contemplated
hereby.
Section 2.06 Consents, Authorizations. Solid has obtained, or shall
have obtained prior to the Effective Date, all consents, approvals or
authorizations (or shall obtain from Prologic a written waiver of the
requirement to obtain any such consent, approval or authorization) of each
person or entity (including Solid's banks or other lenders with regard to loans
outstanding to Solid) whose consent, approval or authorization may be necessary
so as not to impair, terminate or otherwise adversely affect, in any material
respect, any obligation, right or interest of Solid under any contract to which
it is a party, including, without limitation, any and all loan or credit
agreements, notes, mortgages, leases, customer or supplier agreements
(collectively and without limitation, the "Solid Agreements"), or which may
otherwise affect the ability to consummate the transactions contemplated hereby,
including the ability of Surviving Corporation to continue to receive the
benefits under the Solid Agreements.
Section 2.07 No Violations. Except as disclosed on the Solid Disclosure
Schedule, the execution, delivery and performance of this Agreement by Solid,
the consummation by Solid of the transactions contemplated hereby or compliance
by Solid with any of the provisions hereof does not and will not (a) conflict
with or result in any breach or violation of any provision of the Articles of
Incorporation or Bylaws (or similar charter documents) of Solid, (b) result in a
default, or give rise to any right of termination, cancellation or acceleration
or loss of any material benefit (with or without the giving of notice or lapse
of time or both), or require the consent, approval, waiver or other action by
any person under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, trust (constructive or otherwise), agreement,
lease (of real or personal property) or other instrument or obligation to which
Solid is a party or by which Solid may be bound, (c) result in the creation or
imposition of any claim, lien, pledge, security interest, obligation,
restriction or other encumbrance on any of the property of Solid, or (d) to the
best knowledge of Solid, violate any judgment, order, writ, injunction, decree,
statute, rule or regulation applicable to Solid, subject to actions required
under certain of Solid's existing credit arrangements. Reference to Solid in
this Section 2.07 includes any of its Subsidiaries.
Section 2.08 Financial Statements. The consolidated financial
statements, financial statement schedules and notes to such financial statements
and schedules of Solid (the "Solid Financial Statements") for the year ended
September 30, 1998, and the nine months ended June 30, 1999 (the "Balance Sheet
Date"), for Solid and separately for each of its Subsidiaries are complete and
correct and were prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as noted in the Solid Disclosure
Schedule, and fairly present the information purported to be shown therein. All
such Solid Financial Statements have been prepared from the books and records of
Solid, which accurately and fairly reflect the transactions and dispositions of
the assets of Solid. Solid does not have any liabilities,
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contingent or otherwise, whether due or to become due, other than as indicated
on the Solid Financial Statements as of the Balance Sheet Date or as otherwise
indicated in this Agreement or the Solid Disclosure Schedule. Solid has accrued
all employee benefit costs required to be accrued and such accrual is reflected
in the balance sheets included in the Solid Financial Statements.
Section 2.09 Title to and Condition of Assets and Property. Except for
items listed on the Solid Disclosure Schedule, all property used in the business
of Solid is, or will be at the Effective Date, reflected as assets on the books
and records of Solid or is leased by Solid. A list of all such property, real,
personal or intangible, has been provided to Prologic. At the Effective Date,
none of such property will be owned by any Owner or any entity (other than Solid
or a Subsidiary). Solid has, or at the Effective Date will have, good and
marketable title to any and all assets reflected in the Solid Financial
Statements or Solid's other books and records which are currently, or will be at
the Effective Date, owned and used in the operation of its businesses, and such
assets are, or will be at the Effective Date, free and clear of all liens,
claims, charges, security interests, options, or other title defects or
encumbrances, except as set forth in the Solid Disclosure Schedule. The Solid
Disclosure Schedule further sets forth a description of all real and personal
property currently leased or otherwise occupied or used but not owned by Solid,
true, correct and complete copies of which leases and other agreements,
including all amendments and modifications thereto, have previously been
delivered to Prologic. Each of the leases is a valid and binding obligation of
Solid and neither Solid nor, to the best knowledge of Solid, the lessor
thereunder is in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, any such lease. Solid
enjoys peaceful and undisturbed possession of its interests under all such
leases. Except as set forth in the Solid Disclosure Schedule, Solid does not own
any real property or any interest therein. All personal property set forth in
the Solid Disclosure Schedule is owned by Solid and, except as set forth in the
Solid Disclosure Schedule, all property owned or leased by Solid and reflected
on the Solid Financial Statements or located on the premises of Solid, is in
good operating condition and repair, ordinary wear and tear excepted, is
suitable for the use to which it is put by Solid, is free from defects other
than minor defects that do not interfere with or detract from the use or value
thereof and is presently usable in the ordinary course of the operation of the
business of Solid. To the best knowledge of Solid, the buildings, structures,
improvements, assets and operations of Solid conform with all applicable
restrictive covenants, deeds, leases, and restrictions and all applicable
federal, state and local laws, ordinances, rules and regulations, including, but
not limited to, those relating to zoning and working conditions. Reference to
Solid in this Section 2.09 includes any of its Subsidiaries.
Section 2.10 Litigation. Except as disclosed in the Solid Disclosure
Schedule, there is no action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice ("Proceeding") pending or threatened in
writing, or to the best knowledge of Solid, threatened verbally, against,
relating to or affecting Solid or its Subsidiaries, or any of their respective
properties or assets, or any officer or director of Solid or any of its
Subsidiaries relating to, or arising from such person's activities as an officer
or director of Solid or any of its Subsidiaries, at law or in equity, before any
Governmental Body nor, to the best of Solid's knowledge, is there any basis for
commencing a Proceeding that could have a Material Adverse Affect on Solid or
any of its Subsidiaries. Neither Solid nor its Subsidiaries nor any of their
respective properties or
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assets is specifically by name subject to any currently existing order,
judgment, writ, decree or injunction. Except as disclosed in the Solid
Disclosure Schedule, neither Solid nor any of its Subsidiaries is subject to any
currently existing Proceeding by any Governmental Body.
Section 2.11 Absence of Changes. Since the Balance Sheet Date, except
as disclosed in the Solid Disclosure Schedule, the consolidated business of
Solid has been operated consistent with past practice and Solid has not engaged
in any activities or transactions which are outside its ordinary course of
business, including, without limitation, accelerating the collection of accounts
receivable or deferring payment of any liabilities. Further, there has not been
with regard to Solid or any of its Subsidiaries (a) any material adverse change
in the business, operations, properties, condition (financial or otherwise),
prospects, assets or liabilities (contingent or otherwise, whether due or to
become due, known or unknown); (b) any dividend declared or paid or distribution
made on capital stock, or any capital stock redeemed or repurchased; (c) any
incurrence of debt with a maturity greater than one year; (d) any salary, bonus
or compensation increases to any officers, employees or agents; (e) any pending
or, to the best knowledge of Solid, threatened litigation or disputes; or (f)
any other change in the nature of, or the manner of conducting, the business,
other than changes that neither have had, nor reasonably may be expected to
have, a Material Adverse Affect on Solid or any of its Subsidiaries.
Section 2.12 Undisclosed Liabilities; Commitments. Except as disclosed
in the Solid Disclosure Schedule, neither Solid nor any of its Subsidiaries has
any debts, guaranties, liabilities or obligations, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, and, to the best
knowledge of Solid, there is no basis for the assertion against Solid or any of
its Subsidiaries of any such debt, guaranty, liability or obligation, (a) that
were not accrued or reserved against in the Solid Financial Statements; (b) that
were incurred after the Balance Sheet Date, other than in the ordinary course of
business; or (c) that in the aggregate have or can reasonably be expected to
have a Material Adverse Affect on Solid or any of its Subsidiaries. Solid and
any of its Subsidiaries have in all material respects performed all contracts,
agreements and commitments to which any is a party, and there is not under any
such contracts, agreements or commitments any existing default or event of
default or event which with notice or lapse of time or both would constitute a
default.
Section 2.13 Environmental Matters. Except as disclosed in the Solid
Disclosure Schedule, to the best knowledge of Solid, Solid and each of its
Subsidiaries have duly complied with, their respective business, operations,
assets, equipment, leaseholds and other facilities are in compliance with, and
their respective subcontractors are in compliance with, the provisions of all
federal, state, local and applicable foreign environmental, health and safety
laws, codes and ordinances and all rules and regulations promulgated thereunder,
governing (a) air emissions, (b) discharges to surface water or ground water,
(c) solid or liquid waste disposal, (d) the use, storage, generation, handling,
transport, discharge, release, or disposal of toxic or hazardous substances or
wastes, or (e) other environmental, health or safety matters, including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act of 1980, 42 U.S.C. Sections 601 et seq., as amended, the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., as amended,
the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 et seq.,
as amended, the Clean Air Act, 42 U.S.C. Sections 7401 et seq., as amended,
the Occupational Safety and Health Act of 1970, as amended ("OSHA"), the Safe
Drinking Water Act, as
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amended, the Toxic Substances Control Act, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, and other environmental
conservation or protection laws, as well as similar environmental conservation
and protection laws of the foreign jurisdictions in which Solid or any of its
Subsidiaries have operations or facilities. There is no Proceeding pending or
threatened in writing or, to the best knowledge of Solid, threatened verbally,
against Solid or any of its Subsidiaries relating to the environment nor, to the
best knowledge of Solid, is there a basis for an assertion against Solid or any
of its Subsidiaries of any Proceeding.
