AGREEMENT AND PLAN OF MERGER
BY AND AMONG HAGLER BAILLY,INC.
HAGLER BAILLY ACQUISITION CORP. 1997-1,
and
APOGEE RESEARCH, INC.
DATED AS OF NOVEMBER 18, 1997
TABLE OF CONTENTS
[CAPTION]
Page
AGREEMENT AND PLAN OF MERGER 1
ARTICLE I THE MERGER 2
SECTION 1.1. The Merger. 2
SECTION 1.2. Effective Time. 2
SECTION 1.3. Effect of the Merger. 3
SECTION 1.4. Articles of Incorporation; Bylaws. 3
SECTION 1.5. Directors and Officers. 3
SECTION 1.6. Closing. 3
SECTION 1.7. Subsequent Actions. 4
SECTION 1.8. Tax and Accounting Treatment of the
Merger. 4
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES 5
SECTION 2.1. Conversion of Securities. 5
SECTION 2.2. Company Options. 6
SECTION 2.3. Escrowed Merger Stock; Stockholders'
Representative. 7
SECTION 2.4. Exchange of Certificates. 9
SECTION 2.5. Dissenting Shares. 10
SECTION 2.6. Stock Transfer Books. 11
SECTION 2.7. Transferability of Acquiror Common
Stock 11
SECTION 2.8. Certain Adjustments. 12
SECTION 2.9. Legend; Subsequent Transfer. 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
13
SECTION 3.1. Organization and Qualification;
Subsidiaries. 13
SECTION 3.2. Articles of Incorporation and Bylaws. 13
SECTION 3.3. Capitalization. 14
SECTION 3.4. Authority. 15
SECTION 3.5. No Conflict; Required Filings and
Consents. 15
SECTION 3.6. Financial Statements; No Liabilities. 16
SECTION 3.7. Accounts Receivable. 17
SECTION 3.8. Absence of Certain Changes or Events. 17
SECTION 3.9. Assets. 18
SECTION 3.10. Leases. 18
SECTION 3.11. Material Contracts. 19
SECTION 3.12. Real Property. 20
SECTION 3.13 Government Contracts. 21
SECTION 3.14. Environmental Matters. 21
SECTION 3.15. Absence of Litigation. 23
SECTION 3.16. Pooling of Interests. 23
SECTION 3.17. Intellectual Property. 23
SECTION 3.18. Books and Records 24
SECTION 3.19. Taxes and Assessments. 24
SECTION 3.20. Employment Matters. 24
SECTION 3.21. Transactions with Related Parties. 26
SECTION 3.22. Insurance. 26
SECTION 3.23. Board Approval; Vote Required. 26
SECTION 3.24. Brokers. 26
SECTION 3.25. Disclosure. 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
ACQUIROR 27
SECTION 4.1. Organization and Qualification. 27
SECTION 4.2. Certificate of Incorporation and
Bylaws. 27
SECTION 4.3. Capitalization. 27
SECTION 4.4. Authority. 28
SECTION 4.5. No Conflict; Required Filings and
Consents. 28
SECTION 4.6. SEC Filings; Financial Statements. 29
SECTION 4.7. Absence of Certain Changes or Events. 29
SECTION 4.8. Absence of Litigation 30
SECTION 4.9. Brokers. 30
SECTION 4.10 Pooling of Interest. 30
SECTION 4.11. Disclosure. 30
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGER
SUB 31
SECTION 5.1. Organization and Qualification. 31
SECTION 5.2. Certificate of Incorporation and
Bylaws. 31
SECTION 5.3. Authority. 31
SECTION 5.4. No Conflict; Required Filings and
Consents. 32
SECTION 5.5. Disclosure.
32
ARTICLE VI COVENANTS
32
SECTION 6.1. Affirmative Covenants of the Company.
32
SECTION 6.2. Negative Covenants of the Company.
33
SECTION 6.3. Negative Covenants of Acquiror and the
Company After the Effective
Time.
34
ARTICLE VII ADDITIONAL AGREEMENTS
35
SECTION 7.1. Consents and Approvals; Filings and
Notices.
35
SECTION 7.2. Access to Information.
35
SECTION 7.3. Confidentiality.
36
SECTION 7.4. Company Stockholder Approval.
36
SECTION 7.5. Further Action; Reasonable Best
Efforts.
36
SECTION 7.6. Public Announcements.
37
SECTION 7.7. No Solicitation.
37
SECTION 7.8. Employees.
37
SECTION 7.9. Affiliate Agreements.
38
SECTION 7.10. Indemnification.
38
SECTION 7.11 Pooling Accounting.
39
ARTICLE VIII CLOSING CONDITIONS
39
SECTION 8.1. Conditions to Obligations of Acquiror,
Merger Sub and the Company to Effect
the Merger.
39
SECTION 8.2. Additional Conditions to Obligations of
Acquiror.
40
SECTION 8.3. Additional Conditions to Obligations of
the Company.
41
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER
42
SECTION 9.1. Termination.
42
SECTION 9.2. Effect of Termination.
43
SECTION 9.3. Amendment.
43
SECTION 9.4. Waiver.
43
ARTICLE X SURVIVAL OF REPRESENTATIONS; ESCROW
ARRANGEMENTS; REMEDIES
44
SECTION 10.1. Survival of Representations.
44
SECTION 10.2. Indemnification; Escrow Arrangements.
44
SECTION 10.3. Remedies Cumulative
45
ARTICLE XI GENERAL PROVISIONS
45
SECTION 11.1. Notices.
45
SECTION 11.2. Certain Definitions.
46
SECTION 11.3. Headings.
47
SECTION 11.4. Severability.
47
SECTION 11.5. Entire Agreement.
48
SECTION 11.6. Specific Performance.
48
SECTION 11.7. Assignment.
48
SECTION 11.8. Third Party Beneficiaries.
48
SECTION 11.9. Disputes Resolution
49
SECTION 11.10. Governing Law.
50
SECTION 11.11. Counterparts.
50
SECTION 11.12. Fees and Expenses.
50
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Schedules
Schedule 3.1 Subsidiaries and Equity Interests
Schedule 3.3(a) Beneficial and Record Ownership of
Shares
and Shares Received
Schedule 3.3(b) Beneficial and Record Ownership of
Shares
of Subsidiaries
Schedule 3.5(b) Third Party Consents
Schedule 3.7 Accounts Receivable
Schedule 3.8 Company Material Adverse
Effects
Schedule 3.9 Encumbrances on Assets
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Real Property
Interests
Schedule 3.13(a) Government Contracts
Schedule 3.13(d) Breach or Default Under
Government
Contracts
Schedule 3.13(j) Termination for Convenience of
Government
Contracts
Schedule 3.14 Environmental Permits
Schedule 3.15 Litigation
Schedule 3.17 Intellectual Property
Schedule 3.20(a) Directors, Officers and Employees
Schedule 3.20(d) Unfair Labor Practices
Schedule 3.21 Related Party
Transactions
Schedule 3.22 Insurance Policies
Schedule 3.24 Brokers
Schedule 4.3 Hagler Bailly
Redemption
Obligations
Schedule 7.8 Employee Benefit Plans
Schedule 7.9 Affiliates
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Exhibits
Exhibit A Form of Escrow Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Company Stockholder's Certificate
Exhibit E Form of Legal Opinion of Holland & Knight
LLP Exhibit F Form of Legal Opinion of Acquiror's
General Counsel
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Index of Defined Terms
Section
Acquiror PREAMBLE
Acquiror Common Stock PREAMBLE
Acquiror Indemnified Persons 10.2
Acquiror Material Adverse Effect 11.2(a)
Acquiror SEC Reports 4.6(a)
Affiliate Agreement 7.9
affiliate and/or Affiliate 7.9,
11.2(a)
Agreement PREAMBLE
Articles of Merger 1.2
Assets
11.2(c)
Audited Financial Statements 3.6
Balance Sheet Date 3.6
Blue Sky Laws
11.2(d)
business day
11.2(e)
Certificate and/or Certificates 2.4(b)
Closing 1.6
Closing Date 1.6
Code 1.8
Company PREAMBLE
Company Benefit Arrangements 3.20(b)
Company Common Stock 2.1(a)
Company Material Adverse Effect 11.2(f)
Company Options 2.2(a)
Company Shareholder's Agreement 2.2(a)
Company Stockholders 2.1(a)
Company Stockholder's Certificate 8.2(h)
Company Subsidiary and/or Company Subsidiaries
3.1 control, controlled by, under common control with
11.2(g) Dissenting Shares 2.5(a)
Effective Time 1.2
Employment Agreements PREAMBLE
Encumbrances 11.2(h)
Environmental Claim 3.14(f)(i)
Environmental Laws
3.14(f)(ii)
ERISA 3.20(b)
Escrow Agent PREAMBLE
Escrow Agreement PREAMBLE
Escrow Stock Certificate 2.4(b)
Escrow Stock 2.3(a)
Exchange Act 4.6(a)
Exchange Agent 2.4(a)
Financial Statements 3.6
Government Contract 11.2(j)
Government Entity 11.2(i)
Hazardous Materials
3.14(f)(iii)
including 11.2(k)
Intellectual Property 3.17
Laws 11.2(l)
Legend 2.9
Letter of Intent 7.3
Losses 11.2(m)
Material Contracts 3.11
Merger 1.1
Merger Stock 2.1(a)
Merger Stock Certificate 2.4(b)
Merger Sub PREAMBLE
MGCL PREAMBLE
Permitted Encumbrances 3.9
person 11.2(n)
Principal Stockholders Agreement PREAMBLE
Real Property 3.12
Registration Rights Agreement PREAMBLE
Related Agreements PREAMBLE
Securities Act 2.7
Stock Option Plans 2.2(a)
Stockholders' Representative 2.3(b)
Subsidiary 11.2(o)
Surviving Corporation 1.1
Taxes 3.19
Unaudited Financial Statements 3.6
Unvested Optionholder 2.2(b)
Unvested Option Shares 2.2(b)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
"Agreement") is entered into this 18th day of November,
1997, by and among HAGLER BAILLY, INC., a Delaware
corporation ("Acquiror"), HAGLER BAILLY ACQUISITION CORP.
1997-1, a Maryland corporation and a whollyowned
subsidiary of Acquiror ("Merger Sub"), and APOGEE RESEARCH,
INC., a Maryland corporation (the "Company").
WHEREAS, Acquiror desires to acquire the
management consulting business operated by the Company;
WHEREAS, the Boards of Directors of each of
Acquiror, Merger Sub and the Company have determined that
it is advisable and in the best interests of their
respective companies and stockholders that Merger Sub,
a wholly-owned subsidiary of Acquiror, merge with and
into the Company, pursuant to and subject to the terms
and conditions of this Agreement and the General
Corporation Law of the State of Maryland (the "MGCL");
WHEREAS, concurrently with the execution of
this Agreement and as an inducement to Acquiror and
Merger Sub to enter into this Agreement, Acquiror,
Merger Sub and certain stockholders of the Company
have entered into a Principal Stockholders Agreement
(the "Principal Stockholders Agreement") pursuant to
which, among other things, such stockholders have agreed
to vote their shares of common stock of the Company
in favor of this Agreement, the Merger (as defined below) and
the other transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution of
this Agreement and as an inducement to Acquiror and
Merger Sub to enter into this Agreement, Messrs. Kenneth
I. Rubin, Richard R. Mudge, George Davies, Paul
Nissenbaum and Matthew F. Hardison have entered into
employment and noncompetition agreements with the Acquiror
(the "Employment Agreements"), the effectiveness of which
is conditioned upon consummation of the Merger;
WHEREAS, in connection with the
transactions contemplated by this Agreement and as a condition to
consummation of the Merger, the Company shall enter into
an escrow agreement with Acquiror, Merger Sub, the
Stockholders' Representative (as defined in Section
2.2(b) and an escrow agent to be mutually agreed upon
(the "Escrow Agent") at Closing, in the form attached hereto
as Exhibit A (the "Escrow Agreement"), pursuant to which a
certain percentage of the shares of common stock, par value
$.01 per share (the "Acquiror Common Stock") of Acquiror, to
be issued as consideration in the Merger will be retained in
escrow;
WHEREAS, in connection with the
transactions contemplated by this Agreement and as a condition to
consummation of the Merger, Acquiror and the Stockholders'
Representative (as defined below) shall enter into a
Registration Rights Agreement in the form attached
hereto as Exhibit B (the "Registration Rights Agreement"
and, together with the Principal Stockholders Agreement,
the Escrow Agreement, and the Employment Agreements,
the "Related Agreements") at Closing, pursuant to which
certain stockholders of the Company will obtain "piggyback"
registration rights; and
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants
and agreements set forth in this Agreement, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger.
Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the
MGCL, at the Effective Time (as defined in Section 1.2),
Merger Sub shall be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate
corporate existence of Merger Sub shall cease and, and
the Company shall continue as the surviving corporation
of the Merger (sometimes referred to herein as the
"Surviving Corporation") as a wholly-owned subsidiary of
Acquiror. The name of the Company shall continue as the
name of the Surviving Corporation.
SECTION 1.2. Effective Time.
At the Closing (as defined in Section 1.6), the
parties hereto shall cause the Merger to be
consummated by filing articles of merger (the "Articles
of Merger"), with the Maryland Department of State in such
form as required by, and executed in accordance with the
relevant provisions of the MGCL and in such form as
approved by the Company and Acquiror prior to such filing
(the date and time of the filing of the Articles of
Merger or such subsequent date or time specified
therein being the "Effective Time").
SECTION 1.3. Effect of the Merger.
At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the
MGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise
provided herein, all the property, rights, privileges,
powers and franchises of Merger Sub and the Company shall
vest in the Surviving Corporation, and all debts,
liabilities and duties of Merger Sub and the Company shall
become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.4. Articles of Incorporation; Bylaws.
At the Effective Time, the articles of
incorporation of Merger Sub, as in effect immediately prior
to the Effective Time and as amended by the Articles of
Merger, shall be the articles of incorporation of the
Surviving Corporation, and (b) the bylaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall
be the bylaws of the Surviving Corporation.
SECTION 1.5. Directors and Officers.