Section 2.14 Employee Benefit and Retirement Plans. The Solid
Disclosure Schedule contains a list of all pension, bonus, profit-sharing, stock
option or employee welfare agreements or arrangements to which Solid is a party
or by which Solid is bound. All are in full force and effect. Except as set
forth in the Solid Disclosure Schedule, during the past five years, Solid has
not maintained or contributed to any defined benefit pension plans (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) or any multi-employer plans (as defined in Section 3(37)(A)
of ERISA). Each employee benefit plan (as defined in Section 3(3) of ERISA)
(each, an "Employee Benefit Plan" or "Plan") maintained for employees of Solid
to which Solid has contributed and any related trust agreement, annuity contract
or any other funding or implementing instrument complies currently in all
material respects, as to form, operation and administration, with the provisions
of ERISA, as amended, and all other applicable laws, rules and regulations and
with the Internal Revenue Code of 1986, as amended (the "Code"), where required
in order to be tax-qualified under Section 401(a) or 403(a) and 501(a) of the
Code, and, to the best knowledge of Solid, no event has occurred that will cause
disqualification of any such Plan under said Sections. All necessary
governmental approvals for the Employee Benefit Plans have been obtained; each
Employee Benefit Plan that is subject thereto meets the minimum funding
standards of Section 302 of ERISA, Section 412 of the Code and any other
applicable law, and no accumulated funding deficiency, whether or not waived,
exists with respect to any such Plan; each Employee Benefit Plan that is an
employee pension benefit plan (as defined in Section 3(2)(A) of ERISA) has been
duly authorized by the Board of Directors of Solid and a favorable determination
as to the qualification under the Code of each such employee pension benefit
plan has been made by the Internal Revenue Service. References to Solid in this
Section 2.14 include any of its Subsidiaries. The retirement plans of any
foreign Subsidiary comply with applicable foreign law in all material respects.
Section 2.15 Labor Matters. The Solid Disclosure Schedule contains a
list of all employment or consulting agreements, collective bargaining
agreements or other contracts with a labor union or other labor or employee
group, noncompetition agreements and confidentiality agreements binding on Solid
or any of its Subsidiaries and any of their respective employees. There are no
efforts presently being made or threatened by or on behalf of any labor union
with respect to the employees of Solid. Solid is in compliance with all federal,
state or other applicable laws, domestic or foreign, regarding employment and
employment practices, terms and conditions of employment and wages and hours,
and has not and is not engaged in any unfair labor practice. No unfair labor
practice complaint against Solid is pending or threatened in writing or,
threatened verbally, before the National Labor Relations Board or similar
foreign agency. There is no labor strike, dispute, slowdown or stoppage pending
or threatened against or involving Solid. No representation question exists
respecting the employees of Solid. No
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employment-related grievance or internal or informal complaint or liability with
respect to the termination of any employee, consultant or agent exists or, is
threatened. No arbitration proceeding arising out of or under any collective
bargaining agreement is pending and no claim therefor has been asserted. No
collective bargaining agreement is currently being negotiated by Solid, and
Solid has not experienced any material labor difficulty. To the best knowledge
of Solid, there has not been any adverse change in relations with employees of
Solid as a result of any announcement or consummation of the transactions
contemplated by this Agreement. Solid has received no notice that any employee
of Solid is in violation of any term of any employment contract, or any other
contract or agreement with or any restrictive covenant or any other common law
obligation to a former employer relating to the right of any such employee to be
employed by Solid because of the nature of the business conducted or to be
conducted by Solid or to the use of trade secrets or proprietary information of
others, and the employment of Solid's employees does not subject Solid to
liability in connection with such covenants or agreements. There is neither
pending nor, threatened, nor is there any basis for asserting, a material claim
against Solid or any of its Subsidiaries, or any of their respective employees,
based on sexual harassment or employment discrimination laws. There is neither
pending nor, to the best knowledge of Solid, threatened Proceedings with respect
to any contract, agreement, covenant or obligation referred to above nor, to the
best knowledge of Solid, is there any material basis for asserting the
foregoing. Except as set forth in the Solid Disclosure Schedule, Solid has not
entered into any severance or similar arrangement with any present or former
employee that will result in any obligation, absolute or contingent, of Prologic
or Solid, to make any payment to any former employee following termination of
employment. References to Solid in this Section 2.15 include each of its
Subsidiaries.
Section 2.16 Information for Filings. None of the information supplied
or to be supplied by Solid for inclusion, or included, in any documents to be
filed with any regulatory authority in connection with the transactions
contemplated hereby will, at the respective times such documents are filed with
any such regulatory authority, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading.
Section 2.17 Taxes. For purposes of this Agreement, "Tax or Taxes"
shall mean any federal, state, local, foreign or provincial income, gross
receipts, property, sales, use, license, franchise, employment, payroll,
withholding, alternative or added minimum, transfer or excise tax, or any other
governmental fee or other like assessment or charge, together with any interest
or penalties. All Taxes that are due and payable, other than those presently
payable without penalty or interest, have been timely paid, and Solid has timely
filed (and, through the Effective Date, will timely file) all federal, state,
foreign and other tax returns required by law to be filed by it. All such Tax
reports or returns are true, complete and correct in all material respects with
regard to Solid for the periods covered thereby. Solid is not delinquent in the
payment of any material Tax, there is no Tax deficiency asserted against Solid,
and, except as provided above, there is no unpaid assessment, deficiency or
delinquency in the payment of any of the Taxes of Solid. There are no Tax liens
upon any properties or assets of Solid. No Internal Revenue Service, state,
foreign or local, audit, investigation or Proceeding against Solid is pending
or, to the best knowledge of Solid, threatened, and the results of any completed
audits are properly reflected in the Solid Financial Statements. Solid has not
granted any extension to any taxing
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authority of the limitation period during which any Tax liability may be
asserted. All moneys required for the payment of taxes not yet due and payable
with respect to the operations of Solid through and including the Effective Date
have been approved, reserved against and entered upon the books and Solid
Financial Statements. All moneys required to be withheld by Solid from employees
or collected from customers for income taxes, social security and unemployment
insurance taxes and sales, excise and use taxes, and the portion of any such
taxes to be paid by Solid to governmental agencies or set aside in accounts for
such purpose have been approved, reserved against and entered upon the books and
Solid Financial Statements. References to Solid in this Section 2.17 include
each of its Subsidiaries. The Solid Disclosure Schedule contains a list of, and
Solid has provided Prologic with true copies of, the U.S., state and foreign
income tax returns for fiscal years ended September 30, 1998, 1997 and 1996 for
Solid and each of its Subsidiaries.
Section 2.18 Inventory. No item included in the inventories, materials
or supplies of Solid or any of its Subsidiaries is pledged as collateral or held
on consignment from others. All finished goods are standard quality goods
salable in the ordinary course of business.
Section 2.19 Proprietary Rights. Solid owns or validly licenses the
right to use all technology, proprietary information, know-how, ideas (patented
or unpatented), data, licenses, customer lists, processes, formulas, trade
secrets, telephone numbers, computer software, computer programs, designs,
inventions, trademarks, trademark registrations and applications therefor,
registered and common law copyrights, and registered copyright applications,
trade names (whether or not registered or registerable), service marks, service
mark registrations and applications therefor (collectively, the "Proprietary
Rights"), including but not limited to, any and all Proprietary Rights
previously owned by Advanced Mechtronic Services, Inc., necessary to conduct the
business of Solid as the business is presently being conducted. The Solid
Disclosure Schedule sets forth a complete and correct list (including, where
applicable, registration or application numbers and dates of filing, renewal and
termination) of all Proprietary Rights which have been protected by a filing or
registration with a Governmental Body. Solid shall have, after the Effective
Date, the exclusive right to use the Proprietary Rights as listed in the Solid
Disclosure Schedule necessary to continue to conduct the business of Solid as
the business is presently being conducted. No consent of any third party will be
required for the use of the Proprietary Rights by Solid after the Effective
Date. No claim or opposition has been asserted, or to the best knowledge of
Solid, threatened, by any person or entity to the ownership of or Solid's right
to use any of the Proprietary Rights or challenging or questioning the validity
or effect of any license or agreement relating thereto, and, to the best
knowledge of Solid, there is no basis for any such claim or assertion. Solid has
ownership of, or valid licenses to use all of, the Proprietary Rights. Each of
the Proprietary Rights is valid and subsisting, has not been cancelled,
abandoned or otherwise terminated. The Proprietary Rights owned by Solid are
owned free and clear of all liens, charges, or encumbrances. Use by Solid of the
Proprietary Rights will not, and the conduct of the business as presently
conducted does not, infringe on or violate the rights of any other person or
entity. No Proceedings have been instituted, are pending or are threatened that
challenge or oppose the rights of Solid with respect to any of the Proprietary
Rights. Solid has not received any notice or inquiry from any person or entity
of any alleged infringement by Solid. Solid has not given and is not bound by
any agreement of indemnification in connection with any Proprietary Rights or,
except for standard product
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warranties, any product or service sold or performed by Solid. Solid is not
aware of any infringement by others of its Proprietary Rights. Set forth in the
Solid Disclosure Schedule is a list of all confidentiality agreements entered
into by Solid relating to the Proprietary Rights and all such contracts are in
full force and effect. References to Solid in this Section 2.19 include each of
its Subsidiaries.
Section 2.20 Surety Obligations. Except as set forth in the Solid
Disclosure Schedule, neither Solid nor any of its Subsidiaries is obligated as
surety or indemnitor under any surety or similar bond or other contract issued
and none have entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any person or
entity.
Section 2.21 Records. The respective minute books, books of account,
stock record books and other records of Solid, all of which have been or will be
made available to Prologic, contain accurate and complete records of all
corporate actions of the shareholders and Board of Directors (and committees
thereof) during the periods of time in which such minute books were maintained.
Section 2.22 Compliance With Law; Conduct. Neither Solid nor any of its
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule or order of any foreign, federal, state or local government or
agency or any other Governmental Body, or any judgment, order, writ, injunction
or decree of any court or agency, applicable to its business or operation,
except where such violations or failure to comply would not have a Material
Adverse Affect on Solid or any of its Subsidiaries. Solid and its Subsidiaries
have all permits, licenses, authorizations, consents, approvals and franchises
from governmental agencies required to conduct their respective business as now
being conducted.
Section 2.23 Insurance. Contained in the Solid Disclosure Schedule is a
complete and accurate description of all insurance maintained with respect to
the assets, properties and business of Solid and each of its Subsidiaries. All
of the insurable properties of Solid and its Subsidiaries are insured for
Solid's benefit under valid and enforceable policies, issued by insurers rated A
or better by A.M. Best Company. All premiums and brokerage commissions owed by
Solid or its Subsidiaries have been paid or properly accrued on the Solid
Financial Statements.
Section 2.24 Receivables. All accounts receivables at June 30, 1999,
and all account receivables since that date have arisen in the ordinary course
of business for products delivered or services rendered. Solid is not aware of
any event or condition with respect to a specific customer that causes it to
believe that any such receivable will not be collected in full in due course
without resort to litigation and will not be subject to counter claim or setoff.
The reserves for doubtful accounts reflected on the Solid Financial Statements
have been determined in accordance with generally accepted accounting principles
and past practice consistently applied.
Section 2.25 Merger Expenses. The Solid Disclosure Schedule contains a
complete and accurate list of all paid and accrued merger-related expenses
through September 30, 1999,
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subject to Section 8.02, showing the allocation of such expenses between Solid
and the Owners. This list shall be updated as of the Effective Date as provided
in Section 5.16 hereof.
Section 2.26 Bank Accounts; Powers of Attorney. The Solid Disclosure
Schedule completely and accurately lists the name and address of each bank,
brokerage firm or other financial institution in which Solid or any of its
Subsidiaries has an account or possesses a safe deposit box and sets forth the
amount and nature of all cash and cash equivalents contained therein at June 30,
1999. The Solid Disclosure Schedule also lists the names of all persons
authorized to draw thereon, or to have access thereto or to authorize
transactions therein, and the names of all parties, if any, holding powers of
attorney from Solid or any of its Subsidiaries with respect thereto or with
respect to any other matter, and the account number of any such account. Neither
Solid nor any of its Subsidiaries maintains any securities or commodity trading
account or other brokerage account.
Section 2.27 Product and Service Warranties. Except as disclosed on the
Solid Disclosure Schedule, there is no claim against or liability of Solid or
any of its Subsidiaries on account of product or service warranties or with
respect to the manufacture, sale or lease of products or performance of
services, and there is no basis for any such claim on account of products
heretofore manufactured, sold or leased or services performed.
Section 2.28 Transactions with Affiliates. Except as set forth in the
Solid Disclosure Schedule, neither Solid nor any of its Subsidiaries has engaged
in any loans, leases, contracts or other transactions with any director, officer
or key employee of Solid, or any member of any such individual's immediate
family or any other Affiliate of Solid. As used in this Agreement, "Affiliate"
shall mean, with respect to any person or entity, any other person or entity
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such person or entity. A person or entity shall be deemed
to control another person or entity if such person or entity possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such other person or entity, whether through the ownership of voting
securities, by contract or otherwise. Immediately prior to the Effective Date,
all advances or loans made by Solid or any of its Subsidiaries to any
stockholder, officer, director, employee, Affiliate or agent of Solid or any of
its Subsidiaries will have been repaid in full, with accrued interest to the
date of repayment.
Section 2.29 Price and Customer Lists. The Solid Disclosure Schedule
sets forth (a) complete and accurate price lists of Solid and each of its
Subsidiaries used currently, and (b) a list of Solid's and each of its
Subsidiaries' current ten largest customers. No material customer listed in the
Solid Disclosure Schedule is seeking or presently intends to seek to terminate
its relationship or agreement with Solid and nothing has come to Solid's
attention to suggest that any such customer will not renew its existing
agreement with Solid on the expiration date thereof on terms at least as
favorable to Solid as those currently in effect.
Section 2.30 Corrupt Practices. Since the inception of Solid, there
have been no violations of the Foreign Corrupt Practices Act or any similar
state or federal statute relating to bribery or similar offenses by Solid or any
of its agents. Neither Solid nor any officer, director, employee or agent of
Solid (or any person acting on behalf of any of the foregoing) has since the
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date of Solid's incorporation, given or agreed to give any gift or similar
benefit of more than nominal value to any customer, supplier, governmental
employee or official, or any other person or entity who is or may be in a
position to help or hinder Solid or assist Solid in connection with any actual
or proposed transaction, which gift or similar benefit, if not given in the
past, would have a Material Adverse Affect, or which would subject Solid to
material penalty in any private or governmental Proceeding. References to Solid
in this Section 2.30 include each of its Subsidiaries.
Section 2.31 No Default. Except as set forth in the Solid Disclosure
Schedule, neither Solid nor any of its Subsidiaries is in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under (a) their respective Articles of Incorporation or Bylaws (or other
similar charter documents); (b) any mortgage, loan, agreement, contract,
arrangement, lease, lease purchase, indenture or other evidences of indebtedness
for borrowed money or other instrument to which Solid is now a party or by which
Solid or any of its assets is bound; or (c) any judgment, order, writ,
injunction, or decree, of any court, arbitrator, agency, official, authority or
other Governmental Body.
Section 2.32 Additional Items Reflected in the Solid Disclosure
Schedule. In addition to items and information specifically referred to in
previous sections of this Article 2, the Solid Disclosure Schedule contains a
complete and accurate list or brief description of (a) all current or pending
contracts or commitments not previously required to be described in the Solid
Disclosure Schedule, written or otherwise, between Solid and any party that
involve, in the aggregate, the payment or receipt by Solid of more than $25,000,
or which otherwise are material to Solid; (b) any compensation, noncompetition,
severance, consulting, or confidentiality agreements between Solid and any of
its executive officers for the last two fiscal years and at present not
previously required to be described in the Solid Disclosure Schedule; (c) the
number and job category of all current employees of Solid, including with
respect to key employees, their names, date of employment, current compensation
(including sales commissions) and date and amount of last increase in
compensation; (d) a list of all leases, contracts or agreements for which
consents of any private persons or public authorities would be required (citing
the section(s) thereof requiring such consents) for the consummation of the
transactions contemplated hereby, or for the preventing of any termination of
any material right, privilege, license or agreement of, or any loss or
disadvantage to, Solid or Prologic upon consummation of the transactions
contemplated hereby; (e) all governmental licenses and permits relating to the
operations of Solid and any of its Subsidiaries; and (f) any arrangements or
agreements of Solid with its competitors. References to Solid in this Section
2.32 include each of its Subsidiaries.
Section 2.33 Copies of Documents; Accuracy of Information Furnished.
Solid has delivered or made available to Prologic complete and accurate copies
of all documents listed on the Solid Disclosure Schedule. All of the exhibits
and schedules provided by Solid are true, correct and complete in all material
respects and no written representation, warranty or statement made by Solid in
or pursuant to this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
such representation, warranty or statement not misleading to Prologic which is
seeking complete and accurate information with respect to Solid.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PROLOGIC AND SRI
Except as set forth in the disclosure schedule delivered to Solid by
Prologic pursuant to this Agreement (the "Prologic Disclosure Schedule"),
Prologic hereby represents and warrants to Solid and the Owners as follows,
which representations and warranties are made as of the date hereof and as of
the Effective Date and shall survive the Effective Date regardless of what
investigations, if any, Solid or any of the Owners shall have made prior hereto:
Section 3.01 Organization; Qualification. Each of Prologic and SRI is a
corporation duly organized, validly existing and in good standing under the laws
of the States of Arizona and Texas, respectively. Each has full corporate power
and authority to own and lease all of the properties and assets it now owns and
leases and to carry on its business as now being conducted. Prologic is duly
qualified as a foreign corporation and is in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure so to qualify would not have a Material Adverse Affect
on Prologic.