The directors of Merger Sub (or such other or
additional individuals as Acquiror may designate prior to
Closing) shall be the initial directors of the
Surviving Corporation, each to hold office in accordance
with the articles of incorporation and bylaws of the
Surviving Corporation; and the officers of the Company
shall continue as the officers of the Surviving
Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
SECTION 1.6. Closing.
Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will
take place as promptly as practicable after satisfaction
of the latest to occur or, if permissible, waiver of the
conditions set forth in Article VIII hereof (the "Closing
Date"), at the offices of Hogan & Hartson L.L.P., 555
Thirteenth Street, N.W., Washington, D.C. 20004, unless
another date or place is agreed to in writing by the
parties hereto.
SECTION 1.7. Subsequent Actions.
If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to continue
in, vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in,
to or under any of the rights, properties, privileges,
franchises or Assets of either of its constituent
corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall
be directed and authorized to execute and deliver, in the
name and on behalf of either of such constituent
corporations, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all
such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights,
properties, privileges, franchises or Assets in the
Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 1.8. Tax and Accounting Treatment of the
Merger.
It is intended by the parties hereto that the
Merger shall (a) constitute a reorganization of Merger
Sub and the Company within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the
"Code") and (b) qualify for accounting treatment as a
pooling of interests. The parties hereby adopt this
Agreement as a "plan or reorganization" of Merger Sub and
the Company within the meaning of Sections 1.3682(g) and 1.368-3(a) of the
United States Treasury Regulations.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. Conversion of Securities.
At the Effective Time, by virtue of the Merger
and without any action on the part of the parties hereto
or the holders of the following securities:
(a) Company Common Stock. Subject to the
provisions hereof, all of the shares of Company Common
Stock (as defined below) issued and outstanding
immediately prior to the Effective Time shall, in the
aggregate, be converted into the right to receive 410,000
shares of Acquiror Common Stock minus the number of
Unvested Option Shares issuable pursuant to Section
2.2(a) (the "Merger Stock"). Each share of Common Stock,
par value $.10 per share (the "Company Common Stock"), of
the Company issued and outstanding immediately prior to the
Effective Time shall, except as otherwise provided in
Sections 2.1(b) and 2.1(d) (and subject
to the provisions of Section 2.2), be converted into the
right to receive a number of shares of Acquiror Common
Stock equal to a number of shares of Acquiror Common
Stock (including any fractional shares of Acquiror Common
Stock), equal to (i) 410,000 (minus the number of Unvested
Option Shares) divided by (ii) the number of shares of
Company Common Stock issued and outstanding immediately
prior to the Effective Time.
All such shares of Company Common Stock shall
cease to be outstanding and shall automatically be
canceled and retired and shall cease to exist, and
each certificate previously evidencing such shares shall
thereafter represent only the right to receive the
Acquiror Common Stock. The holders of
certificates previously evidencing such shares of Company
Common Stock outstanding immediately prior to the Effective
Time (the "Company Stockholders") shall cease to have
any rights with respect to such shares of Company
Common Stock, except as otherwise provided herein. After
the Closing Date, there will be no adjustment to the number
of shares of Merger Stock into which the Company Common
Stock is convertible if the Merger has been accounted for
as a pooling of interests and there is a subsequent
retroactive invalidation of such accounting treatment.
For purposes of this Agreement, the parties agree and
acknowledge that the term "Merger Stock" shall include the
Escrow Stock.
(b) Treasury Stock. All shares of capital
stock of the Company held in the treasury of the Company
immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof and no
Acquiror Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Merger Sub Stock. Each share of common
stock, par value $.01 per share, of Merger Sub issued
and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
(d) No Fractional Shares. No fraction of a
share of Acquiror Common Stock shall be issued in
connection with the Merger. In lieu of any such
fractional share, the holder thereof shall have the right
to receive an amount in cash, without interest, equal
to the product of such fractional part of Acquiror
Common Stock multiplied by the reported closing price of a
share of Acquiror Common Stock on the Nasdaq Stock Market
on the last business day prior to the Closing Date.
SECTION 2.2. Company Options.
(a) Immediately prior to the Effective Time,
each outstanding stock option to purchase shares of
Company Common Stock (the "Company Options") granted under
the 1997 Stock Option Plan or any other stock option plan
or agreement of the Company (the "Stock Option Plans")
shall be terminated, except for any Unvested Options.
Prior to the Closing, the Company shall take all such
action as is necessary to terminate the options so that on
or after the Effective Time no holder of an option
or participant or former participant in the options shall
have any right to purchase shares of Company Common Stock
or any other equity interest in the Company or the
Surviving Corporation pursuant to Company
Options under that certain Apogee
Shareholders Agreement dated as of January 23, 1997 by and
among the Company and Company Shareholders (the "Company
Shareholder's Agreement").
(b) From and after the date hereof, the Company
agrees not to accelerate the vesting or exercise date of any
Company Options. Each Company Option which is unvested as of the date
hereof and not exercisable upon the consummation of the
Merger (collectively, the "Unvested Options") shall at
the Effective Time, be converted into the right to receive
a number of shares equal to six-tenths of a share of
Acquiror Common Stock (including any fractional shares of Acquiror
Common Stock). For purposes of this Agreement, (i) the term
"Unvested Option Shares" shall mean the total number of shares of Acquiror
Common Stock which are issuable, in the aggregate, upon
conversion of the Unvested Options in accordance with
this Section 2.2(b) and, (ii) the term "Unvested
Optionholder" shall mean the holder of an Unvested Option as
of the Effective Time. For purposes of this Agreement,
the parties acknowledge and agree that any of the
Unvested Option Shares issuable pursuant hereto, shall be
treated for all purposes as Merger Stock hereunder.
SECTION 2.3. Escrowed Merger Stock;
Stockholders' Representative.
(a) When making the issuances of shares of
Acquiror Common Stock required by Section 2.1(a) above and
pursuant to the Agreement, Acquiror shall withhold and
retain in escrow from the Company Stockholders five percent
(5%) of the aggregate number of shares of Acquiror Common
Stock issuable pursuant to Section 2.1(a) (as adjusted
pursuant to Section 2.1(d)) (the "Escrow Stock").
The Escrow Stock will be placed in escrow pursuant to
the Escrow Agreement as security for the faithful
performance of the indemnity obligations of the Company
under Section 10.2 of this Agreement. The Merger Stock
otherwise distributable as of the Effective Time to each
Company Stockholder in connection with the Merger as
provided in Section 2.1(a) shall be proportionally reduced
to reflect the deposit in escrow of those portions of the
aggregate Merger Stock required to be deposited in
escrow as described in this Section 2.3, and such Escrow
Stock shall be released to the Company Stockholders or
Acquiror, as the case may be, only in accordance with the
terms of the Escrow Agreement and this Agreement. Any cash
or other dividends paid with respect to such Escrow Stock
shall be paid to the Company Stockholders outside of the
terms and application of the Escrow Agreement in accordance
with each Company Stockholder's respective
proportionate interest in the Escrow Stock.
(b) Richard R. Mudge shall, by virtue of the
Merger, be appointed attorney-in-fact and authorized and
empowered to act, for and on behalf of any or all of the
Company Stockholders (with full power of substitution in
the premises), in connection with the indemnity provisions
of Section 10.2 as they relate to the Company generally
and such other matters as are reasonably necessary for the
consummation of the transactions contemplated hereby
including, without limitation, (i) to review all claims
for indemnification asserted by an Acquiror Indemnified
Person, and, to the extent deemed appropriate, dispute,
question the accuracy of, compromise, settle or otherwise
resolve any and all such claims, (ii) to compromise on
their behalf with Acquiror any claims asserted thereunder,
(iii) to authorize payments to be made with respect to
any such claims for indemnification, (iv) to execute and
deliver on behalf of the Company Stockholders any document
or agreement contemplated by or necessary or desirable in
connection with this Agreement, the Escrow Agreement,
the Registration Rights Agreement and the transactions
contemplated hereby and thereby, (v) to enforce the rights
of the Company Stockholders under the Registration Rights
Agreement and (vi) to take such further actions
including coordinating
and
administering post-closing matters related to the rights
and obligations of the Company Stockholders as are
authorized in this Agreement (the above named representative, as well as
any subsequent representative of the Company Stockholders appointed
by the Company Stockholders being referred to herein as
the "Stockholders' Representative"). The Stockholders'
Representative shall not be liable to any Company
Stockholder, Acquiror,the Surviving
Corporation or their respective
affiliates or any other person with respect to any action
taken or omitted to be taken by the Stockholders' Representative
in his role as Stockholders' Representative under or in
connection with this Agreement unless such action or
omission results from or arises out of fraud, gross
negligence, willful misconduct or bad faith on the part of
the Stockholders' Representative; provided, however, that
the Stockholders' Representative shall not be liable to any Company
Stockholder in the event that in the
exercise of his reasonable judgment, the
Stockholders' Representative believes there will not be adequate
resources available to cover potential costs and expenses
to contest a claim made by Acquiror against the Escrow
Stock. Acquiror and Merger Sub shall be entitled to
rely on such appointment and treat such Stockholders'
Representative as the duly appointed attorney-in-fact of
each Company Stockholder. Each Company Stockholder who
votes in favor of the Merger pursuant to the terms
hereof, by such vote, without any further action, and each
Company Stockholder who receives shares of Acquiror Common
Stock in connection with the Merger, by acceptance thereof
and without any further action, confirms such appointment
and authority.
SECTION 2.4. Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing
Date,
Acquiror shall designate a bank or trust company
reasonably acceptable to the Company to act as Exchange
Agent hereunder (the "Exchange Agent"). As of the Effective
Time, Acquiror shall, on behalf of Merger Sub, deposit
with or for the account of the
Exchange Agent (i) stock certificates representing the
aggregate number of whole shares of
Merger Stock issuable pursuant to
Section 2.1(a) (less certificates representing the
shares of Escrow Stock to be deposited in escrow pursuant to the
Escrow Agreement, as contemplated by
Section 2.1(b)), which shares of
Merger Stock shall be deemed to have been issued at the
Effective Time and (ii) sufficient cash to pay the amounts
contemplated by Section 2.1(d).
(b) Exchange Procedures. At the Effective
Time, certificates representing the Company Common Stock
shall be canceled, and, simultaneously with such
cancellation, Acquiror shall issue two certificates with
respect to the canceled Company Common Stock for each
Company Stockholder. One such certificate (the "Merger
Stock Certificate") shall be registered in the name of the
Company Stockholder and shall represent ninety-five
percent (95%) of the total number of shares of Acquiror
Common Stock issuable pursuant to the Merger in respect of
shares of Company Common Stock held by such Company
Stockholder and the second certificate, representing the
remaining five percent (5%) of
such Company Stockholder's share (the "Escrow
Stock Certificate") shall be issued in the name of the
Company Stockholder, to be held by the Escrow Agent.
Promptly after the Effective Time, Acquiror shall
cause the Exchange Agent to mail to each Company
Stockholder of record a certificate or certificates
(each a "Certificate" and collectively, the
"Certificates") that immediately prior to
the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into
the right to receive shares of Acquiror Common Stock
pursuant to Section 2.1(a), (i) a form of letter of
transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and (ii) instructions
for use in surrendering such Certificates in exchange for
certificates representing Acquiror Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal duly
executed, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Stock
Certificate, plus cash in lieu of fractional shares in
accordance with Section 2.1(d), and the Certificate so
surrendered shall forthwith be canceled. At the Effective
Time, Acquiror shall issue the Escrow Stock Certificates
and transfer them to the Escrow Agent to be held in
escrow. In the event of a transfer of ownership of
Company Common Stock which is not registered in the
transfer records of the Company, the Merger Common Stock and
the right to receive cash in lieu of the issuance of any
fractional shares in accordance with Section 2.1(d) may be
issued to a transferee if the Certificate representing
such Company Common Stock is
presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer,
and by evidence that any applicable stock transfer taxes
have been paid. Until so surrendered, each Certificate shall
be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender
the Merger Common Stock and the right to receive cash in
lieu of the issuance of any fractional shares in
accordance with Section 2.1(d).
SECTION 2.5. Dissenting Shares.
(a) Notwithstanding any provision of this
Agreement to the contrary, any shares of Company Common
Stock held by a Company Stockholder who has demanded
fair value and perfected appraisal rights for such shares
in accordance with the MGCL and who, as of the Effective
Time, has not effectively withdrawn such demand or lost such
appraisal rights ("Dissenting Shares"), shall not be
converted into or represent a right to receive Acquiror
Common Stock pursuant to Section 2.1(a), but the holder
thereof shall only be entitled to such rights as are granted
by the MGCL.
(b) Notwithstanding the provisions of subsection
(a), if any holder of shares of Company Common Stock who
demands fair value and seeks appraisal of such shares
under the MGCL shall effectively withdraw (with the
written consent of the Surviving Corporation) or lose
(through failure to perfect or otherwise) such right,
then, as of the later of the Effective Time and the
occurrence of such event, such holder's shares
shall automatically be converted into and represent only the
right to receive Acquiror Common Stock in accordance with
the terms of this Agreement, upon surrender of the
certificate representing such shares to the extent and in
the event allowed by the MGCL.
(c) The Company shall give Acquiror (i) prompt
notice of any written demands for fair value or appraisal
of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to the
MGCL and received by the Company and (ii) the
opportunity to participate in all
negotiations and proceedings with respect to demands for
fair value or appraisal under the MGCL. The Company shall
not, except with the prior written consent of Acquiror,
voluntarily provide any consideration with respect to any
demands for fair value or appraisal of Company Common
Stock or offer to settle or settle any such demands.
SECTION 2.6. Stock Transfer Books.
At the Effective Time, the stock transfer books
of the Company with respect to all shares of capital stock of
the Company shall be closed and no further registration of
transfers of such shares of capital stock shall thereafter
be made on the records of the Company.
SECTION 2.7. Transferability of Acquiror Common Stock
The shares of Acquiror Common Stock to be issued
and delivered to the Company Stockholders in the Merger in
accordance with the provisions of Section 2.1 hereof will
not have been registered under the Securities Act of
1933, as amended (the "Securities Act") or under the
securities laws of any state as of the Closing.