Section 3.02 Authority Relative to this Agreement. Each of Prologic and
SRI has full corporate power and authority to execute, deliver and perform this
Agreement and, subject to approval by the shareholders of SRI and Solid, to
consummate the transactions contemplated hereby. The execution and delivery by
Prologic and SRI of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by the Board of
Directors of SRI and Prologic. Except for the approval of the Merger by the sole
shareholder of SRI, no other corporate actions on the part of SRI is necessary
with respect thereto. Except for the shareholder approval required as set forth
in Section 3.05, no other corporate actions on the part of Prologic is necessary
with respect thereto. Prologic and SRI will take or cause to be taken all
corporate action that is necessary for each to execute and file the Articles of
Merger with the Secretary of State of Texas, and to complete the transactions to
be completed by SRI pursuant to this Agreement. This Agreement has been duly and
validly executed and delivered by Prologic and SRI and constitutes a legal,
valid and binding obligation of both, enforceable against each in accordance
with its terms.
Section 3.03 Capitalization. The authorized capital stock of Prologic
consists of: (a) 10,000,000 shares of Prologic Common Stock, no par value per
share; and (b) 1,000,000 shares of Prologic Preferred Stock, no par value per
share, of which 16,667 are designated Series A, 8% Cumulative Convertible
Preferred Stock, and 150,000 are designated Series B, 10% Cumulative Convertible
Preferred Stock. As of August 31, 1999, 8,221,321 shares of Prologic Common
Stock, 16,667 shares of Series A Preferred Stock and 72,000 shares of Series B
Preferred Stock are validly issued and outstanding, fully paid and
nonassessable. Prologic has also entered into a Stock Purchase and Merger
Agreement, dated as of July 9, 1999, with Sunburst Acquisitions IV, Inc.
("Sunburst") pursuant to which Sunburst has the right to acquire up to 6,171,050
shares of Prologic Common Stock. As of August 31, 1999, Sunburst had acquired
3,459,972 shares of Common Stock, which amount is included in the number of
outstanding shares set forth above.
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Section 3.04 Validity of Shares to be Issued. The shares of Prologic
Series C Convertible Preferred Stock to be issued to the stockholders of Solid
as a result of the Merger have been duly authorized and, upon delivery thereof
pursuant to the provisions of this Agreement, will be validly issued and
outstanding, fully paid and non-assessable, not subject to any preemptive
rights, and issued in compliance with applicable securities laws. Such shares
will be "restricted securities" and, when delivered at the Effective Date, will
not be registered with the SEC under the Securities Act of 1933, as amended.
Section 3.05 Authorization of Additional Common Stock. No later than
December 31, 1999, Prologic will cause a shareholders' meeting to be held to
authorize an amendment to the Company's Articles of Incorporation to increase
Prologic's authorized common stock to provide sufficient shares to permit the
conversion of the Prologic Series C Convertible Preferred Stock as set forth in
Section 1.02 hereof. If for any reason the authorized shares of Prologic's
common stock is not increased in the manner set forth in this Section 3.05 prior
to the eligibility of conversion of the Prologic Series C Convertible Preferred
Stock, Prologic will provide to the Owners other consideration of equal value,
as mutually agreed by the Owners and Prologic.
Section 3.06 Governmental Consents and Approvals. Except as set forth
on the Prologic Disclosure Schedule, the execution, delivery and performance by
Prologic and SRI of this Agreement and the consummation of the transactions
contemplated hereby by Prologic and SRI require no consent, approval, order or
authorization of, action by or in respect of, or registration or filing with,
any Governmental Body, court, agency, or authority, other than (a) the filing of
the Articles of Merger with the Secretary of State of Texas, (b) any applicable
filings with and consents and/or approvals of the SEC and state securities
commissions under state securities laws and (c) consents, permits,
authorizations, notifications or filings the failure of which to obtain or make
would have a Material Adverse Affect on Prologic or have a Material Adverse
Affect the ability of Prologic to perform its obligations set forth herein or to
consummate the transactions contemplated hereby.
Section 3.07 No Violations. Except as set forth on the Prologic
Disclosure Schedule, the execution, delivery and performance of this Agreement
by Prologic, the consummation by Prologic and SRI of the transactions
contemplated hereby or compliance by Prologic and SRI with any of the provisions
hereof does not and will not (a) conflict with or result in any breach or
violation of any provision of the Articles of Incorporation or Bylaws of
Prologic, (b) result in a default, or give rise to any right of termination,
cancellation or acceleration, or loss of any material benefit (with or without
the giving of notice or lapse of time or both), or require the consent,
approval, waiver or other action of any person, under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, trust
(constructive or otherwise) agreement, lease or other instrument or obligation
to which Prologic is a party or by which Prologic or any of its Subsidiaries may
be bound other than that which has been or will be obtained, (c) result in the
creation or imposition of any claim, lien, pledge, security interest,
obligation, restriction or other encumbrance on any of the property of Prologic,
or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Prologic.
Section 3.08 Financial Statements; SEC Reports. The consolidated
financial statements, financial statement schedules and notes to such financial
statements and schedules of
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Prologic ("Prologic Financial Statements") contained in Prologic's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 1999, as filed with the SEC
("Prologic Form 10-KSB") and any Prologic Quarterly Reports on Form 10-QSB as
filed with the SEC after June 30, 1999 ("Prologic Form 10-QSB") is, or will be,
complete and correct and were, or will be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis except as noted
therein, and fairly present the information purported to be shown therein. All
Prologic Financial Statements have been prepared from the books and records of
Prologic and its subsidiaries, which accurately and fairly reflect the
transactions and dispositions of the assets of Prologic and its subsidiaries.
Neither Prologic nor any of its subsidiaries had any material liabilities,
contingent or otherwise, whether due or to become due, known or unknown, other
than as indicated on the latest balance sheets ("Latest Prologic Balance Sheet")
included in the Prologic Financial Statements. Prologic and its subsidiaries
have adequately funded all accrued employee benefit costs and such funding is
reflected in the balance sheets included in the Prologic Financial Statements.
Each of Prologic's Form 10-KSB, Prologic's Form 10-QSB, and Prologic's other
public filings with the SEC are collectively referred to as the "Prologic
Filings."
Section 3.09 Litigation. Except as disclosed in the Prologic Filings or
in the Prologic Disclosure Schedule, there is no material Proceeding pending or,
to the knowledge of Prologic, threatened against, relating to or affecting
Prologic, any of its subsidiaries or any of their respective properties or
assets or any officer or director of Prologic or its subsidiaries relating to
Prologic or its subsidiaries, at law or in equity, before any Governmental Body
nor, to the knowledge of Prologic, is there any basis for asserting the
foregoing. Except as disclosed in the Prologic Disclosure Schedule, Prologic is
not subject to any material Proceeding by any Governmental Body.
Section 3.10 Information of Filings. None of the information supplied
or to be supplied by Prologic for inclusion or included in any documents to be
filed with any regulatory authority in connection with the transactions
contemplated hereby will, at the respective time such documents are filed with
such regulatory authority, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein in light of the circumstances under which they were made, not
misleading.
Section 3.11 Copies of Documents; Accuracy of Information Furnished.
Prologic has delivered or made available to Solid complete and accurate copies
of all documents listed on the Prologic Disclosure Schedule. All of the exhibits
and schedules provided by Prologic are true, correct and complete in all
material respects and no written representation, warranty or statement made by
Prologic in or pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty or statement not misleading to
Solid or any of the Owners, each of which is seeking complete and accurate
information with respect to Prologic and its Subsidiaries.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OWNERS
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Except as set forth in the disclosure schedule delivered to Prologic
and SRI by Owners pursuant to this Agreement (the "Owners Disclosure Schedule"),
Owners hereby represent and warrant to Prologic and SRI as follows, which
representations and warranties are made as of the date hereof and as of the
Effective Date and shall survive the Effective Date regardless of what
investigations, if any, Prologic or SRI shall have made thereof prior thereto:
Section 4.01 Title to Shares. Immediately prior to the Effective Date,
collectively, Owners shall be the lawful owners and holders of an aggregate of
1,000,000 shares of Solid Common Stock, and, on the Effective Date, shall hold
all such shares. Each Owner's shares of Solid Common Stock are free and clear of
all liens and encumbrances of any kind.
Section 4.02 Authority Relative to this Agreement. This Agreement has
been duly and validly executed and delivered by the Owners and constitutes the
legal, valid and binding obligation of the Owners, enforceable against them in
accordance with its terms, except as enforcement hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, moratorium or other similar laws
affecting enforcement of creditors' rights generally. The execution, delivery
and performance by the Owners of this Agreement and the consummation of the
transactions contemplated hereby will not violate any provision of any law to
which the Owners are subject nor result in a breach or violation by the Owners
of any of the terms or provisions of, or constitute a default by the Owners
under any note, bond, mortgage, indenture, license, trust (constructive or
other), agreement, lease, or other instrument or obligation to which the Owners
are a party or by which the Owners are bound or by which any of the Owners may
be organized. The Owners are not a party to, or subject to, or bound by, any
currently existing order, judgment, injunction, writ or decree of any court or
governmental authority, or any arbitration award that would restrict performance
by the Owners of this Agreement or such other documents or instruments to be
executed or delivered by the Owners in conjunction herewith.
Section 4.03 Transfers to Solid. All assets, liabilities and properties
belonging to any of the Owners, any Solid Subsidiary, or any affiliated
partnership or limited liability company, that are to be transferred to Solid
between the date of this Agreement and the Effective Date are set forth on the
Owners Disclosure Schedule. Except as set forth in the Owners Disclosure
Schedule, such assets and properties will be transferred free and clear of all
liens and encumbrances of whatever kind and nature. The liens and encumbrances,
if any, on such assets or property reflected in the Owner's Disclosure Schedule
are, and at the Effective Date will be, the only liens or encumbrances relating
to such assets or property. The procedures for completing the transfers are set
forth on the Owners Disclosure Schedule.
Section 4.04 Certain Transactions or Arrangements. Except for
agreements and transactions entered into in connection with this Agreement and
except as set forth in the Owners Disclosure Schedule, the Owners are not
presently, directly or indirectly, a party to any transaction with Solid,
including without limitation: (a) any contract, agreement, understanding or
commitment or other arrangement providing for the furnishing of services by,
rental of real or personal property from or otherwise requiring payments to the
Owners or any Affiliate of the Owners; (b) any contract, agreement,
understanding, commitment or other arrangement relating to the employment of the
Owners by the Company, or any bonus, deferred compensation,
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pension, profit sharing, stock option, employee stock purchase, retirement or
other employee benefit plan; or (c) any loans or advances to or from Solid.
Section 4.05 Investments in Competitors. Except as set forth in the
Owners Disclosure Schedule, the Owners do not own, directly or indirectly, any
interest or have any investment in any corporation, business or other person or
entity that is a competitor or potential competitor of, or that otherwise
directly or indirectly does business with, Solid or affiliated entities.
Section 4.06 Solid's Representations. The Owners have reviewed the
representations, warranties and statements made by Solid in this Agreement and,
to the best knowledge and belief of each of them, such representations and
warranties do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make any such representation, warranty or
statement not misleading.
Section 4.07 Investment Representation. Each Owner is receiving shares
of the Prologic Series C Convertible Preferred Stock for investment for the
Owner's own account, not on behalf of others and not with a view to sell or
otherwise distribute such shares. Each Owner acknowledges that such shares of
Prologic Series C Convertible Preferred Stock have not been registered under the
Securities Act of 1933, as amended, or under any state securities laws, and
therefore, cannot be resold after the Effective Date unless registered under the
Securities Act and applicable state securities laws or unless an exemption from
registration is available and, as a result, each Owner must bear the risk of an
investment in the Prologic Series C Convertible Preferred Stock for an
indefinite period of time. The financial condition of each Owner is currently
adequate to bear the economic risk of an investment in the Prologic Series C
Convertible Preferred Stock. Each Owner has sufficient knowledge and experience
in investment and business matters to understand the economic risk of such an
investment and the risk involved in a commercial enterprise such as Prologic.
Each Owner has received and carefully read the Prologic Filings. Each Owner has
had an opportunity to ask questions of, and receive answers from officers of
Prologic, concerning Prologic and the Prologic Series C Convertible Preferred
Stock and to obtain any additional information which each Owner reasonably
requested and is material to its investment decision.
Section 4.08 Copies of Documents; Accuracy of Information Furnished.
The Owners have delivered or made available to Prologic and SRI complete and
accurate copies of all documents listed in the Owners Disclosure Schedule. All
the exhibits and schedules provided by the Owners are true, correct and complete
in all material respects and no written representation, warranty or statement
made by the Owners in or pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make such representation, warranty or statement not misleading
to Prologic or SRI who are seeking complete and accurate information with
respect to the Owners.
Section 4.09 Liabilities of Advanced Mechtronic Services, Inc. Solid
shall not be liable for any liabilities of Advanced Mechtronic Services, Inc.
incurred prior or subsequent to the Effective Date.
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ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.01 Conduct of Business of Solid. After the date hereof and
prior to the Effective Date, Solid shall conduct its operations according to its
normal course of business to preserve intact its business organization, use
reasonable efforts to keep available the services of their officers and
employees, use reasonable efforts to preserve and maintain satisfactory
relationships and goodwill with licensors, suppliers, dealers, customers and all
others having business relationships with them, pay the suppliers, vendors and
taxing authorities of Solid in accordance with its usual business practices and
in a timely fashion and continue to service and maintain all of its assets in a
manner consistent with past practice.
Section 5.02 Forbearances by Solid. Except as contemplated by this
Agreement, neither Solid nor any of its Subsidiaries shall, after the date
hereof and prior to the Effective Date, without the prior written consent of
Prologic;
(a) issue additional capital stock or any additional securities or
obligations convertible into or exchangeable for, or giving any person any right
to acquire, capital stock;
(b) acquire any shares of its capital stock;
(c) declare or pay any dividend;
(d) issue any stock options, stock appreciation rights, warrants or any
other rights relating to their respective securities;
(e) sell (i) any assets not in the ordinary course of business or (ii)
any assets whether or not in the ordinary course of business for an amount
greater than $25,000 except for invoiced sales of inventory previously disclosed
in writing to Prologic;
(f) issue or incur additional debt for borrowed money;
(g) mortgage, pledge or otherwise encumber any of their respective
properties or assets;
(h) make any investment in third parties or assets of a capital nature
either by purchasing stock, securities or assets, contributing to capital,
transferring property or otherwise making any investment;
(i) make any commitments in excess of $25,000 for capital expenditures
or other commitment or transaction;
(j) increase in any manner, whether by bonus or otherwise, the
compensation of any of their respective officers or employees;
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(k) amend their respective Articles of Incorporation or Bylaws (or
similar charter documents) except as may be necessary to facilitate the
consummation of the transactions contemplated by this Agreement;
(l) undertake any action that will reduce Solid's working capital, as
determined by generally accepted accounting principles, to an amount lower than
the working capital of Solid at June 30, 1999, and previously furnished to
Prologic; or
(m) enter into any agreement to do any of the things described in
clauses (a) through (l) above.
Section 5.03 No Solicitation. Solid, its officers and directors and the
Owners will not, nor permit any of their respective officers, employees, agents
or representatives (including, without limitation, investment bankers, attorneys
and accountants) to, directly or indirectly (a) solicit, initiate or encourage
submission of proposals or offers by, or (b) furnish any information with
respect to or otherwise cooperate in any way with, or participate in any
discussions or negotiations with, any corporation, partnership, person or other
entity or group ("Person") with respect to any proposal regarding the
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Solid, or any business combination with Solid. Solid and/or
the Owners shall promptly notify Prologic if any such proposal or offer, or any
inquiry or contact with any Person with respect thereto, is made and shall, in
any such notice, indicate in reasonable detail the identity of the offeror and
the terms and conditions of any such proposal.
Section 5.04 Investigation of Business and Properties. Each party
hereto may make or cause to be made such investigation of the business and
properties of the other parties and of their financial and legal condition as
such party deems appropriate or advisable to familiarize himself/itself
therewith, provided such investigation shall not unreasonably interfere with the
normal operations of the other parties.
Section 5.05 Confidentiality. Each party agrees with respect to all
technical, commercial and other information that is furnished or disclosed by
the other parties, and stamped "Confidential" or identified as such in writing
following disclosure, including, but not limited to, information regarding such
party's (and its subsidiaries' and affiliates') organization, personnel,
business activities, customers, subscribers, policies, assets, finances, costs,
sales, revenues, technology, rights, obligations, liabilities and strategies
(the "Information"), that, unless and until the transactions contemplated hereby
shall have been consummated, (a) such Information is confidential and/or
proprietary to the furnishing/disclosing party and entitled to and shall receive
treatment as such by the receiving party; (b) the receiving party will hold in
confidence and not disclose or use (except in respect of the transactions
contemplated hereby) any such Information, treating such Information with the
same degree of care and confidentiality as it accords its own confidential and
proprietary information; provided, however, that the receiving party shall not
have any restrictive obligation with respect to any Information that (i) is
contained in a printed publication available to the general public, (ii) is or
becomes publicly known through no wrongful act or omission of the receiving
party, (iii) is known by the receiving party without any proprietary
restrictions by the furnishing/disclosing party at the time of receipt of such
Information, (iv) the use of which is necessary or appropriate in making any
filing or obtaining
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any consent or approval required for consummation of the Merger, or (iv) is
required to be furnished or used in connection with any Proceedings; and (c) all
such Information furnished to a party by another, unless otherwise specified in
writing, shall remain the property of the furnishing/disclosing party and, in
the event this Agreement is terminated, shall be returned to it, together with
any and all copies made thereof, upon written request for such return by it
(except for documents submitted to a governmental agency with the consent of the
furnishing/disclosing party or upon subpoena and that cannot be retrieved with
reasonable effort), and each party shall confirm in writing to the others
compliance with any such request. Each party hereto acknowledges that the remedy
at law for any breach by a party of its obligations under this section is
inadequate and that the other parties shall be entitled to equitable remedies,
including injunctive relief, in the event of breach by any other party.