Accordingly, those shares of Acquiror Common Stock (together
with any other shares with respect to these shares
received pursuant to conversions, exchanges, stock splits,
stock dividends or other reclassifications or changes
thereof, or consolidations or reorganizations of
Acquiror) will not be transferable except upon compliance
with the Securities Act, any state securities laws, the
rules, regulations and other administrative
regulations promulgated under the Securities Act and any
state securities laws and shall bear appropriate legends to
this effect as set forth in Section 2.9 below. In
addition, where applicable, the legend shall provide
notice as to the restrictions on transfer pursuant to the
Affiliate Agreement (as defined in Section 7.9).
SECTION 2.8. Certain Adjustments.
If between the date hereof and the Effective
Time, the outstanding shares of Acquiror Common Stock shall
be changed into a different number of shares by reason of
any reclassification, stock dividend or stock split with a
record date within such period, the number of shares of
Merger Stock shall be adjusted accordingly to provide to
the Company Stockholders the same economic effect as
contemplated by this Agreement prior to such
reclassification, stock dividend or stock split.
SECTION 2.9. Legend; Subsequent Transfer.
Each certificate representing Acquiror Common
Stock issued to the Company Stockholders hereunder shall be
stamped or otherwise imprinted with a legend (the "Legend")
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR UNDER THE SECURITIES
LAW OF ANY STATE. SUCH SECURITIES MAY NOT
BE SOLD OR OFFERED FOR SALE OR
OTHERWISE HYPOTHECATED OR
DISTRIBUTED EXCEPT (A)(i) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SECURITIES UNDER THE ACT; OR (ii)
PURSUANT TO A VALID EXEMPTION FROM SUCH
REGISTRATION UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, AND (B)
UPON RECEIPT BY THE ACQUIROR OF AN
OPINION OF COUNSEL FOR THE HOLDER, WHICH
OPINION SHALL BE SATISFACTORY IN FORM AND
SUBSTANCE TO ACQUIROR THAT SUCH SALE IS IN
COMPLIANCE WITH THE ACT AND SUCH STATE
SECURITIES LAW.
Acquiror agrees to remove such Legend upon
the earlier of the registration under the
Securities Act of the Acquiror Common Stock
received by the Company Stockholders or the
expiration of any required holding period of Rule 144
under the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the attached Schedules,
the Company represents and warrants to Acquiror and
Merger Sub as follows:
SECTION 3.1. Organization and Qualification;
Subsidiaries.
The Company and each Subsidiary of the
Company (each, a "Company Subsidiary"
and collectively, the "Company
Subsidiaries") is a corporation duly organized,
validly existing and in good standing under the
laws of the jurisdiction of its organization. The
Company and each Company Subsidiary has the
requisite power and authority to own, lease and
operate its business as it is now being conducted
and to perform the terms of this Agreement and the
transactions contemplated hereby. The
Company and each Company Subsidiary is duly
qualified to conduct its business, and is in good
standing, in Maryland, Florida, Pennsylvania,
Minnesota and Canada, and in each other
jurisdiction in which the ownership or leasing of its
Assets or the nature of its activities in
connection with the conduct of its business makes
such qualification necessary, except where the
failure to be so qualified would not have a
Company Material Adverse Effect. The Company has
no Subsidiaries or any equity interest or other
investment in any entity other than those listed
on Schedule 3.1.
SECTION 3.2. Articles of Incorporation and Bylaws.
The Company has heretofore delivered to
Acquiror a complete and correct copy of the
articles of incorporation, bylaws, operating
agreement or other organizational documents of the
Company and each Company Subsidiary, each as amended
to date. Each such articles of incorporation,
bylaws, operating agreement or other organizational
documents is in full force and effect. None of the
Company or the Company Subsidiaries is in violation
of any of the provisions of its respective
articles of
incorporation, bylaws, operating agreement
or other organizational document.
SECTION 3.3. Capitalization.
(a) The authorized capital stock of
the Company consists of 500,000 shares of Company
Common Stock, of which 261,747 shares are issued
and outstanding. All of the
outstanding shares of capital stock of the Company
are owned beneficially and of record as set forth in
Schedule 3.3(a), free and clear of all Encumbrances.
Schedule 3.3(a) sets forth a list of each option
holder, the number of shares issuable upon
exercise of options held by each option holder,
the exercise price and the dates upon which each
option becomes exercisable or terminates. Except as
set forth in Schedule 3.3(a), there are no options,
warrants or other rights, agreements, arrangements
or commitments of any character relating to the
issued or unissued capital stock of the Company or
obligating the Company to issue or sell any shares
of capital stock of, or other equity interests in
the Company, including any securities directly or
indirectly convertible into or exercisable or
exchangeable for any capital stock or other equity
securities of the Company. There are no
outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any shares of its
capital stock or make any investment (in the
form of a loan, capital contribution or
otherwise) in any other person. All of the
issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued in
accordance with applicable laws
and are fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in Schedule
3.3(a), no shares of capital stock of the Company
have been reserved for any purpose.
(b) All of the outstanding shares of
capital stock of each Company Subsidiary are (i)
duly authorized and validly issued in accordance
with applicable laws and are fully paid and
nonassessable and not subject to preemptive
rights, and
(ii) owned beneficially and of record as set forth
in Schedule 3.3(b), free and clear of all
Encumbrances. Except as set forth in Schedule
3.3(b), there are no options, warrants or other
rights, agreements, arrangements or commitments of
any character relating to the issued or unissued
capital stock of the Company Subsidiaries or
obligating the Company Subsidiaries to issue or
sell any shares of capital stock of, or other equity
interests in the Company Subsidiaries, including
any securities directly or indirectly convertible
into or exercisable or exchangeable for any
capital stock or other equity securities of the
Company Subsidiaries. There are no outstanding
obligations of the Company Subsidiaries to
repurchase, redeem or otherwise acquire any shares
of its capital stock or make any investment (in the
form of a loan, capital contribution or otherwise)
in any other person.
(c) The Company represents and warrants
to Acquiror and Merger Sub that as of the
Effective Time, the aggregate number of
outstanding shares of Company Common Stock on a
fully diluted basis (assuming full exercise of all
stock options of the Company), shall not exceed
323,665 shares. As of the Effective Time there
shall be no outstanding options under, or any shares
of Company Common Stock or other securities subject
to, any Stock Option Plans.
SECTION 3.4. Authority.
The Company has the necessary corporate
power and authority to enter into this Agreement and
the Related Agreements to which the Company is a
party and, subject to obtaining any necessary
stockholder approval of the Merger, to perform
its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and
thereby. The execution and delivery of this
Agreement and the Related Agreements by the Company
and the consummation by the Company of the
transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action
and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement
and the Related Agreements to which the Company is a
party or to consummate the transactions
contemplated hereby and thereby, other than the
approval of this Agreement by the stockholders of
the Company in accordance with the MGCL. This
Agreement and the Related Agreements to which the
Company is a party have been duly executed and
delivered by the Company and, assuming the due
authorization, execution and delivery by Acquiror and
Merger Sub, constitute legal, valid and binding
obligations of the Company, enforceable in
accordance with their terms, except as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other
similar laws of general applicability relating
to or affecting creditors' rights generally and
by the application of general principles of equity.
SECTION 3.5. No Conflict; Required Filings and
Consents.
(a) The execution and delivery of this
Agreement and the Related Agreements to which the
Company is a party by the Company do not, and
the performance by the Company of its
obligations under this Agreement and the Related
Agreements to which the Company is a
party will not, (i) conflict with or
violate the articles of incorporation, bylaws,
operating agreement or other organizational document of the
Company or any Company Subsidiary, (ii) conflict
with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree, whether
national or foreign, applicable to the Company or
any Company Subsidiary or to their respective Assets,
or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of
time or both would become a default) under any note,
bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other
instrument or obligation to which the Company or any
Company Subsidiary is a party or by
which the Company or any Company Subsidiary is bound
or to which any of their respective Assets is
subject.
(b) Except as set forth in Schedule
3.5(b), the Company's execution and delivery of
this Agreement and the Related Agreements to which
the Company is a party does not, and the Company's
performance of this Agreement and the Related
Agreements to which the Company is a party will not,
require any consent, approval, authorization or
permit of, or filing with or notification to, any
third party or any court, arbitral tribunal,
administrative agency or commission, whether national
or foreign, or Government Entity, except for the
receipt of approval of this Agreement, the Merger and
the transactions contemplated hereby by the Company
Stockholders and the filing and recordation of
appropriate merger documents as required by the MGCL.
SECTION 3.6. Financial Statements; No Liabilities.
Except as set forth in Schedule 3.6, the
Company has furnished to Acquiror (a) the audited
balance sheets of the Company as of December 31,
1994, 1995 and 1996, and the related audited
statements of income and cash flows for the fiscal
years then ended (such audited financial
statements, including the schedules and notes
thereto, collectively, the "Audited Financial
Statements"); and (b) the unaudited balance sheet of
the Company and its Subsidiaries as of October 31,
1997, and the unaudited statements of income and
cash flows for the ten months then ended (such
unaudited financial statements, collectively, the
"Unaudited Financial Statements" and together with
the Audited Financial Statements, the "Financial Statements").
The Financial Statements referred to in this Section
3.6, including the related schedules and notes,
present fairly the financial condition of the
Company as of their respective dates and the
results of operations and cash flows
for the respective periods indicated
and have been prepared in accordance with
generally accepted accounting principles
applied on a consistent basis (except as
otherwise noted in the notes thereto and that
the Unaudited Financial Statements do not contain
all required footnotes and are subject to normal
recurring year-end adjustments). Except as reflected
in the Financial Statements (or disclosed in the
notes to the Financial Statements), there exist no
liabilities (whether contingent or absolute,
matured or unmatured, known or unknown)
of the Company. Except as reflected in the
Unaudited Financial Statements of the Company
as of October 31, 1997 (the "Balance
Sheet Date"), the Company has no liabilities,
contingent or absolute, matured or unmatured,
known or unknown, except for liabilities incurred
in the ordinary course of business since the Balance
Sheet Date that would not have a Company Material
Adverse Effect.
SECTION 3.7. Accounts Receivable.
Except as set forth in Schedule 3.7,
the accounts
receivable of the Company shown on the balance sheets
included in the Financial Statements, or acquired
by the Company after September 30, 1997, are
actual and bona fide accounts receivable which arose
in the ordinary course of business of the Company
and/or the Company Subsidiaries, and represent valid
obligations due the Company and/or the Company
Subsidiaries, except to the extent previously
collected.
SECTION 3.8. Absence of Certain Changes or
Events.
Except as set forth in Schedule 3.8
hereto or as otherwise disclosed in the
Financial Statements, since the Balance Sheet
Date, there has been no Company Material Adverse
Effect. Since the Balance Sheet Date, the
Company and the
Company Subsidiaries have conducted their
business inthe ordinary course, and the Company and the Company
Subsidiaries have not (a) paid any dividend or
distribution in respect of, or redeemed or
repurchased any of, its capital stock; (b) issued any
capital stock, bonds or other corporate
securities or debt instruments, granted any
options, warrants or other rights calling for
the issuance thereof, or borrowed any funds;
(c) incurred loss of, or significant injury to,
any of their respective Assets as the result of
any fire, explosion, flood, windstorm, earthquake,
labor trouble, riot, accident, act of God or public
enemy or armed forces, or other casualty; (d)
incurred, or become subject to, any obligation or
liability (absolute or contingent, matured or
unmatured, known or unknown), except current
liabilities incurred in the ordinary course of
business; (e) mortgaged, pledged or subjected to
any Encumbrance any of their respective Assets;
(f) sold, exchanged, transferred or otherwise
disposed of any of their respective Assets except
in the ordinary course of business, or canceled any
debts or claims except in the ordinary course of
business consistent with past practice; (g) written
down the value of any of their respective Assets or
written off as uncollectible any accounts receivable,
except write downs and write-offs in the ordinary
course of business, none of which, individually or
in the aggregate, are material; (h) entered into
any transactions other than in the ordinary course
of business; (i) made any change in any method of
accounting or accounting practice; or (j) made any
agreement to do any of the foregoing.
SECTION 3.9. Assets.
Each of the Company and the Company
Subsidiaries is the sole and exclusive legal and
equitable owner of and has good and valid title to
the Assets that are owned by the Company and the
Company Subsidiaries, as applicable, and, such
Assets of the Company and the Company Subsidiaries
are free and clear of all Encumbrances, except as
set forth in Schedule 3.9 or as reflected in the
Financial Statements and liens for current taxes not
yet due and payable ("Permitted Encumbrances").
No person or
Government Entity has an option to purchase,
right of first refusal or other similar right with
respect to all or any part of these Assets.
SECTION 3.10. Leases.
Schedule 3.10 lists and describes all
leases and other agreements under which the Company
or any Company Subsidiary is lessee or lessor of any
Asset, or holds, manages or operates any Asset owned
by any third party, or under which any Asset owned by
the Company or any Company Subsidiary is held,
operated or managed by a third party. Each such
lease and other agreement is in full force and
effect and constitutes a legal, valid and binding
obligation of, and is legally enforceable against,
the
Company or the Company Subsidiary which is a party
thereto and, to the knowledge of the Company, the
other party or parties thereto and grants the
leasehold estate it purports to grant free and clear
of all Encumbrances except for Permitted
Encumbrances. All necessary governmental
approvals with respect thereto
required to be obtained by the Company or any Company
Subsidiary, as applicable, have been obtained, all
necessary filings or registrations therefor
required to be made by the Company or any Company
Subsidiary, as applicable, have been made, and to
the knowledge of the
Company, there have been no threatened
cancellations thereof and no outstanding disputes
thereunder. The Company and the Company Subsidiaries
have performed in all material respects all
obligations thereunder required to be performed
by the Company and the Company Subsidiaries to
date. To the knowledge of the Company, no party is
in default in any material respect under any of the
foregoing, and there has not occurred any event
which (whether with or without notice, lapse of
time or the happening or occurrence of any other
event) would constitute such a default.
SECTION 3.11. Material Contracts.
(a) Schedule 3.11 sets forth a complete
and correct list, as of the date of this Agreement,
of all agreements of the following type to which the
Company or any Company Subsidiary is a party or may
be bound (collectively, the "Material Contracts"):
(i) material contracts; (ii) employment, severance,
termination, consulting and retirement agreements;
(iii) license agreements or distributor, dealer,
manufacturer's representative, sales agency,
advertising, property management or brokerage
agreements; (iv) agreements with any labor
organization or other collective bargaining unit;
(v) agreements for the future purchase of
materials, supplies, services, merchandise or
equipment involving payments of more than $10,000
individually (or $40,000 in the aggregate for all
such agreements) over its remaining term
(including, without limitation, periods covered by
any option to renew by either party); (vi)
agreements for the purchase, sale or lease of any
real estate or other Assets; (vii) profit-sharing,
bonus, incentive compensation, deferred
compensation, stock option, severance pay,
stock purchase, employee benefit,
insurance, hospitalization, pension, retirement or
other similar plans or agreements; (viii)
agreements for the sale of Assets other than in the
ordinary course of business or the grant of any
preferential rights to purchase Assets; (ix)
agreements which contain provisions
requiring the Company or any Company
Subsidiary to indemnify any person; (x) joint
venture agreements or other agreements
involving the sharing of profits; or
(xi) outstanding loans to any persons or entities or
receivables due from any Company Stockholders or
any stockholders of the Company Subsidiaries or
any affiliates of the Company or the Company
Subsidiaries.
(b) All the Material Contracts are valid
and in full force and effect on the date hereof
(except to the extent they have previously expired
in accordance with their terms) and constitute
legal, valid and binding obligations of, and are
legally enforceable against, the Company or
the Company
Subsidiary which is a party thereto, and to the
knowledge of the Company, the other party or
parties thereto. All necessary governmental
approvals with respect thereto required to be
obtained by the Company or any Company Subsidiary, as
applicable, have been obtained, all necessary
filings or registrations therefor required to be
made by the Company or any Company Subsidiary, as
applicable, have been made, and, to the knowledge of
the Company, there have been no threatened
cancellations thereof and no outstanding disputes
thereunder. Each of the
Company and the Company Subsidiaries has in all
material respects performed all the obligations
thereunder required to be performed by the Company
and the Company Subsidiaries to date. No party is in
default in any material respect under any of the
Material
Contracts, and there has not occurred any event
which (whether
with or without notice, lapse of time or the
happening or occurrence of any other event)
would constitute such a default.
True and complete copies of all Material Contracts
have been
delivered to Acquiror or made available for
inspection.
SECTION 3.12. Real Property.
Schedule 3.12 contains a list and brief
description of all leasehold interests in real
estate, easements, rights to access, rights-of-way
and other real property interests which are owned,
leased, used or held for use by the Company and
the Company Subsidiaries (collectively, the "Real
Property"). None of the Company or the Company
Subsidiaries holds any fee simple interest in any
real estate. The Real Property described in
Schedule 3.12 constitutes all real property
interests necessary to conduct the business and
operations of the Company and the
Company Subsidiaries as now conducted and is
suitable and adequate for the uses for which it is
currently devoted.
SECTION 3.13 Government Contracts.
(a) Schedule 3.13(a) sets forth a listing
of (i) each Government Contract to
which the Company or any Company
Subsidiary is or has been a party during the past
three years;
(ii) all outstanding quotations, bids and proposals
submitted by the Company or any Company Subsidiary
to either the Government or any proposed prime
contractor of the Government; and (iii) all
Government Contracts (including options) on which
delivery or performance is currently in an unsatisfactory or
delinquent
status, behind schedule or which the Company or
any Company Subsidiary knows or has
reason to know, after reasonable
investigation, will be performed unsatisfactorily
or behind schedule or will become delinquent in the
future. Each of the Company and the Company
Subsidiaries has provided access to a complete and
correct copy of each Government Contract listed in
Schedule 3.13 (a) to Acquiror. Schedule 3.13(a) also
sets forth (i) all outstanding or pending change
orders, claims and requests for equitable
adjustments relating to such Government Contracts,
(ii) all outstanding or pending subcontractor,
supplier and
vendor claims for the Government Contracts, and (iii)
all current teaming agreements, joint
venture arrangements and agency
agreements relating to the Government Contracts
(access to copies of
which had been provided to Acquiror). All
financing arrangements, if any, with respect to the
performance of any current Government Contract
have been disclosed.
Each of the
Company and the Company Subsidiaries possesses
all necessary security clearances and permits
for the execution of
its
obligations under each Government Contract to
which it is
currently a party. None of the Company or
the Company
Subsidiaries has ever been denied a security
clearance.
(b) None of the Company or the Company
Subsidiaries
has ever been debarred or suspended from contracting
(as a prime contractor or subcontractor at
any tier) for or bidding on any
Government Contract or, at any time during the past
three (3)
years, had a Government Contract canceled or
terminated, in whole or in part, by reason of a
default or alleged default on the part of the Company
or any Company Subsidiary. None of the Company or
the Company Subsidiaries is currently debarred or
suspended from (nor has it received
written notice that it is under
investigation with respect to a possible debarment or
suspension
from) bidding on or entering into any Government
Contract. With
respect to any Government Contract in effect as of
the date of
this Agreement, none of the Company or the Company
Subsidiaries has received written notice (i) that any
such Government Contract may be or will be
terminated for convenience or by reason of a
default or alleged default by the Company or
any Company Subsidiary, (ii) that funding for any
such Government Contract or governmental program
involving the Company or any
Company
Subsidiary will be eliminated or substantially
reduced
or
suspended, (iii) requiring or resulting in loss
of use or
substantial impairment or interference of use by the
Company or
any Company Subsidiary of any facilities owned by a
governmental authority, or (iv) that any relevant
budget authority or contract authority has been
exceeded with respect to any such Government
Contract to which the Company or any Company
Subsidiary is a party.
None of the Company or the Company
Subsidiaries
anticipates that it will incur any cost overrun with
respect to
any Government Contract to which it is a party that
would have a Company Material Adverse Effect.
(c) To the Company's knowledge, there are
no facts or issues that could reasonably be expected
to result in any of the following in the event an
audit of the Government Contracts of
the Company or any Company Subsidiary is conducted by
the Defense Contract Audit Agency: (i) the
suspension or debarment of the Company or any
Company Subsidiary from bidding on or entering into
any Government Contract, (ii) the termination for
default of any Government Contract to which the
Company or any Company Subsidiary is a party or
under which the Company is providing goods or
services, or (iii) except as reserved for in
the Financial Statements, any assertion or
claim of material liability against the Company
or any Company Subsidiary for an
equitable adjustment, price reduction, liquidated
damages or
monetary penalty, or damages under the terms of such
Government Contract or based on a default or alleged
default by the Company or other malfeasance or
alleged malfeasance by the Company or any Company
Subsidiary arising out of or relating to the
performance or failure to perform by the Company or
any Company Subsidiary thereunder.
(d) Except as set forth in Schedule
3.13(d), none of
the Company or the Company Subsidiaries is, nor will
consummation of this Agreement and the
transactions contemplated hereby result, in any
material violation, breach or default of any term or
provision of (i) any Government Contract or (ii)
any bid, proposal or quote submitted to the
Government by the Company or
any Company Subsidiary, nor will the
consummation of this Agreement and the
transactions contemplated hereby permit the
termination by the Government of any Government
Contract. None
of the Company or the Company Subsidiaries
is, nor will
consummation of this Agreement and the transactions
contemplated hereby result, in any violation,
breach or default in any material respect of any
provision of any Federal or state order, status,
rule or regulation governing any Government
Contract, bid, proposal, quote, or transaction of
any kind between the Government and the Company or
any Company Subsidiary.
(e) To the knowledge of the Company,
each of the Company and the Company Subsidiaries
has complied in all respects with each certification
executed, acknowledged or set forth by
the Company or any Company Subsidiary with
respect to each Government Contract awarded to
the Company or any Company Subsidiary within the
past three years and each bid, quotation or proposal
submitted by the Company or any Company Subsidiary to
the Government or any prospective prime
contractor of the Government within the past three
years. To the knowledge of the
Company and the Company Subsidiaries, each of the
Company and the Company Subsidiaries has complied
in all respects with all clauses, provisions and
requirements incorporated expressly, by reference
or by operation of law in each and every
Government Contract awarded to the Company or any
Company Subsidiary within the past three years.
To the knowledge of the Company, all
certifications, representations or disclosure statements
submitted by the Company with respect to any
Government Contract awarded to the Company or any
Company Subsidiary within the past three years were
true in all material respects as of the date of
submission. None of the Company or the Company
Subsidiaries has knowledge of any misstatement or
omission relating to any of the Government
Contracts awarded to the Company or any Company
Subsidiary within the past three years, or any bids,
quotations or proposals submitted within the past
three years, that have led to or could lead to,
either before or after the Effective Time, (i) any
administrative, civil or criminal investigation
or indictment of the Company or any Company
Subsidiary, (ii) the formal questioning or
disallowance of any costs submitted for payment by
the Company or any Company Subsidiary, (iii) the
recoupment of any payments previously made to the
Company or any Company Subsidiary or (iv) the
assessment of any penalties or damages of any
kind against the Company or any
Company
Subsidiary, arising out of such irregularities,
misstatements or omissions.
(f) No show cause notices or cure
notices have been issued against the Company or
any Company Subsidiary on any Government
Contracts awarded to the Company or any Company
Subsidiary within the past three years. No default
terminations have been issued against the Company or
any Company Subsidiary on any Government Contracts
awarded to the Company or any Company Subsidiary
within the past three years.
No negative
determinations of responsibility have been raised
against the Company or any Company Subsidiary
with respect to any bid, question or proposal
submitted by the Company or any Company Subsidiary
within the past three years. No costs in excess of
$25,000 incurred by the Company or any Company
Subsidiary within the past three years have been
formally disallowed as a result of a finding or
determination of any kind by the Government, and all
amounts previously charged or at present carried as
chargeable by the Company or any Company
Subsidiary with respect to any Government
Contract has been or will be reasonable, allowable
and allocable
to each such Government Contract.
Neither the
Government nor any prime contractor of the
Government under a Government Contract has
withheld or set off, or attempted to withhold or
set off, monies due to the Company or any Company
Subsidiary under any Government Contracts awarded
within the past three years. There exist no (i)
outstanding claims against the Company or any
Company Subsidiary either by the Government or by
any prime contractor, subcontractor, vendor or any
third party arising under or relating to any
Government Contract, (ii) dispute between the
Company or any Company Subsidiary and the
Government or any prime contractor, subcontractor,
or vendor arising under or relating to any
Government Contract, and (iii) facts over which
such a dispute could reasonably expect to arise in
the future. None of the Company or the Company
Subsidiaries has any interest in any pending or
potential claims against the Government or against
any prime contractor, subcontractor, or vendor
arising under or relating to any Government
Contract. There are no facts which are known by the
Company or any Company Subsidiary upon which such
claims could reasonably be based in the future.
(g) No representative of the Company or
any Company Subsidiary is in receipt or
possession of any Government
procurement sensitive information under circumstances
where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
(h) The Company has no knowledge that it
or any of the Company Subsidiaries is currently under
administrative, civil or criminal investigation or
indictment with respect to any alleged irregularity,
misstatement or omission arising under or relating
to any of its Government Contracts, bids,
quotations or
proposals, past or present, by any Government
agency, including without limitation the General
Accounting Office, the Defense Government Contract
Audit Agency, the Defense Government Contract
Administrative Service, the Department of Labor, the
Department of Health and Human Services, the
Environmental Protection Agency, or the inspector
general or auditor general or similar functionary of
any Government Agency or instrumentality, nor has
such investigation been threatened.
(i) The Government has only those
rights, including royalty rights, with respect to any
"technical data" or "computer software," on the
Company's federal contract that are set forth in
the Federal Acquisition Regulations, Part 27 and
agency supplements thereto, or any Intellectual
Property (as defined in Section 3.17) which is
presently used in the operation of the Company and
the Company Subsidiaries' businesses.
(j) Except as set forth in Schedule
3.13(j), the Company has no facts in the Company's
possession which would lead the Company to believe
that there would be a future termination for
convenience, if applicable, of any Government
Contracts.
SECTION 3.14. Environmental Matters.
(a) Each of the Company and the Company
Subsidiaries has complied in all material
respects and is in material compliance with all
Environmental Laws (as defined below). There are no
pending or, to the knowledge of the Company and
the Company Subsidiaries, threatened actions, suits,
claims, legal proceedings or other proceedings
based on, and none of the Company and the
Company Subsidiaries has directly or indirectly
received any notice of any complaint, order,
directive, citation, notice of responsibility, notice
of potential responsibility, or information request
from any Government Entity or any other person
arising out of or attributable to: (i) the current
or past presence at any part of the Real Property
of Hazardous Materials (as defined below) or any
substances that pose a hazard to human health or an
impediment to working conditions; (ii) the current or past release
or threatened release into the
environment from the Real Property
(including, without
limitation, into any storm drain, sewer, septic
system or publicly owned treatment works) of any
Hazardous Materials or any substances that pose a
hazard to human health or an impediment to working
conditions; (iii) the off-site disposal of
Hazardous Materials originating on or from the Real
Property; or (iv) any
violation of Environmental Laws at any part of the
Real Property or otherwise arising from the
Company's activities involving Hazardous Materials.
(b) To the knowledge of the Company,
each of the Company and the Company Subsidiaries
has been duly issued, and currently has and will
maintain through the Effective Time, all
permits, licenses, certificates and approvals
required to be maintained by the Company under
any Environmental Law with respect to the use
or ownership of the Real Property by the Company
and the Company Subsidiaries. A true and complete
list of such permits, licenses, certificates and
approvals, all of
which are valid and in full force and effect, is
set out in Schedule
3.14. Except in accordance with such permits,
licenses,
certificates and approvals, there has been no
discharge of any Hazardous Materials or any
other material regulated by such permits,
licenses, certificates or approvals.
(c) There is no material Environmental
Claim (as
defined below) pending or, to the knowledge of
the Company, threatened against or involving the
Company or any Company Subsidiary or against any
person or entity whose liability for any material
Environmental Claim the Company or any Company
Subsidiary has or may have retained or
assumed either
contractually or by operation of law.