Section 5.06 Public Announcements. Prologic and Solid shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this Agreement or transactions
contemplated hereby, shall not issue any such press release or make any such
public statement prior to such consultation, and shall consult with each other
as to form and substance of other public disclosures related thereto; provided
however, that nothing contained herein shall prohibit either party from making
any disclosure that is required by law. None of the Owners shall make any
announcement with respect to the Merger, this Agreement or transactions
contemplated hereby, without the express written consent of Prologic.
Section 5.07 Agreement to Consummate. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use reasonable
efforts to do all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated by this Agreement, including, but not
limited to, the obtaining of all consents, authorizations, orders and approvals
of any governmental commission, board or other regulatory body required in
connection therewith and initiating or defending any legal action that is
necessary or appropriate to permit the transactions contemplated hereby to be
consummated. Without limiting the foregoing, none of the Owners will take any
action to exercise any statutory appraisal rights that they may have with
respect to the Merger. At any time after the Effective Date, if any further
action is necessary, proper or advisable to carry out the purposes of this
Agreement, then, as soon as is reasonably practicable, each party to this
Agreement shall take, or cause its proper officers to take, such action. No
party to this Agreement shall take or cause to be taken any action that would
cause the representations or warranties expressed herein to be untrue or
incorrect on the Effective Date.
Section 5.08 Solid Shareholders' Approval. Within ten business days
after the execution of this Agreement by Solid and Owners, Solid shall hold a
meeting of its shareholders for the purpose of voting upon the Merger. In
connection with such meeting, Solid shall deliver by mail all required notices
and other materials to its shareholders, and the Board of Directors of Solid
shall recommend approval of the matters related to the Merger to be voted upon
at such shareholder meeting and shall use its best efforts to obtain such
shareholder approval. In lieu of such meeting, such approval may be in the form
of the unanimous written consent of the shareholders of Solid.
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Section 5.09 SRI Shareholder's Approval. Within ten business days after
the execution of this Agreement by SRI, SRI shall obtain the written consent of
its sole shareholder to the Merger.
Section 5.10 Notice. Solid shall promptly give notice to Prologic and
the Owners upon becoming aware of the occurrence or failure to occur, or the
impending or threatened occurrence or failure to occur, of any event that would
cause or constitute, any of Solid's representations or warranties being or
becoming untrue. Prologic will promptly give notice to Solid and the Owners upon
becoming aware of the occurrence or failure to occur, of any event that would
cause or constitute, any of Prologic's representations or warranties being or
becoming untrue. Owners will promptly give notice to Prologic and Solid upon
becoming aware of the occurrence or failure to occur, or the impending or
threatened occurrence or failure to occur, of any event that would cause or
constitute, any of the Owners' representations or warranties being or becoming
untrue.
Section 5.11 Representation, Warranties, and Agreements; Survival. The
representations, warranties and indemnities of Solid, Prologic and Owners,
contained in this Agreement and any related documents, shall survive for a
period of two years from the Effective Date. At the end of the survival period
of the representations and warranties of Solid and Owners, Prologic shall,
without further action, be deemed to have fully released Solid and Owners from
any and all responsibility with respect to a breach of such representations and
warranties (including any obligation under the indemnification provisions
contained in Section 5.12) unless during such survival period Prologic shall
have given Solid and Owners notice of the nature and reasonable particulars
under the then existing circumstances of any claimed breach by Solid and/or
Owners. At the end of the survival period of representations and warranties of
Prologic, Owners shall, without further action, be deemed to have fully released
Prologic from any and all responsibility with respect to a breach of such
representations and warranties (including any obligation under the
indemnification provisions contained in Section 5.12) unless during such
survival period Owners shall have given Prologic notice of the nature and
reasonable particulars under the then existing circumstances of any claimed
breach by Prologic and the basis therefor. The obligations, covenants and
agreements of Solid, Owners and Prologic contained in this Agreement and any
related documents shall survive the Closing. The representations, warranties,
obligations, covenants, indemnities and agreements shall not be affected by, and
shall remain in full force and effect notwithstanding, any investigation at any
time made by or on behalf of any party hereto or any information any party may
have with respect thereto.
Section 5.12 Indemnification. Prologic and the Owners shall be subject
to the indemnification obligations set forth in this Section 5.12.
Notwithstanding any other provision of this Agreement, neither Prologic nor the
Owners shall be liable for any such indemnification regarding any single claim,
loss, expense, obligation or other liability that does not exceed $50,000;
provided, however, that when the aggregate amount of all such claims, losses,
expenses, obligations and liabilities not exceeding $50,000 each reaches a total
of $50,000 (the "Indemnification Threshold"), Prologic or the Owners, as the
case may be, shall be responsible for satisfying such indemnification obligation
as provided below.
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(a) Owners Indemnify Prologic. Provided the Indemnification Threshold
is met, Owners, jointly and severally, shall indemnify and hold Prologic
harmless from and against, and promptly reimburse Prologic for, any and all
loss, expense, damage, deficiency, liability or obligation, including
investigative and settlement costs and attorneys' fees (collectively, "Claims"),
arising out of or in connection with any breach of representation or warranty of
Solid or Owners contained in Article 2 hereof or in any certificate delivered
pursuant hereto, regardless of whether Prologic relied upon the truth of such
representation or warranty or had any knowledge of any breach thereof. Each
Owner, individually, shall indemnify and hold Prologic harmless from and
against, and promptly reimburse Prologic for any Claim arising our out of or in
connection with any breach of representation or warranty of Owner contained in
Article 4 hereof or in any certificate delivered pursuant hereto, regardless of
whether Prologic relied upon the truth of such representation or warranty or had
knowledge of any breach thereof. In computing the amount to be paid by Owners
under this Section 5.12(a), there shall be deducted an amount equal to any tax
benefits actually received by Prologic, Solid or any of its Subsidiaries, taking
into account the income tax treatment of the receipt of such indemnity payment.
(b) Prologic Indemnifies Owners. Provided the Indemnification Threshold
is met, Prologic shall indemnify and hold each of the Owners harmless from and
against, and promptly reimburse each of the Owners for, any and all loss,
expense, damage, deficiency, liability or obligation, including investigative
and settlement costs and attorneys' fees, arising out of or in connection with
any breach of representation or warranty of Prologic contained in Article 3
hereof or in any certificate delivered pursuant hereto, regardless of whether
any of the Owners relied upon the truth of such representation or warranty or
had any knowledge of any breach thereof.
(c) Procedure for Indemnification. Upon receipt by a party entitled to
indemnification hereunder (the "Indemnified Party") of notice of any situation,
event or occurrence that might give rise to a claim for indemnification of such
Indemnified Party against any of another party pursuant to this Section 5.12,
the Indemnified Party shall give prompt written notice thereof to the other
party (an "Indemnifying Party"), indicating with reasonable specificity the
nature and amount of such indemnification. Failure to give any notice provided
under this Section 5.12(c) shall in no way be deemed a forfeiture of the
Indemnified Party's rights to be indemnified under Section 5.12. A claim for
indemnity may, at the option of the Indemnified Party, be asserted as soon as
any situation, event, or occurrence has been noticed by the Indemnified Party,
regardless of whether actual harm has been suffered or out-of-pocket expenses
incurred. Disputed claims will be resolved pursuant to Section 5.13.
(d) Offset. Prologic shall be entitled to offset any amount to which it
is entitled to be indemnified pursuant to this Section 5.12 from any amounts due
the Owners as a result of a Consideration Adjustment pursuant to Section 1.02
hereof. Prologic and Solid understand and agree that if any Claims giving rise
to indemnification affect Adjusted EBITDA at September 30, 2000, then Adjusted
EBITDA will be revised prior to finally determining the Consideration
Adjustment.
Section 5.13 Resolution of Disputed Claims under Section 5.12.
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Any controversy, claim or dispute arising out of or relating to any
indemnification under Section 5.12, which cannot be resolved through good-faith
negotiation, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The award of the arbitrator shall be final and binding.
(a) Procedures; Location of Arbitration. Whenever possible, the
Expedited Procedures of the Commercial Arbitration Rules shall be followed. In
the event that the Expedited Procedures are not practicable, the arbitration
shall be held before a single arbitrator in accordance with the Regular
Procedures of the Commercial Arbitration Rules. The arbitration shall be held at
the Phoenix Regional offices of the American Arbitration Association, or at such
other location as may be mutually agreed by the Parties.
(b) Award; Fees and Costs. The award shall contain the arbitrator's
reasoned findings and conclusions, and shall specify in reasonable detail the
nature of the claims and the arbitrator's determination as to the amount
thereof. The arbitrator shall apportion among the Parties the costs, fees and
expenses of arbitration, including without limitation attorneys' fees and costs,
in such amounts as the arbitrator deems reasonable and proper.