(d) To the knowledge of the Company, there
are no past or present actions or activities by the
Company or any Company Subsidiary including the
storage, treatment, release, emission, discharge,
disposal or arrangement for disposal of any
Hazardous Materials, that could reasonably form
the basis of any
Environmental Claim against the Company or any
Company Subsidiary or
against any person or entity whose liability
for any
Environmental Claim the Company or any Company
Subsidiary may have retained or assumed either
contractually or by operation of law.
(e) To the knowledge of the Company, none
of the Real
Property contains any underground storage tanks, or
underground piping associated with such tanks, used
currently or in the past for Hazardous Materials.
(f) As used herein, these terms
shall have the
following meanings:
(i) "Environmental Claim" means
any and all administrative, regulatory or judicial
actions, suits, demands, demand letters,
directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation
(written or oral) by any person or governmental
authority alleging potential liability arising out
of, based on or resulting from the presence,
or release or threatened release into the
environment, of any Hazardous Materials at any
location owned or leased by the Company or other
circumstances forming the basis of any violation or
alleged violation of any Environmental Law.
(ii) "Environmental Laws" means all
applicable foreign, federal, state and local laws
(including the common law), rules, requirements
and regulations relating to pollution, the
environment (including, without limitation,
ambient air, surface water, groundwater, land
surface or subsurface strata) or protection of
human health as it relates to the environment
including, without limitation, laws and regulations
relating to releases of Hazardous Materials, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials
or relating to management of asbestos in buildings.
(iii) "Hazardous Materials"
means wastes, substances, or materials (whether
solids, liquids or gases) that are deemed
hazardous, toxic, pollutants, or contaminants,
including without limitation, substances defined as
"hazardous substances", "toxic substances",
"radioactive materials", or other similar
designations in, or otherwise subject to regulation
under, any Environmental Laws.
SECTION 3.15. Absence of Litigation.
Except as set forth in Schedule 3.15, there
are (a) no claims, actions, suits, investigations,
or proceedings pending or, to the Company's
knowledge, threatened against the Company or any of
the Company Subsidiaries or any of their
respective properties or Assets before any
court, administrative, governmental, arbitral,
mediation or regulatory authority or body,
domestic or foreign, that challenge or seek to
prevent, enjoin, alter or materially delay the
transactions contemplated hereby, and (b) no
judgments, decrees, injunctions or orders of any
Government Entity or arbitrator outstanding
against the Company or any of the Company
Subsidiaries or any of their respective
properties or Assets that would prevent or materially
delay the transactions contemplated hereby.
SECTION 3.16. Pooling of Interests.
Neither the Company nor any Company
Subsidiaries nor any of their respective directors,
officers or shareholders has taken any action which
would interfere with Acquiror's ability to account
for the Merger as a pooling of interests.
SECTION 3.17. Intellectual Property.
Schedule 3.17 lists all material
franchises, patents, patent qualifications,
trademarks, service marks, trade names, trade
styles, brands, private labels, copyrights,
computer software, industrial designs and drawings,
licenses and rights and filings with respect
to the foregoing (including all reissues,
extensions and renewals thereof) (the
"Intellectual Property"), and applications therefor
owned or licensed by or registered in the name
of the Company and the
Company
Subsidiaries. Except as set forth in Schedule 3.17,
the Company and the Company Subsidiaries own all of
the Intellectual Property listed that is purported
to be owned by the Company and the Company
Subsidiaries, pays no royalty to anyone with respect
to any Intellectual Property, and has the right to
bring action for the infringement of such
Intellectual Property purported to be owned by the
Company and the Company Subsidiaries. Each of the
Company and the Company Subsidiaries owns or
possesses adequate rights to use all Intellectual
Property necessary to the conduct of
the present business of the Company and the
Company
Subsidiaries. None of the Company or the Company
Subsidiaries has any knowledge that any product
it sells or service it renders, or that the
marketing or use by the Company and the Company
Subsidiaries of such product or service, may or
is claimed
to infringe any Intellectual Property or
legally
protectable right of another.
SECTION 3.18. Books and Records
As of the Closing Date, the books of account,
stock records and minute books of the Company are
true and complete in all material respects, and
the matters contained therein
are
appropriately and accurately reflected in the
financial statements to the extent required to be
reflected therein.
SECTION 3.19. Taxes and Assessments.
Each of the Company and the Company
Subsidiaries has (i) duly and timely paid all Taxes
(as defined below) which have become due and
payable by it; (ii) none of the Company or the
Company Subsidiaries has received notice of, nor does
the Company and the Company Subsidiaries have any
knowledge of, any notice of deficiency or
assessment or proposed deficiency or assessment
from any taxing Government Entity; and (iii) to the
Company and the Company Subsidiaries' knowledge,
there are no audits pending
and there are no outstanding agreements or waivers by
the Company or any Company Subsidiary that extend
the statutory period of limitations applicable to
any federal, state, local, or foreign tax returns
or Taxes. As used herein, the term "Taxes" shall
mean all federal, state, local and foreign taxes
(including income, profit, franchise, sales, use,
real property, personal property, ad valorem,
excise, employment, social security and wage
withholding taxes) and installments of estimated
taxes, assessments, deficiencies, levies, imports,
duties, license fees, registration, fees,
withholdings or other similar charges of every
kind, character or description imposed by any
governmental authorities, and any interest,
penalties or additions to tax imposed thereon or
in connection therewith.
SECTION 3.20. Employment Matters.
(a) Schedule 3.20(a) contains a true and
complete list of names, positions and annual rates
of compensation (including the total amount accrued
for bonuses (irrespective of account of $421,000
plus accruals for the months of October, November
and December to be paid according to the Company
bonus plan attached to Schedule 3.20(a) and
specific bonus targets) of all current
directors, officers and employees of the Company and
the Company Subsidiaries. With respect to any
persons employed by the Company and the Company
Subsidiaries, the Company and the Company
Subsidiaries are in compliance with all Laws
respecting employment conditions and practices, have
withheld all amounts required by any applicable
Laws to be withheld from wages or any Taxes or
penalties for failure to comply with any of
the foregoing.
(b) Schedule 7.8 lists all employee
benefit plans and other similar arrangements
(collectively "Company Benefit
Arrangements") to which the Company or any Company
Subsidiary is a party or by which any of them is
bound, including, without limitation, (i) any
Employee Benefit Plans (as such term is defined
in the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) maintained by the
Company or the Company's Subsidiaries, (ii) any
profit-sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer,
consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement, or
(iii) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to
employees, officers, directors or agents,
including but not limited to benefits relating
to Company automobiles, clubs, vacation, child
care, parenting, sabbatical, sick leave, medical,
dental, hospitalization, life insurance and
other types of insurance. The Company and each of
the Company Subsidiaries have complied, and
currently are in compliance, in all materials
respects with the terms and conditions of all
Company Benefit Arrangements and all laws and
regulations applicable thereto. No reportable event,
within the meaning of ERISA, 4043(c)(1), (2), (3),
(5), (6), (7) or (10), has occurred and is continuing
with respect to any such Employee Benefit Plan
and no prohibited transaction, within the meaning
of Title I of ERISA, has occurred with respect to
any such Employee Benefit Plan. No Employee
Benefit Plan maintained by the Company or
the Company
Subsidiaries is a Multiemployer Plan (as such term is
defined in ERISA), is subject to Title IV of
ERISA or provides postretirement medical, life
insurance or other benefits except to the extent
required to comply with the health care continuation
coverage requirements of ERISA and the Code.
(c) There are no collective bargaining
agreements applicable to any Company or any Company
Subsidiary employees and none of the Company or the
Company Subsidiaries has a duty to
bargain with any labor organization with respect
to any such persons. To the knowledge
of the Company, there is not pending
any demand for recognition or any other request or
demand from a labor organization for representative
status with respect to any persons employed by the
Company and the Company Subsidiaries.
(d) Except as set forth in Schedule
3.20(d), with respect to any persons employed by
the Company and the Company Subsidiaries, (i)
each of the Company and the Company
Subsidiaries has not engaged in any unfair labor
practice within the meaning of the National Labor
Relations Act and has not violated any legal
requirement prohibiting discrimination on the basis
of race, color, national origin, sex, religion,
age, marital status, or handicap in its
employment conditions or practices; and (ii) there
are no pending or, to the knowledge of the Company
or the Company Subsidiaries, threatened unfair labor
practice charges or discrimination complaints
relating to race, color, national origin, sex,
religion, age, marital status, or handicap against
the Company or the Company Subsidiaries before any
Government Entity nor, to the knowledge of the
Company and the Company Subsidiaries, does any basis
therefor exist.
SECTION 3.21. Transactions with Related
Parties.
Except as set forth in Schedule 3.21, no
present or former officer, director, stockholder
or person known by the Company to be an
affiliate of the Company or any Company
Subsidiary, nor any person known by the Company or
any Company Subsidiary to be an affiliate of any
such person, is currently a party to any
transaction or agreement with the Company or any
Company Subsidiary, including any agreement
providing for any loans, the employment of,
furnishing of services by, rental of their
respective Assets from or to, or otherwise
requiring payments to, any such
officer, director, stockholder or
affiliate.
SECTION 3.22. Insurance.
Schedule 3.22 contains a list of all
insurance policies of title, property, fire,
casualty, liability, life, workmen's compensation,
libel and slander, and other forms of insurance of
any kind relating to the Assets or the business and
operations of the Company and the Company
Subsidiaries, copies of which have been made
available to Acquiror. All premiums with respect to
such policies covering all periods up to and
including the date hereof have been paid, and
no notice of cancellation or
termination has been received with respect to any
such policy. All such policies: (a) are in full
force and effect and are enforceable; (b) are
sufficient for compliance by the Company and the
Company Subsidiaries with all requirements of
applicable Law and of all licenses, franchises and
other agreements to which the Company and the Company
Subsidiaries are a party. Except as set forth in
Schedule 3.22, there are no pending claims under
any insurance policies and the Company has no facts
in the Company's possession which would lead the
Company to believe that the Company will receive
a claim under their professional liability policy.
SECTION 3.23. Board Approval; Vote Required.
The Board of Directors of the Company has
determined that the transactions contemplated by
this Agreement are in the best interests of the
Company and the Company Stockholders and has
resolved to recommend to such Company Stockholders
that they vote in favor thereof. The affirmative
vote of two-thirds of all the votes entitled to
be cast by the holders of outstanding
shares of the Company Common Stock is the only vote
of any class or series of capital stock of the
Company necessary to approve this Agreement, the
Merger and the transactions contemplated hereby.
SECTION 3.24. Brokers.
Except as set forth on Schedule 3.24, no
broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or
commission in connection with the transactions
contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
SECTION 3.25. Disclosure.
No representations or warranties by the
Company in this Agreement and no statement or
information contained in the Schedules hereto or
any certificate furnished or to be furnished by the
Company to Acquiror pursuant to the provisions of
this Agreement, contains or will contain any untrue
statement of a material fact or omits or will
omit to state any material fact necessary, in light
of the circumstances under which it was made, in
order to make the statements herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the
Company as follows:
SECTION 4.1. Organization and Qualification.
Acquiror is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Delaware. Acquiror
has the requisite power and authority to own, lease
and operate its Assets and properties and to carry on
its business as it is now being conducted and to
perform the terms of this Agreement and the
transaction contemplated hereby. Acquiror is duly
qualified to conduct its business, and is in
good standing, in each jurisdiction where the
ownership or leasing of its properties or the nature
of its activities in connection with the conduct of
its business makes such qualification necessary,
except where the failure to be so qualified would
not have an Acquiror Material Adverse Effect.
SECTION 4.2. Certificate of Incorporation and
Bylaws.
Acquiror has heretofore delivered to the
Company a complete and correct copy of the
certificate of incorporation and the bylaws of
Acquiror, each as amended to date. Such
certificate of incorporation and bylaws are in full
force and effect. Acquiror is not in violation of
any of the provisions of its certificate of incorporation
or bylaws or other
organizational or governing document.
SECTION 4.3. Capitalization.
The authorized capital stock of Acquiror
consists of: (a) 20,000,000 shares of common stock,
par value $.01 per share, of which 7,982,516 shares
are issued and outstanding as of the date hereof;
and (b) 5,000,000 shares of preferred stock, par
value $.01 per share, of which no shares are
issued and outstanding. As of the date hereof,
there are 1,091,127 shares of Acquiror Common Stock
subject to options, warrants or other
rights, agreements, arrangements or commitments of
any character relating to the issued or unissued
capital stock of Acquiror or obligating Acquiror to
issue or sell any shares of capital stock of, or
other equity interests in Acquiror, including
any securities directly or indirectly convertible
into or exercisable or exchangeable for any capital
stock or other equity securities of Acquiror. There
are no outstanding obligations of Acquiror to
repurchase, redeem or otherwise acquire any shares of
its capital stock or make any investment (in the
form of a loan, capital contribution or
otherwise) in any other person. All of the
issued and outstanding shares of Acquiror Common
Stock have been duly authorized and validly issued
in accordance with applicable laws and are fully
paid and nonassessable and not subject to
preemptive rights.
SECTION 4.4. Authority.
Acquiror has the necessary corporate
power and
authority to enter into this Agreement and
the Related
Agreements, to perform its obligations hereunder and
thereunder and to consummate the transactions
contemplated hereby and thereby. The execution
and delivery of this Agreement and the
Related Agreements by Acquiror and the consummation
by Acquiror of the transactions contemplated
hereby have been duly and validly authorized by
all necessary corporate action and no other corporate
proceedings on the part of Acquiror are necessary
to authorize this Agreement and the Related
Agreements or to consummate the transactions
contemplated hereby and thereby. This Agreement
and the Related Agreements have been duly executed
and delivered by Acquiror and, assuming the due
authorization, execution and delivery by the
Company, constitute legal, valid and binding
obligations of Acquiror, enforceable in accordance
with their terms, except as such enforceability may
be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws
of general applicability relating to or affecting
creditors' rights generally and by the application
of general principles of equity.
SECTION 4.5. No Conflict; Required Filings and
Consents.
(a) The execution and delivery of this
Agreement and the Related Agreements by Acquiror do
not, and the performance by Acquiror of its
obligations under this Agreement and the Related
Agreements will not, (i) conflict with or violate the
certificate of incorporation or bylaws of Acquiror,
(ii) conflict with or violate any law, statute,
ordinance, rule, regulation, order, judgment or
decree whether national or foreign, applicable to
Acquiror or its Assets and properties, or (iii)
result in any breach of or constitute a default
under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation to which Acquiror is a party
or by which Acquiror is bound, or by which any of
its properties or Assets is subject.
(b) The execution and delivery of this
Agreement and the Related Agreements by Acquiror
does not, and the performance of this Agreement by
Acquiror will not, require any consent, approval,
authorization or permit of, or filing with or
notification to, any Government Entity, except for
the filing and recordation of appropriate merger
documents as required by the MGCL.
SECTION 4.6. SEC Filings; Financial
Statements.
(a) Acquiror has filed all forms,
reports, statements and other documents required to
be filed with the SEC since
November 14, 1997, and has heretofore made
available to the Company, in the form filed with
the SEC since such date, together with any
amendments thereto, its (i) prospectus relating to
its initial public offering in July 1997, (ii) its
Quarterly Reports on Form 10-Q, and (iii) any
other reports or registration statements filed
by Acquiror (collectively, the "Acquiror SEC
Reports"). As of their respective filing dates the
Acquiror SEC Reports (i) complied as to form in all
material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the Securities Act and (ii) did
not at the time they were filed contain any
untrue statement of a material fact or omit to
state a material fact required to be stated
therein or necessary to make the statements therein,
in the light of the circumstances under which they
were made, not misleading.
(b) The financial statements, including
all related notes and schedules, contained in the
Acquiror SEC Reports (or incorporated by
reference therein) fairly present the
consolidated financial position of Acquiror as at the
respective dates thereof and the consolidated results
of operations and cash flows of Acquiror for the
periods indicated in accordance with generally
accepted accounting principles applied on a
consistent basis throughout the periods involved
(except as may be noted therein) and subject in
the case of interim financial statements to normal
year-end adjustments.
SECTION 4.7. Absence of Certain Changes or Events.
Except as disclosed in the Acquiror SEC
Reports filed prior to the date of this Agreement
and except as set forth in Schedule 4.7, , since
November 14, 1997, there has been no Acquiror
Material Adverse Effect and Acquiror has conducted
its business in the ordinary course, and Acquiror
has not (a) paid any dividend or distribution in
respect of, or redeemed or repurchased any of,
its capital stock; (b) issued any capital stock,
bonds or other corporate securities or debt
instruments, granted any options, warrants or other
rights calling for the issuance thereof, or
borrowed any funds; (c) incurred loss of, or
significant injury to, any of the Assets as the
result of any fire, explosion, flood, windstorm,
earthquake, labor trouble, riot, accident, act of
God or public enemy or armed forces, or other
casualty; (d) incurred, or become subject to, any
obligation or liability (absolute or contingent,
matured or unmatured, known or unknown), except
current liabilities incurred in the ordinary course
of business; (e) mortgaged, pledged or subjected
to any Encumbrance any of the Assets; (f)
sold, exchanged, transferred or otherwise disposed of
any of the Assets except in the ordinary course of
business, or canceled any debts or claims; (g)
written down the value of any Assets or written off
as uncollectible any accounts receivable, except
write downs and write-offs in the ordinary course of
business, none of which, individually or in the
aggregate, are material; (h) entered into any
transactions other than in the ordinary course of
business; (i) made any change in any method of
accounting or accounting practice; or (j) made any
agreement to do any of the foregoing.
SECTION 4.8. Absence of Litigation
There are (a) no claims,
actions, suits, investigations, or proceedings
pending or, to Acquiror's knowledge, threatened
against Acquiror or any of its properties or
Assets before any
court, administrative, governmental,
arbitral, mediation or regulatory authority or body,
domestic or foreign, that challenge or seek to
prevent, enjoin, alter or materially delay the
transactions contemplated hereby, and (b) no
judgments, decrees, injunctions or orders of any
Government Entity or arbitrator outstanding against
Acquiror or any of its properties or Assets that
would prevent or materially delay the transactions
contemplated hereby.
SECTION 4.9. Brokers.
No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or
commission in connection with the transactions
contemplated by this Agreement based upon
arrangements made by or on behalf of Acquiror.
SECTION 4.10 Pooling of Interest.
Neither Acquiror nor any of Acquiror's
subsidiaries nor any of their respective directors,
officers or shareholders has taken any action which
would interfere with Acquiror's ability to account
for the Merger as a pooling of interests.
SECTION 4.11. Disclosure.
No representations or warranties by
Acquiror in this Agreement and no statement or
information contained in the Schedules hereto or
any certificate furnished or to be furnished by
Acquiror to the Company pursuant to the provisions
of this Agreement, contains or will contain any
untrue statement of a material fact or omits or
will omit to state any material fact necessary, in
light of the circumstances under which it was made,
in order to make the statements herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF MERGER SUB
Acquiror and Merger Sub jointly and
severally represent and warrant to the Company as
follows:
SECTION 5.1. Organization and Qualification.
Merger Sub is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Maryland. Merger
Sub was formed solely for the purpose of
engaging in the transactions contemplated by this
Agreement. As of the date of this Agreement,
except for obligations or liabilities incurred
in connection with its incorporation or
organization and the transactions contemplated by
this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or
liabilities or engaged in any business activities of
any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 5.2. Certificate of Incorporation and
Bylaws.
Merger Sub has heretofore made available to
the Company a complete and correct copy of the
articles of incorporation and the bylaws of Merger
Sub, each as amended to date. Such articles of
incorporation and bylaws are in full force and
effect. Merger Sub is not in violation of any of
the provisions of its articles of incorporation or
bylaws or other organizational or governing
document.
SECTION 5.3. Authority.
Merger Sub has the necessary corporate
power and
authority to enter into this Agreement, to
perform its obligations hereunder and to
consummate the transactions contemplated hereby.
The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of
the transactions contemplated hereby have been
duly and validly authorized by all necessary
corporate action and no other corporate
proceedings on the part of Merger Sub are necessary
to authorize this Agreement or to consummate
the transactions contemplated hereby. This
Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization,
execution and delivery by the Company and Acquiror,
constitutes a legal, valid and binding obligation of
Merger Sub, enforceable in accordance with its terms,
except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general applicability
relating to or affecting creditors' rights
generally and by the application of general
principles of equity.
SECTION 5.4. No Conflict; Required Filings and
Consents.
(a) The execution and delivery of this
Agreement by Merger Sub do not, and the
performance by Merger Sub of its obligations under
this Agreement will not, (i) conflict with or
violate the certificate of incorporation or bylaws of
Merger Sub, (ii) conflict with or violate any law,
statute, ordinance, rule, regulation, order, judgment
or decree applicable to Merger Sub or its Assets and
properties, or (iii) result in any breach of or
constitute a default under any note, bond, mortgage,
indenture, contract, agreement, lease, license,
permit, franchise or other instrument or
obligation to which Merger Sub is a party or by
which Merger Sub is bound, or by which any of its
properties or Assets is subject.
(b) The execution and delivery of this
Agreement by Merger Sub does not, and the
performance of this Agreement by Merger Sub will
not, require any consent, approval, authorization or
permit of, or filing with or notification to, any
Government Entity, except for the filing and
recordation of appropriate merger documents as
required by the MGCL.
SECTION 5.5. Disclosure.
No representations or warranties by Merger
Sub in this Agreement and no statement or
information contained in the Schedules hereto or
any certificate furnished or to be furnished by
Merger Sub to the Company pursuant to the provisions
of this Agreement, contains or will contain any
untrue statement of a material fact or omits or
will omit to state any material fact necessary, in
light of the circumstances under which it was made,
in order to make the statements herein or therein not
misleading.
ARTICLE VI
COVENANTS
SECTION 6.1. Affirmative Covenants of the
Company.
The Company hereby covenants and agrees
that, prior to the Effective Time, unless
otherwise expressly contemplated by this Agreement
or consented to in writing by Acquiror, the
Company shall (a) operate its business in the usual
and ordinary course consistent with past practices
and in accordance with applicable Laws; (b)
preserve substantially intact its business
organization, maintain its rights and contracts,
use its best efforts to retain the services of
its respective principal officers and key employees
and maintain its relationship with its respective
suppliers, contractors, distributors, customers and
others having business relationships with it; (c)
maintain and keep its properties and Assets in as
good repair and condition as at present, ordinary
wear and tear excepted; and (d) keep in full force
and effect insurance comparable in amount and
scope of coverage to that currently maintained.
SECTION 6.2. Negative Covenants of the
Company.
Except as expressly contemplated by this
Agreement or otherwise consented to in writing by
Acquiror, from the date hereof until the Effective
Time, the Company shall not do any of the following:
(a) (i) increase the compensation
payable to or to become payable to any of its
directors, officers or employees, except for
increases in salary, wages or bonuses payable or to
become payable in the ordinary course of business
and consistent with past practice; (ii) grant any
severance or termination pay to, or enter into or
modify any employment or severance agreement with,
any of its directors, officers or employees; or (iii)
adopt or amend any employee benefit plan or
arrangement, except as may be required by applicable
Law;
(b) declare, set aside or pay any dividend
on, or make any other distribution in respect of, any
of its capital stock;
(c) (i) redeem, repurchase or otherwise
reacquire any share of its capital stock or any
securities or obligations convertible into or
exchangeable for any share of its capital stock,
or any options, warrants or conversion or other
rights to acquire any shares of its capital stock or
any such securities or obligations; (ii) effect any
reorganization or recapitalization; or (iii) split,
combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of
any other securities in respect of, in lieu of, or
in substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant
or sell, or authorize or propose the issuance,
delivery, award, grant or sale (including the grant
of any Encumbrances) of, any shares of any class of
its capital stock (including shares held in treasury)
or other equity securities, any securities or
obligations directly or indirectly convertible into
or exercisable or exchangeable for any such shares,
or any rights, warrants or options to acquire, any
such shares or securities or any rights, warrants or
options directly or indirectly to acquire any such
shares or securities; or (ii) amend or otherwise
modify the terms of any such securities,
obligations, rights, warrants or options in a manner
inconsistent with the provisions of this Agreement or
the effect of which shall be to make such terms
more favorable to the holders thereof;
(e) acquire or agree to acquire, by
merging or consolidating with, by purchasing an
equity interest in or a portion of the Assets of,
or by any other manner, any business or any
corporation, partnership, association or other
business organization or division thereof, or
otherwise acquire or agree to acquire any Assets
of any other person (other than the purchase of
inventory in the ordinary course of business and
consistent with past practice), or make or commit
to make any capital expenditures other than
capital expenditures in the ordinary course of
business consistent with past practice and in
amounts which are set forth and described in the
Company's budget for 1997, a true and complete copy
of which has been provided to Acquiror;
(f) sell, lease, exchange, mortgage,
pledge, transfer
or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its Assets except
for dispositions of inventory in the ordinary
course of business and consistent with past practice;
(g) propose or adopt any amendments to its
articles of incorporation or bylaws;
(h) (i) change any of its methods of
accounting in
effect at January 1, 1997, or (ii) make or rescind
any express or deemed election relating to taxes,
settle or compromise any claim, action, suit,
litigation, proceeding, arbitration,
investigation, audit or controversy relating to
taxes, or change any of its methods of reporting
income or deductions for federal income tax purposes
from those employed in the preparation of the federal
income tax returns for the taxable year ending
December 31, 1997, except, in the case of clause (i)
or clause (ii), as may be required by law or
generally accepted accounting principles,
consistently applied;
(i) prepay, before the scheduled maturity
thereof, any of its long-term debt, or incur any
obligation for borrowed money, whether or not
evidenced by a note, bond, debenture or similar
instrument, other than trade payables incurred in
the ordinary course of business consistent with past
practices.
(j) enter into or modify in any material
respect any
Material Contract or Government Contract which, if
in effect as of the date hereof, would have been
required to be disclosed on Schedule
3.11 and/or Schedule
3.13(a), respectively;
(k) take any action that would or could
reasonably be expected to result in any of its
representations and warranties set forth in this
Agreement being untrue or in any of the
conditions to the Merger set forth in Article VIII
not being satisfied; or
(l) agree in writing or otherwise to do
any of the
foregoing.
SECTION 6.3. Negative Covenants of
Acquiror and the
Company After the
Effective Time.
Except as expressly contemplated by this
Agreement or otherwise consented to in writing by
the Company or Acquiror, until consummation of the
Merger on the Closing Date, or in the event the
Merger is not consummated, neither the Company nor
Acquiror shall solicit or hire the employees
engaged in the other's business for a period of
one year from the date of this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. Consents and Approvals; Filings
and Notices. The Company shall use
reasonable efforts to as promptly
as possible make all filings with, provide all
notices to and obtain all consents and approvals
from third parties required to
be obtained by the Company in connection with the
transactions contemplated hereunder, including all
filings with, notices to and consents and approvals
from any Government Entities and other persons.
SECTION 7.2. Access to Information.
The Company shall afford Acquiror and its
accountants, counsel and other representatives,
reasonable access during normal business hours
during the period prior to the Effective Time to
(a) all of the Company's properties, books,
contracts, commitments and records, and (b) all other
information concerning the business, properties and
personnel (subject to restrictions imposed by
applicable law) of the Company and as Acquiror may
reasonably request. The Company agrees to provide
to Acquiror and its accountants, counsel and other
representatives copies of internal financial
statements promptly upon request.
Acquiror
shall provide the Company and the Company
Stockholders with copies of such publicly available
information about Acquiror as the Company may
request and shall provide the Company with
reasonable access to its executive officers in this
regard. No
information or knowledge obtained in any
investigation pursuant to this Section
7.2 shall affect or be deemed to modify any
representation or warranty contained herein or the
conditions to the obligations of the parties to
consummate the Merger.
In the event of the termination of this
Agreement, each of Acquiror and the Company or any
Company Subsidiary and their respective officers,
directors, employees, representatives, advisors
and agents, as applicable, shall destroy or deliver
to the Company or Acquiror, as applicable,
all confidential documents, work papers and other
materials, and all copies thereof, obtained by
Acquiror or the Company, as applicable, or on their
respective behalf, as applicable, from either party
as a result of this Agreement or in connection
herewith, whether obtained before or after the
execution and delivery of this Agreement.