Section 5.14 Tax Return Filings.
(a) Owners' Obligations. Owners shall file, or cause to be filed, on a
timely basis and at their sole cost and expense, all tax returns, tax reports or
similar filings required to be filed by any governmental entity or regulatory
body with respect to Solid and its Subsidiaries for tax periods ending prior to
or on September 30, 1999. Prologic, and Surviving Corporation agree to make the
books and records of Solid available to the Owners at reasonable times and upon
reasonable notice for purposes of complying with this Section 5.14(a).
(b) Prologic Obligations. Prologic and its subsidiaries shall file, or
cause to be filed, on a timely basis and at their sole cost and expense all tax
returns, tax reports or similar filings required to be filed by any governmental
entity or regulatory body with respect to Solid and its Subsidiaries for tax
periods ending after September 30, 1999.
Section 5.15 Delivery of Disclosure Schedules. Prologic, Solid and the
Owners agree that the Prologic Disclosure Schedule, the Solid Disclosure
Schedule and the Owners Disclosure Schedule shall be delivered no later than
September 30, 1999. Prologic, Solid and the Owners further agree that no later
than the Effective Date, they will provide amendments to any such schedules to
reflect any changes that have occurred between September 30, 1999 and the
Effective Date.
Section 5.16 Employee Matters. Prologic agrees that it will either
maintain all current Solid employee benefit programs or will replace one or more
of such programs with a substantially similar employee benefit program.
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Section 5.17 Solid Employee Stock Option Plan. On the Effective Date,
any right of a Solid employee to purchase Solid Common Stock under the Solid
Employee Stock Option Plan shall be converted into a right to purchase the same
number of shares of Prologic Common Stock under the Prologic 1994 Stock Option
Plan (the "Prologic SOP"). The terms and conditions of the Prologic SOP shall
control such employee's participation in the stock option program, with the
exception that (i) Prologic agrees to maintain the same vesting schedule for
such employees as set forth in the Solid Employee Stock Option Plan; and (ii)
the exercise price for the Prologic Common Stock issued to such employees shall
be determined in good faith by the Compensation and Stock Option Committee of
Prologic's Board of Directors, which price shall be consistent with the exercise
price for Prologic employees.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING AND POST-CLOSING COVENANTS
Section 6.01 General Conditions. Consummation of the Merger shall be
subject to the fulfillment at the Effective Date of each of the following
conditions:
(a) No Injunction. No court having jurisdiction shall have issued, to
the knowledge of Prologic, Solid or Owners, an injunction preventing the
consummation of the Merger that shall not have been stayed or dissolved at the
Effective Date.
(b) Securities Law. Prologic shall have filed all applicable federal
and state securities law notices of issuance of Prologic Series C Convertible
Preferred Stock in connection with the Merger.
(c) Corporate and Other Actions. All actions taken or to be taken in
connection with the transactions contemplated hereby, and all documents incident
thereto shall be reasonably satisfactory in form and substance to the parties
and their counsel, and the parties and their counsel shall have received all
such counterpart originals or certified or other copies of such documents as the
parties or their counsel may reasonably request.
(d) Articles of Merger. SRI and Solid shall have executed and filed
with the Secretary of State of Texas Articles of Merger in a form mutually
agreed upon by the Parties.
(e) Appointment of Owners to Board of Surviving Corporation. Prologic
agrees that William H. Cruise, III, Kenneth B. Cruise and John W. Schauweker
shall each be appointed to the Board of Directors of the Surviving Corporation
for terms that will extend, at a minimum, through September 30, 2000.
(f) Employment of John W. Schauweker and Other Key Employees. Prologic
and SRI agree to offer John W. Schauweker employment with the Surviving
Corporation as its President, and, prior to the effective Date, to enter into an
employment contract with Mr. Schauweker on terms mutually agreed upon by
Prologic and Mr. Schauweker. At the Effective Date, the Parties also agree that
Prologic may offer employment
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contracts to certain other key employees that Prologic, in its sole discretion,
determines are essential to the operations of Solid, as continued by the
Surviving Corporation. Any severance or other termination compensation due any
employees as a result of not continuing in the employ of Surviving Corporation
shall be paid by the Surviving Corporation.
(g) Non-Competition Agreements. The Owners agree to execute
non-competition agreements in a form mutually agreed upon by Prologic and the
Owners.
(h) Extension of Maturity Date of William H. Cruise, III Promissory
Note. Solid and William H. Cruise, III acknowledge that Mr. Cruise and his wife,
Liesel Cruise, hold a promissory note from Solid in the original amount of
$115,000, with principal balance of $100,000 as of September 8, 1999 (the
"Cruise Note"). To help ensure a smooth transition in Solid's post-merger
financing, Solid and Mr. Cruise agree to extend the maturity of the Cruise Note
to such time as may, in good faith, be required by Prologic for it to
restructure Solid's financing, but in no event shall such extension be later
than December 31, 1999. Solid and Mr. Cruise also agree to ensure that the
Cruise Note remains subordinate to all current institutional financing of Solid
or Surviving Corporation or Prologic.
Section 6.02 Conditions to Closing in Favor of Solid. Consummation of
the Merger shall be subject to the fulfillment, to the satisfaction of Solid, or
written waiver, at or before the Effective Date, of each of the following
conditions:
(a) Copies of Resolutions of Prologic and SRI. Prologic shall have
furnished Solid with copies of resolutions duly adopted by the Board of
Directors and stockholders of SRI and the Board of Directors of Prologic
approving the execution and delivery of this Agreement and consummation of the
transactions contemplated hereby, certified as of the Effective Date by the
Secretary or an Assistant Secretary of Prologic and the Secretary or Assistant
Secretary of SRI.
(b) Opinion of Counsel for Prologic. Prologic shall have furnished
Solid with an opinion dated the Effective Date of Arter & Hadden LLP, counsel
for Prologic, in a form mutually agreed upon by Prologic and Solid.
(c) Representations and Warranties of Prologic. The representations,
warranties and statements of Prologic contained in this Agreement, the exhibits
hereto and the Prologic Disclosure Schedule, shall be complete and accurate as
of the date of this Agreement and shall also be complete and accurate at and as
of the Effective Date, except for changes contemplated by this Agreement, as if
made on the Effective Date; and Prologic shall have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Effective Date.
(d) Prologic Officers' Certificate. Prologic shall have delivered to
Solid an Officer's Certificate, dated the Effective Date, to the effect that (i)
such officer is familiar with the provisions of this Agreement and (ii) the
conditions specified in Section 6.01 and in paragraph (c) of this Section 6.02
have been satisfied in all material respects.
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(e) Governmental Consents, Authorizations, Etc. All material consents,
authorizations, orders or approvals of, and filings or registrations with, and
any permits, licenses or other authorizations required by, any applicable
Governmental Body that are required for, or in connection with, the execution
and delivery of this Agreement by Prologic and SRI and the consummation by
Prologic and SRI of the transactions contemplated hereby shall have been
obtained or made.
(f) Legislation. No law or legally binding regulation shall have been
enacted that does or would prohibit, restrict or delay consummation of the
Merger or any of the conditions to the consummation of the Merger or that does
or would have a Material Adverse Affect on Prologic.
(g) SRI Shareholder Approval. The sole shareholder of SRI shall have
voted in favor of the Merger.
(h) Consents. On or before the Effective Date, Prologic shall have
obtained all necessary or required consents to the transactions contemplated by
this Agreement or otherwise necessary.
Section 6.03 Conditions to Closing in Favor of Prologic. Consummation
of the Merger shall be subject to the fulfillment, to the satisfaction of
Prologic, or written waiver, at or before the Effective Date of the following
conditions:
(a) Consents. On or before the Effective Date, Solid shall have
obtained all necessary or required consents to the transactions contemplated by
this Agreement or otherwise necessary.
(b) Release of Shareholder Claims. Solid shall have furnished Prologic
with releases of all claims which any of Solid's shareholders may have against
Solid for other than unpaid loans or advances, which releases shall be in a form
mutually agreed upon by Prologic, Solid and the Owners.
(c) Inspection of Proprietary Rights. Solid shall have furnished
Prologic for inspection and review all items described or referenced in the
first sentence of Section 2.20 hereof not furnished during Prologic's due
diligence investigation.
(d) Shareholder Acknowledgments. Solid shall have furnished Prologic
with acknowledgments agreements by the Owners in a form mutually agreed upon by
Prologic, Solid and the Owners.
(e) Copies of Resolutions of Solid. Solid shall have furnished Prologic
with copies of resolutions duly adopted by the Board of Directors and
shareholders of Solid approving the execution and delivery of this Agreement,
and the consummation of the transactions contemplated hereby, certified as of
the Effective Date by the Secretary or an Assistant Secretary of Solid.
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(f) Opinion of Counsel for Solid. Solid shall have furnished Prologic
with an opinion dated the Effective Date of counsel for Solid (which counsel
must be reasonably acceptable to Prologic), in a form mutually agreed upon by
Prologic and Solid.