SECTION 7.3. Confidentiality.
Each of the parties hereto hereby
agree to keep confidential any information or
knowledge obtained pursuant to Section 7.2, the
Confidentiality Agreement dated August 5, 1997, the
Letter of Intent dated September 15, 1997 (the
"Letter of Intent"), or pursuant to the negotiation
and execution of this Agreement or the
effectuation of the transactions contemplated
hereby; provided, however, that the foregoing shall
not apply to information or knowledge which (a) a
party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the
other party, (b) is generally known to the public
and did not become so known through any violation
of law, (c) became known to the public through no
fault of such party, (d) is later lawfully acquired
by such party from other sources, (e) is required
to be disclosed by order of court of government
agency with subpoena powers or (f) which is
disclosed in the course of any litigation between
any of the parties hereto.
The
confidentiality provisions of the Confidentiality
Agreement and Letter of Intent are incorporated
herein by reference with the same effect as if
fully set forth herein.
SECTION 7.4. Company Stockholder Approval.
As promptly as practicable after the
execution of this Agreement, the Company shall
submit this Agreement and the transactions
contemplated hereby to the Company's Stockholders
for approval and adoption as provided by the
MGCL and its
articles of incorporation and bylaws. The Company
shall use its best efforts to solicit and obtain
the consent of the Company Stockholders sufficient
to approve the Merger and this Agreement and to
enable the Closing to occur as promptly as
practicable. The materials submitted to the Company
Stockholders shall be subject to the reasonable
review and approval by Acquiror and include
information regarding the Company and Acquiror, the
terms of the Merger and this Agreement and the
unanimous recommendation of the Board of Directors
of the Company in favor of the Merger and this
Agreement.
SECTION 7.5. Further Action; Reasonable Best
Efforts.
Subject to the terms and conditions
herein provided, each of the parties shall use
reasonable best efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable
under applicable Laws or otherwise to
consummate and make effective the
transactions contemplated by this Agreement as
promptly as practicable, including using its
reasonable best efforts to obtain all licenses,
permits, consents, approvals,
authorizations, qualifications and orders of
Government Entities and parties to contracts with
the Company and Acquiror as are necessary for the
transactions contemplated herein.
SECTION 7.6. Public Announcements.
Acquiror and the Company agree that neither
will issue any press release or otherwise make
any public statements concerning this Agreement or
the transactions contemplated hereby without the
prior written consent of the other party, except that
Acquiror may make such public disclosure that
Acquiror believes in good faith to be required
by law or any NASD listing requirements (in
which event Acquiror shall consult with the
Company and obtain the Company's written
concurrence prior to making such public
announcement, which concurrence will not be
unreasonably withheld, conditioned or delayed).
SECTION 7.7. No Solicitation.
During the term of this Agreement, neither
the Company nor any of its affiliates or any person
acting on behalf of such party shall (a) solicit or
favorably respond to indications of interest from,
or enter into negotiations with, any third party for
any proposed merger, consolidation, sale or
acquisition of the Company, the Assets or the
Company Common Stock or
(b) furnish or cause to be furnished any nonpublic
information concerning the business to any person
other than in the ordinary course of business or
pursuant to applicable Law and after prior written
notice to Acquiror.
SECTION 7.8. Employees.
(a) The Employment Agreements executed
on the date hereof are incorporated herein, made a
part hereof and will be enforceable in accordance
with their terms after the Closing Date and the
Effective Time. In addition, the Company shall use
its best efforts to encourage the current employees
of the Company to continue their employment with
the Acquiror or any of its Subsidiaries
following the Closing Date.
(b) Acquiror agrees that, as of the
Effective Time, Acquiror shall cause the Surviving
Corporation to continue to employ all of the
employees of the Company and the Company
Subsidiaries, it being understood that nothing in
this Agreement (other than in connection with any
employment agreement to be
entered into pursuant to the terms hereof) shall be
deemed to create any employment status other than
employment at will. Acquiror agrees to continue all
employee benefit plans maintained by the Company
for employees of the Surviving Corporation
generally on the terms and conditions set forth in
Schedule 7.8 hereto until such time as such
employees participate in the employee benefit
plans of Acquiror, which shall occur no later than
January 1, 1999.
SECTION 7.9. Affiliate Agreements.
At least five (5) days prior to the
Effective Time, the Company shall deliver to
Acquiror a list identifying all persons who might, in
the Company's opinion, be deemed to be "affiliates"
of the Company as such term is used in SEC
Accounting Series Release Number 130 and Release
Number 135 and Rule 145 under the Securities Act
(the "Affiliates"). Schedule 7.9 identifies all
persons who might, in the Company's Opinion, be
deemed to be Affiliates as of the date hereof. The
Company shall use its best efforts to cause each
person who is identified as an Affiliate to deliver
to Acquiror on or prior to the Effective Time a
written agreement, in the form attached hereto
as Exhibit C (the "Affiliate Agreement"), that he
will not offer to sell, sell or otherwise dispose
of any of the shares of Acquiror Common Stock issued
to him in connection with the Merger, except in
accordance with the terms of the Affiliate
Agreement. If any Affiliate refuses to execute
an Affiliate Agreement, Acquiror shall, in lieu of
receipt of such Affiliate Agreement, be entitled to
place appropriate legends on the certificates
evidencing the Acquiror Common Stock to be
received by such Affiliate pursuant to the terms
of this Agreement, and to issue appropriate stock
transfer instructions to the transfer agent for
Acquiror Common Stock, to the effect that the
shares received or to be received by such Affiliate
pursuant to this Agreement may only be sold,
transferred or otherwise conveyed, and the holder
thereof may only reduce his interest in or risks
relating to such shares, pursuant to the
requirements set forth in the Affiliate
Agreement. The foregoing restrictions on the
transferability of Acquiror Common Stock shall
apply to all purported sales, transfers and other
conveyances of the shares received or to be
received by such Affiliate pursuant to this Agreement
and to all purported reductions in the interest in
or risks relating to such shares, whether or not
such Affiliate has exchanged the
certificate previously evidencing shares of the
Company's capital stock, into which such shares were
converted.
SECTION 7.10. Indemnification.
From and after the Effective Time,
Acquiror agrees to cause the Surviving Corporation
to indemnify and hold harmless each current and
former director and officer of the Company against
any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with
any claim, action, suit, proceeding or
investigation, whether civil or criminal,
administrative or investigative, arising out of
matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior
to, at or after the Effective Time, to the same
extent as the Company provided for
under the Company's articles of
incorporation or by-laws as in effect on the date
hereof to indemnify such person (and Acquiror
shall advance expenses as incurred to the same
extent provided for under the Company's articles
of incorporation and by-laws as in effect on the
date hereof, provided the person to whom
expenses are advanced provides an unsecured
undertaking to repay such advances if it is
ultimately determined that such person is not
entitled to
indemnification).
SECTION 7.11 Pooling Accounting.
Acquiror and the Company shall each use its best
efforts to cause the business combination to be
effected by the Merger to be accounted for as a
pooling of interests. Each of Acquiror and the
Company shall use its best efforts to cause its
Affiliates not to take any action that would
adversely affect the ability of Acquiror to account
for the business combination to be effected by the
Merger as a pooling of interests.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1. Conditions to Obligations of
Acquiror, Merger
Sub and the Company to Effect the
Merger.
The respective obligations of Acquiror,
Merger Sub and the Company to effect the Merger
and the other transactions contemplated herein
shall be subject to the satisfaction at or prior
to the Effective Time of the following conditions,
any or all of which may be waived, in whole or in
part, to the extent permitted by applicable law:
(a) No Order. No Government Entity or
federal or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive
order, decree, judgment, injunction or other
order (whether temporary, preliminary or permanent),
in any case which is in effect and which prevents
or prohibits consummation of the Merger or any other
transactions contemplated in this Agreement;
provided, however, that the parties shall use their
reasonable efforts to cause any such decree,
judgment, injunction or other order to be vacated
or lifted, and any such action or proceeding to be
dismissed.
(b) Stockholder Approval. This
Agreement and the transactions contemplated hereby
shall have been approved and adopted by the
requisite vote of the Company Stockholders in
accordance with the MGCL.
(c) Pooling of Interests. Acquiror
shall have received reasonable assurances from
Ernst & Young L.L.P., in form and substance
reasonably satisfactory to Acquiror and the Company
that the Merger will qualify as a "pooling of
interests" in accordance with generally accepted
accounting principles.
SECTION 8.2. Additional Conditions to
Obligations of Acquiror.
The obligations of Acquiror and Merger Sub
to effect the Merger and the other transactions
contemplated in this Agreement are also subject to
the fulfillment at or prior to the Effective Time of
the following conditions, any or all of which may
be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Representations and
Warranties. The representations and warranties
of the Company made in this Agreement shall be
true and correct in all material respects, on and
as of the Effective Time with the same effect as
though such representations and warranties had been
made on and as of the Effective Time (provided
that any representation or warranty
contained herein that is qualified by a
materiality standard shall not be further
qualified hereby), except for
representations and warranties that speak as of a
specific date or time (which need only be true
and correct in all material respects as of such
date or time). Acquiror shall have received a
certificate signed on behalf of the Company by
the chief executive officer of the Company to that
effect.
(b) Agreements and Covenants. The
agreements and
covenants of the Company required to be performed on
or before the Effective Time shall have been
performed in all material respects. Acquiror
shall have received a certificate signed on behalf
of the Company by the chief executive officer of
the Company to that effect.
(c) Dissenting Shares. The aggregate
number of
Dissenting Shares shall not constitute more than
five percent (5%) of the Company Common Stock
outstanding on the Closing Date.
(d) Legal Proceedings. No action or
proceeding before any Government Entity shall have
been instituted or threatened (and not
subsequently settled, dismissed, or otherwise
terminated) which is reasonably expected to restrain,
prohibit or invalidate the Merger or other
transactions contemplated by this Agreement other
than an action or proceeding instituted or
threatened by Acquiror or Merger Sub.
(e) No Company Material Adverse Effect.
Since the
date of this Agreement, no Company Material Adverse
Effect shall have occurred and be continuing.
(f) Required Consents. The Company
shall have
delivered to Acquiror at or before Closing all
consents or notices necessary to be obtained or
made by the Company in connection with the
transactions contemplated by this Agreement.
(g) Escrow Agreement. Acquiror,
Merger Sub, the
Escrow Agent and the Stockholders' Representative
shall enter into the Escrow Agreement at or
before Closing in a form substantially similar to
Exhibit A, pursuant to which the Escrow Stock shall
have been retained in escrow.
(h) Company Stockholders' Certificate.
Each of the
Company Stockholders and Unvested Optionholders
shall have executed a certificate in the form set
forth as Exhibit D hereto (the "Company
Stockholder's Certificate").
(i) Affiliate Agreement. Acquiror shall
have received from each of the Affiliates of the
Company an executed Affiliate Agreement which shall
be in full force and effect.
(j) Legal Opinion. Acquiror shall have
received an
opinion from Holland & Knight LLP, counsel to
the Company, substantially in the form of Exhibit E
hereto.
(k) Employment Agreements. The
Employment Agreements
shall remain in full force and effect.
(l) Option Exercises and Cancellations.
Except for
the Unvested Options, all outstanding Company
Options shall have been terminated by exercise or
cancellation on or before the Effective Time
such that there shall be no Company Options
outstanding after the Effective Time.
(m) Termination of Certain Agreements.
Acquiror shall have received reasonably satisfactory
evidence that the following
agreements shall have been terminated prior to the
Effective Time (i) Company Shareholder's Agreement
and (ii) that certain market development and
management agreement between the Company and
Joseph Giglio.
(n) Other Closing Documents. The Company
shall have
executed and/or delivered to Acquiror such
additional documents, certificates, opinions and
agreements as Acquiror may reasonably request.
SECTION 8.3. Additional Conditions to
Obligations of the
Company.
The obligations of the Company to effect
the Merger and the other transactions contemplated
in this Agreement are also subject to the
fulfillment at or prior to the Effective Time of the
following conditions any or all of which may be
waived, in whole or in part, to the extent permitted
by applicable law:
(a) Representations and
Warranties. The
representations and warranties of Acquiror and Merger
Sub made in this Agreement shall be true and
correct in all material respects, on and as of the
Effective Time with the same effect as though such
representations and warranties had been made on and
as of the Effective Time (provided that any
representation or warranty contained herein that
is qualified by a materiality standard shall not
be further qualified hereby), except for
representations and warranties that speak as of a
specific date or time other than the Effective
Time (which need only be true and correct in all
material respects as of such date or time). The
Company shall have received a certificate of an
executive officer of Acquiror to that effect.
(b) Agreements and Covenants. The
agreements and
covenants of Acquiror and Merger Sub required to be
performed on or before the Effective Time shall
have been performed in all material respects. The
Company shall have received a certificate of the
chief executive officer of Acquiror to that effect.
(c) Legal Proceedings. No action or
proceeding before any Government Entity shall have
been instituted or threatened (and not
subsequently settled, dismissed, or otherwise
terminated) which is reasonably expected to restrain,
prohibit or invalidate the Merger or other
transactions contemplated by this Agreement other
than an action or proceeding instituted or
threatened by the Company.
(d) Registration Rights Agreement.
Acquiror and the
Stockholders' Representative shall execute at or
before Closing an agreement in form substantially
as set forth in Exhibit B providing, among other
things, that such Stockholders shall have "piggy-
back" registration rights with respect to the
Acquiror Common Stock.
(e) No Acquiror Material Adverse Effect.
Since the
date of this Agreement, no Acquiror Material Adverse
Effect shall have occurred and be continuing.
(f) Legal Opinion. The Company shall have
received an opinion from the General Counsel of the
Acquiror, substantially in the form of Exhibit F
hereto.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination.