(g) Representations and Warranties of Solid and Owners. The
representations, warranties and statements of Solid and Owners contained in this
Agreement, the exhibits hereto, the Solid Disclosure Schedule and the Owners
Disclosure Schedule shall be complete and accurate as of the date of this
Agreement and shall also be complete and accurate at and as of the Effective
Date, except for changes contemplated by this Agreement, as if made at and as of
the Effective Date; and Solid and Owners shall have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Effective Date.
(h) Solid Officers' and Owners Certificates. Solid shall have delivered
to Prologic an Officer's Certificate, dated the Effective Date, to the effect
that (i) such officer is familiar with the provisions of this Agreement and (ii)
the conditions specified in Section 6.01 and in paragraph (g) of this Section
6.03 have been fully satisfied. The Owners shall have delivered to Prologic a
Certificate, dated the Effective Date, to the effect that (i) they are familiar
with the provisions of the Agreement and (ii) the conditions specified in
Section 6.01 and in paragraphs (g) and (j) of this Section 6.03 have been fully
satisfied.
(i) Consents, Authorizations, Etc. All material consents,
authorizations, orders or approvals of, and filings or registrations with, and
any permits, licenses or other authorizations required by, any applicable
Governmental Body, private entity or individual (including any lenders of Solid)
that are required for or in connection with the execution and delivery of this
Agreement by Solid and the consummation by Solid of the transactions
contemplated hereby shall have been obtained or made, including, without
limitation, those consents and authorizations required by Sections 2.06 and 2.07
hereof. No consent or authorization obtained by Solid shall be deemed effective
for purposes of this Section 6.03(i) if, as a condition to the issuance of such
consent or authorization, one or more of the Solid Agreements (as defined in
Section 2.07) is required to be modified or amended in any manner, unless such
modification or amendment shall be deemed acceptable to Prologic, in its sole
discretion.
(j) No Dissenters. No Owner has exercised dissenters' rights under the
TBCA.
(k) Legislation. No law or legally binding regulation shall have been
enacted that does or would prohibit, restrict or delay consummation of the
Merger or any of the conditions to the consummation of the Merger or that does
or would have a Material Adverse Affect on Solid.
(l) Bank Consents. On or before the Effective Date, Solid shall have
obtained all necessary or required consents to the transactions contemplated by
this Agreement or otherwise necessary, including, without limitation, consents
from its banks or other lenders with regard to loans outstanding to Solid.
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(m) Shareholder Loan Repayment. On or before the Effective Date, each
of the Owners shall have repaid all amounts due to Solid pursuant to all loans
granted to such Owners, if any.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Date, whether or not stockholder approval has been
received:
(a) by mutual consent of the Boards of Directors of Solid and Prologic;
(b) by Solid if any representation, warranty or breach of other
agreement or condition of closing of Prologic, or by Prologic if any
representation, warranty or breach of other agreement or condition of closing of
Solid or the Owners, contained herein shall have been incorrect or breached in
any material respect, as to which notice shall have been given to such party,
and shall not have been cured or otherwise resolved to the reasonable
satisfaction of the other party on or before the Effective Date, or by either
Solid or Prologic if any condition to the consummation of the Merger that must
be fulfilled to its satisfaction has (in the good faith judgment of its Board of
Directors) become impractical to be fulfilled;
(c) by either Solid or Prologic if any permanent injunction or other
order of a court or other competent authority preventing the consummation of the
Merger shall have become final and non-appealable;
(d) by Solid or Prologic if the Merger has not become effective by
November 15, 1999; provided, however, that no party shall be permitted to
terminate hereunder if such party is in violation of this Agreement;
(e) by any of the Parties if after completion of due diligence
inquiries, including reviewing the Disclosure Schedules or the amended
Disclosure Schedules as provided in Section 5.15, any of the Parties determines
that the Disclosure Schedule(s) or other due diligence inquiries reveals
information that shows a material adverse change in the business, operations,
properties, condition (financial or otherwise) prospects, assets or liabilities
(contingent or otherwise, whether due or to become due, known or unknown) of
Solid or Prologic such that the applicable party concludes in good faith that
the Merger cannot be consummated as contemplated.
Section 7.02 Effect of Termination. In the event of the termination of
this Agreement as provided herein, this Agreement shall become wholly void and
have no further force and effect except as hereinafter provided; and there shall
be no liability on the part of Solid or Prologic (or their respective officers
of directors) except to comply with the confidentiality provisions of Section
5.05 hereof, and except as otherwise provided herein. Nothing contained herein
shall relieve any party from liability for its breach of this Agreement.
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Section 7.03 Amendment. This Agreement and the exhibits and schedules
hereto may be amended by the parties hereto at any time prior to the Effective
Date; provided, however, that any amendment must be by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto.
Section 7.04 Extension; Waiver. At any time prior to the Effective
Date, any of the Parties hereto may (a) extend the time for the performance of
any of the obligations or other acts of any of the other parties hereto, (b) in
whole or in part, waive any inaccuracy in the representations and warranties of
any of the other parties hereto contained herein or in any exhibit or schedule
hereto or in any document delivered pursuant hereto, and (c) in whole or in
part, waive compliance with any of the agreements of any of the other parties
hereto or conditions contained herein. Any agreement on the part of the parties
hereto pursuant to this Section 7.04 shall be valid only if set forth in an
instrument in writing signed and delivered on behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
Section 8.01 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if and when delivered personally
or transmitted by telex or telegram, mailed by registered or certified mail
(return receipt requested) or sent by a recognized next business day courier to
the persons at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Prologic: 2030 East Speedway
Tucson, Arizona 85719
Attention: James M. Heim, President
with a copy to David R. Decker, Esq.
Arter & Hadden LLP
725 South Figueroa Street
34th Floor
Los Angeles, California 90017
If to Solid: William H. Cruise, III, CEO and
John W. Schauweker
Solid Systems, Inc.
One Northwest Centre
13831 Northwest Freeway
Suite 450
Houston, Texas 77040
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with a copy to: Counsel for Solid Systems, Inc.
c/o Solid Systems, Inc.
One Northwest Centre
13831 Northwest Freeway
Suite 450
Houston, Texas 77040
If to Owners: William H. Cruise, III
Solid Systems, Inc.
One Northwest Centre
13831 Northwest Freeway
Suite 450
Houston, Texas 77040
Section 8.02 Fees and Expenses of the Transaction. Prologic shall bear
its own tax, accounting and legal expenses in negotiating, executing and
delivering this Agreement and any related documents and in preparing for the
consummation of the merger (collectively, "Transaction Expenses"). The
individual Owners shall bear all Transaction Expenses incurred by Solid, any of
its Subsidiaries, or any of the Owners, regardless of whether those Transaction
Expenses are invoiced to Solid.
Section 8.03 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein," "hereof,"
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Terms used in the plural include the singular, and vice versa, unless the
context otherwise requires.
Section 8.04 Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. To the maximum
extent permitted by law or by any applicable Governmental Authority, any
document may be signed and transmitted by telecopier facsimile with the same
validity as if it were an ink-signed document.
Section 8.05 Miscellaneous. This Agreement, including the Exhibits and
Schedules hereto, (a) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof; (b) is not intended
to and shall not confer upon any other person any rights or remedies hereunder
or otherwise with respect to the subject matter hereof, except for rights that
may expressly arise as a consequence of the Merger; (c) shall not be assigned by
operation of law or otherwise; (d) has been drafted by all of the parties to
this Agreement and should not be construed against any of the parties hereto;
and (e) shall be governed in all respects, including validity, interpretation
and effect by the substantive laws of the State of Texas without regard to
conflict of law provisions.
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Section 8.06 Survival. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and warranties of the
parties that are contained herein, and each such representation and warranty
shall survive such investigation for the period set forth in Section 5.12.
Section 8.07 Mutual Cooperation. After the Effective Date, the Owners,
Solid and its Subsidiaries and Prologic and its subsidiaries shall, and shall
cause their agents and employees to, cooperate with each party as reasonably
requested by such party in connection with the prosecution or defense of any
claims or matters relating to Solid and its Subsidiaries. Such cooperation shall
include but is not limited to tax matters involving Solid, its Subsidiaries and
the Owners. Cooperation shall include making books and records available and
permitting access to employees, the Owners and other persons. The requesting
party shall reimburse the other party for any out-of-pocket expenses incurred by
it in connection with such request.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be executed by their duly authorized officers.
PROLOGIC MANAGEMENT SYSTEMS, INC.
By /s/ James M. Heim
------------------------------
James M. Heim, President
"Prologic"
SRI ACQUISITION CO.
By /s/ James M. Heim
------------------------------
James M. Heim, President
"SRI"
SOLID SYSTEMS, INC.
By /s/ William H. Cruise, III
------------------------------
William H. Cruise, III, CEO
"Solid"
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/s/ William H. Cruise, III "Owners"
- --------------------------
William H. Cruise, III
/s/ Kenneth Cruise
- --------------------------
Kenneth B. Cruise
/s/ John W. Schauweker
- --------------------------
John W. Schauweker
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