This Agreement may be terminated at any
time prior to the Effective Time:
(a) by mutual written consent of
Acquiror and the
Company;
(b) by Acquiror if the Company shall have
breached any of its representations, warranties,
covenants or agreements contained in this
Agreement, or any such representation or warranty
shall have become untrue, in any such case such that
the conditions precedent to the obligations of
Acquiror to close specified in Section 8.2 will
not be satisfied and such breach has not been
promptly cured within thirty (30) days following
receipt by the Company of written notice of such
breach;
(c) by the Company if Acquiror or Merger
Sub shall
have breached any of its representations,
warranties, covenants or agreements
contained in this Agreement, or any such
representation or warranty shall have become untrue,
in any such case such that the conditions precedent
to the obligation of the Company to close specified
in Section 8.3, will not be satisfied and such
breach has not been promptly cured within thirty
(30) days following receipt by Acquiror of written
notice of such breach;
(d) by either Acquiror or the Company if
any decree,
permanent injunction, judgment, order or other
action by any court of competent jurisdiction
or any Government Entity preventing or
prohibiting consummation of the Merger shall have
become final and nonappealable; or
(e) by either Acquiror or the Company if
the Effective Time has not occurred on or prior to
December 31, 1997 (unless such date shall be
extended by the mutual written consent of the
parties); provided, that the right to terminate
this Agreement under this Section 9.1(e) shall not
be available to any party whose breach of
representations, warranties, covenants or
agreements contained in this Agreement has been the
cause of, or resulted in, the failure of the
Effective Time to occur by such date or the
inability of such condition to be satisfied.
SECTION 9.2. Effect of Termination.
If this Agreement is terminated
pursuant to
Section 9.1, this Agreement shall forthwith become
void and there shall be no liability or obligation
on the part of any party hereto, except that the
provisions of Sections 6.3, 7.3 and 11.12 shall not
be extinguished but shall survive such termination,
and nothing herein shall relieve any party from
liability for any breach hereof and each party
shall be entitled to any remedies at law or in equity
for such breach.
SECTION 9.3. Amendment.
This Agreement may not be amended
except by an
instrument in writing signed by the parties hereto.
SECTION 9.4. Waiver.
At any time prior to the Effective Time,
one party may (a) extend the time for the performance
of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the
representations and warranties contained in this
Agreement or
in any document delivered pursuant to this Agreement
of the other party and (c) waive compliance by the
other party with any of the agreements or conditions
contained in this Agreement. Any such extension
or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such
party.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; ESCROW ARRANGEMENTS;
REMEDIES
SECTION 10.1. Survival of Representations.
All representations, warranties, covenants,
indemnities and other agreements made by any party
to this Agreement herein or pursuant hereto,
shall be deemed made on and as of the Effective
Time as though such representations, warranties,
covenants, indemnities and other agreements were made
on and as of such date, and all such
representations, warranties, covenants, indemnities
and other agreements shall survive for a period
of twelve (12) months after the Effective
Time. Notwithstanding anything herein to the
contrary, any
representation, warranty, covenant or agreement
which is the subject of a claim which is
asserted in writing prior to the expiration of the
applicable period set forth above shall survive with
respect to such claim or dispute until the final
resolution thereof.
SECTION 10.2. Indemnification; Escrow
Arrangements.
Each Company Stockholder, jointly and
severally, hereby agrees to indemnify and hold the
Acquiror and the Surviving Corporation and their
respective officers, directors, employees, agents
and representatives (collectively, the
"Acquiror
Indemnified Persons") harmless, to the extent of
the Escrow Stock, against all Losses resulting
from, imposed upon or incurred by any Acquiror
Indemnified Person (including the Surviving
Corporation), directly or indirectly, as a result
of (a) any inaccuracy or breach of a representation
or warranty of the Company, (b) any failure by the
Company to perform or comply with any covenant or
agreement contained in this Agreement or in any
document, certificate or agreement furnished pursuant
to this Agreement, or (c) any breach of any
Company Stockholder's Certificate. The Acquiror
Indemnified Persons shall be
compensated for any such Losses from the Escrow Stock
pursuant to the terms and conditions of the Escrow
Agreement. Nothing herein shall limit the liability
of the Acquiror or the Company for any breach of
any representation, warranty or covenant contained
in this Agreement if the Merger is not consummated.
SECTION 10.3. Remedies Cumulative
The remedies provided herein shall be
cumulative and shall not preclude the assertion by
the parties hereto of any other rights or the
seeking of any other remedies against the other, or
their respective successors or assigns.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. Notices.
All notices and other communications
given or made pursuant hereto shall be in writing
and shall be deemed to have
been duly given or made as of the date delivered,
mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by
registered or certified mail (postage prepaid,
return receipt requested) to the parties at
the following addresses (or at such other address
for a party as shall be specified by like
changes of address) or sent by electronic
transmission to the telecopier number specified
below:
(a) If to Acquiror:
Hagler Bailly, Inc.
1530 Wilson Boulevard Arlington,
Virginia 22209 Telecopier No.:
(703) 528-8573 Attention: Stephen
V.R. Whitman
With a copy (which shall not
constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopier No.: (202)
637-5910 Attention:
David B.H. Martin,
Jr.
(b) If to the Company:
Apogee Research, Inc.
4350 East West Highway Bethesda,
Maryland 20814 Telecopier No.:
(301) 654-9355 Attention: Kenneth
I. Rubin
With a copy (which shall not
constitute notice) to:
Holland & Knight LLP
2100 Pennsylvania Avenue, N.W.
Washington, D.C. 20037
Telecopier No.: (202) 955-5564
Attention: David Metzger
SECTION 11.2. Certain Definitions.
For purposes of this Agreement, the term:
(a) "Acquiror Material Adverse Effect"
means any material adverse effect on the Assets or the
business, financial
condition or results of operations of Acquiror.
(b) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by,
or is under common control with, the first mentioned
person.
(c) "Assets" shall mean the assets, rights and
properties,
whether owned, leased or licensed, real, personal or
mixed, tangible or intangible, that are used, useful
or held for use in connection with the business of an
entity.
(d) "Blue Sky Laws" shall mean state securities
or "blue
sky" laws.
(e) "business day" shall mean any day other
than a day on
which banks in the State of Maryland are authorized
or obligated to be closed.
(f) "Company Material Adverse Effect" means any
material
adverse effect on the Assets or the business,
financial condition
or results of operations of the Company and the
Company Subsidiaries taken as a whole.
(g) "control" (including the terms "controlled
by" and
"under common control with") means the possession,
directly or indirectly or as trustee or executor, of
the power to direct or cause the direction of the
management or policies of a person, whether through
the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise.
(h) "Encumbrances" means mortgages, liens,
pledges,
encumbrances, security interests, deeds of trust,
options, encroachments, reservations, orders,
decrees, judgments, restrictions, charges, contract
rights, claims or equity of any kind.
(i) "Government Entity" means any United States
or other
national, state, municipal or local government,
domestic or foreign, any subdivision, agency, entity,
commission or authority thereof, or any quasi-
governmental or private body exercising any
regulatory, taxing, importing or other governmental
or quasigovernmental authority.
(j) "Government Contract" means any Agreement
with or for
(and any subcontract at any tier under an Agreement
with or for) any foreign, federal, state or local
governmental agency, department, commission, board,
bureau, authority or instrumentality.
(k) "including" means "including but not
limited to."
(l) "Laws" means all foreign, federal, state
and local
statues, laws, ordinances, regulations, rules,
resolutions, orders, determinations, writes,
injunctions, awards (including, without limitation,
awards of any arbitrator), judgments and decrees
applicable to the specified persons or entities.
(m) "Losses" means all demands, losses,
claims, actions or
causes of action, assessments, damages, liabilities,
costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees
and disbursements.
(n) "person" means an individual, corporation,
partnership,
association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)
of the Exchange Act).
(o) "Subsidiary" means any corporation,
partnership, joint
venture or other legal entity of which such person
(either alone or through or together with any other
Subsidiary) (i) owns, directly or indirectly, fifty
percent (50%) or more of the stock, partnership
interests or other equity interests the holders of
which are generally entitled to vote for the
election of the board of directors or other
governing body of such corporation, partnership,
joint venture or other legal entity; or
(ii) possesses, directly or indirectly, control over
the direction of management or policies of such
corporation, partnership, joint venture or other
legal entity (whether through ownership of voting
securities, by agreement or otherwise).
SECTION 11.3. Headings.
The headings contained in this
Agreement are for reference purposes only and
shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.4. Severability.
If any term or other provision of this
Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public
policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force
and effect so long as the economic or legal
substance of the transactions contemplated
hereby is not affected in any manner materially
adverse to any party. Upon such determination that
any term or other provision is invalid, illegal
or incapable of being enforced, the parties
hereto shall negotiate in good faith to
modify this Agreement so as to effect the original
intent of the parties as closely as possible in an
acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent
possible.
SECTION 11.5. Entire Agreement.
This Agreement (together with the
Exhibits, the
Schedules and the other documents delivered
pursuant hereto), together with the Related
Agreements, constitute the entire agreement of
the parties and supersede all prior agreements and
undertakings, both written and oral, between the
parties, or any of them, with respect to the
subject matter hereof and, except as otherwise
expressly provided herein, are not intended to
confer upon any other person any rights or remedies
hereunder.
SECTION 11.6. Specific Performance.
The transactions contemplated by this
Agreement are unique. Accordingly, each of the
parties acknowledges and agrees that, in addition
to all other remedies to which it may be
entitled, each of the parties hereto is entitled to
a decree of specific performance, provided such
party is not in material default hereunder.
SECTION 11.7. Assignment.
Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior
written consent of the other party; provided,
however, that Acquiror and Merger Sub shall have
the right to assign this Agreement without the
prior written consent of the Company to a direct
or indirect subsidiary of Acquiror, but no such
assignment shall relieve Acquiror or Merger Sub, as
the case may be, of its obligations hereunder.
Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and
be enforceable by the parties and their respective
successors and assigns.
SECTION 11.8. Third Party Beneficiaries.
This Agreement shall be binding upon and
inure solely to the benefit of each party
hereto, and nothing in this Agreement, express
or implied, is intended to or shall confer upon
any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this
Agreement.
SECTION 11.9. Disputes Resolution
(a) In the event any dispute arises
under or in connection with this Agreement which
cannot be resolved between the parties, the
dispute will be immediately referred to
Executive Negotiation. Executive Negotiation is
a process whereby the President of the Company
and the President of Acquiror (or their
delegates) will confer and negotiate in good faith
to seek to resolve the dispute. In the event that
either party's representative is not available
within forty-eight (48) hours of notice of the
dispute, an alternate executive will be specified
for the negotiations by that party.
(b) In the event the parties agree the
dispute cannot be resolved by Executive
Negotiation, or the dispute is not resolved
within thirty (30) days after notice of the
dispute, the parties shall attempt to resolve
the dispute through Mediation. Either party may
avoid Mediation, however, if it
determines in its sole discretion that Mediation
is futile to resolution of the dispute. Mediation
shall involve submission of the dispute to a
single third party individual, selected by mutual
consent of the parties, and the cost of whom is
borne equally by the parties. The parties may
submit their dispute orally or in writing to the
mediator. The mediator shall confer with the
parties, either in person or by electronic means,
as agreed to by the parties. The parties shall
submit this clause to the mediator, and the
mediator shall deliver his/her decision either
orally or in writing no later than five (5) calendar
days after the conference. Such decision is binding
on the parties if the decision does not become the
subject of arbitration.
(c) Executive Negotiation and Mediation,
as provided
above, shall be a condition precedent to the
filing of any arbitration demand under this
Agreement by either party, unless a party in its
sole discretion serves notice of its belief that
Executive Negotiation and/or Mediation is futile
to resolution of the dispute. No arbitration
demand may be filed until thirty (30) days after
one party has notified the other of its desire to
enter into Executive Negotiation or Mediation,
provided, however, that such condition precedent
shall not apply if either party refuses to
continue Executive Negotiation and/or
Mediation. In the event Executive Negotiation
and/or Mediation are pursued, the combined
Executive Negotiation and/or Mediation period shall
be deemed to be sixty (60) days from the date of
receipt of a request for Executive Negotiations,
after which either party may file an arbitration
demand.
(d) In the event that Executive
Negotiation and/or
Mediation does not resolve the dispute, the parties
shall submit the dispute to arbitration, in
accordance with this paragraph. Any dispute
between the parties arising under this Agreement,
including, without limitation, the termination
thereof, but not including any commercial tort,
shall be resolved by binding arbitration under
the auspices of and according to the commercial
rules of the American Arbitration Association. Any
arbitration under this provision shall be held
in the Commonwealth of Virginia unless the
parties mutually agree to another location. The
parties further agree that the above dispute or
controversy be submitted to one (1) arbitrator
selected from the panel of arbitrators of the
American Arbitration Association. In selecting an
arbitrator, the aggrieved party shall obtain a
list of arbitrators from the AAA, strike one name
and send it to the other party. The parties
shall alternatively strike names until an
arbitrator is selected. The parties to any such
dispute shall pay their own incurred costs,
including, without limitation, reasonable
attorneys' fees, and shall split evenly the
arbitration costs and arbitrator's fees. Judgment
upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
(e) Subject to the rights of each
party to seek
specific performance as provided in Section 11.6,
nothing in this Section 11.9 shall in any manner
be deemed to supersede or otherwise undermine
any of the rights of the parties to seek specific
performance as provided for in Section 11.6.
SECTION 11.10. Governing Law.
This Agreement shall be governed by, and
construed in accordance with, the laws of the State
of Maryland, regardless of the laws that might
otherwise govern under applicable principles of
conflicts of law.
SECTION 11.11. Counterparts.
This Agreement may be executed and
delivered in one or more counterparts, and by
the different parties hereto in separate
counterparts, each of which when executed and
delivered shall be deemed to be an original but all
of which taken together shall constitute one and the
same agreement.
SECTION 11.12. Fees and Expenses.
Except as otherwise provided for in
this Agreement, each party hereto shall pay its
own fees, costs and expenses incurred in
connection with this Agreement and in the
preparation for and consummation of the transactions
provided for herein.
IN WITNESS WHEREOF, the parties hereto
have caused this AGREEMENT AND PLAN OF MERGER to be
executed and delivered as of the date first
written above.
HAGLER BAILLY, INC.
By:
Name:
Title:
HAGLER BAILLY ACQUISITION
CORP. 1997-1
By:
Name:
Title:
APOGEE RESEARCH,
INC.
By:
Name:
Title: