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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made as of
June 13, 1997, by and among Nematron Corporation, a Michigan corporation
("Nematron"), Imagination Systems, Inc., a Michigan corporation ("ISI"),
Virtual-Time Software, Inc., a California corporation ("VTS"), and Xxxxxxx
Xxxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxx, J. Xxxx Xxxxxxx and Xxxxxxxx
Xxxxxxxxx (collectively, the "Shareholders"). Nematron, ISI, VTS and the
Shareholders may be referred to individually as a "Party" or collectively as the
"Parties".
WITNESSETH
WHEREAS, ISI, a wholly owned subsidiary of Nematron, VTS and Nematron
desire that VTS merge with and into ISI (the "Merger"), with ISI being the
surviving corporation of the Merger;
WHEREAS, the Shareholders own approximately 67% of the outstanding
shares of VTS Common Stock; and
WHEREAS, the Merger is intended to constitute a tax-free reorganization
as described in Section 368(a) of the Code.
NOW, THEREFORE, subject to the terms and conditions of this Agreement
and the Certificate of Merger to be filed in the States of Michigan and
California in order to effectuate the Merger, and in consideration of the
premises and the mutual covenants and agreements hereinafter set forth, the
Parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following capitalized
terms will have the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Balance Sheet" has the meaning set forth in Section 4.1(h).
"CGCL" means the California General Corporation Law.
"Certificate" has the meaning set forth in Section 3.1(a).
"Certificate of Merger" means the Certificate of Merger to be filed with
the Michigan Department of Consumer and Industry Services and the California
Secretary of State setting forth the terms of the Merger.
"Closing" has the meaning set forth in Section 8.1.
"Closing Date" has the meaning set forth in Section 8.1.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Constituent Corporations" has the meaning set forth in Section 2.1(b).
"Dissenters' Shares" has the meaning set forth in Section 3.1(f).
"Effective Time" has the meaning set forth in Section 2.2(a).
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit Plan,
including medical, dental, disability and other welfare benefits plan, and
material fringe benefit plan or program, (e) employee, severance and
termination agreements and arrangements, and (f) all plans, programs and
arrangements with respect to stock options, restricted stock, phantom stock
and other stock-based or stock-related compensation.
"Employee Pension Benefit Plan" has the meaning set forth in Section
3(2) of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA.
"Employment and Noncompetition Agreement" means the employment and
noncompetition agreement between ISI and Xxxxxxx Xxxxxxx in the form
attached hereto as Exhibit 8.2(a)(iv).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and
Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of
the environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974
(including any amendments thereof, and the regulations and published
interpretations thereunder).
"Escrow Agreement" means an agreement in the form attached as Exhibit
8.2(b)(ix) to this Agreement.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning set forth in Section 4.1(f).
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"Intellectual Property Rights" means all of the right, title and
interest of VTS in and to (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever
form or medium).
"Investment Representation Letter" means a letter in the form attached
as Exhibit 8.2(b)(viii).
"ISI" has the meaning set forth in the preamble to this Agreement.
"ISI Common Stock" means the common stock, no par value, of ISI.
"ISI Shares" means any shares of ISI Common Stock.
"Knowledge" means present actual knowledge, without independent
investigation.
"Liability" means any liability (whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due), including any
liability for Taxes.
"MBCA" means the Michigan Business Corporation Act.
"Merger" has the meaning set forth in the first recital to this
Agreement.
"Merger Consideration" has the meaning set forth in Section 3.1(a).
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"Most Recent Financial Statements" has the meaning set forth in Section
4.1(f).
"Multiemployer Plan" has the meaning set forth in Section 3(37) of
ERISA.
"Nematron" has the meaning set forth in the preamble to this Agreement.
"Nematron Common Stock" means the common stock, no par value, of
Nematron.
"Nematron Share" means any share of Nematron Common Stock.
"Ordinary Course of Business" means the ordinary course of business
consistent with current and past custom and practice (including with respect
to quantity and frequency).
"Party" and "Parties" have the meaning set forth in the preamble of
this Agreement.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or association, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Related Agreements" means any agreements being delivered in connection
with or ancillary to this Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"Shareholders" has the meaning set forth in the preamble to this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1(a).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
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"VTS" has the meaning set forth in the Preamble to this Agreement.
"VTS Common Stock" means the common stock, no par value, of VTS.
"VTS Share" means any share of VTS Common Stock.
2. MERGER.
2.1 The Merger.
(a) Subject to the terms and conditions of this Agreement, the
Certificate of Merger, the MBCA and the CGCL, at the Effective Time (as
defined in Section 2.2(a) below) (i) VTS will be merged with and into ISI
and (ii) the separate existence of VTS will cease and ISI will continue as
the "Surviving Corporation".
(b) At the Effective Time (i) the Surviving Corporation will
continue its corporate existence under the laws of the State of Michigan and
will possess all of the rights, privileges, immunities, powers, franchises
and purposes of VTS and ISI immediately prior to the Merger (VTS and ISI will
be referred to in this Agreement as the "Constituent Corporations"), (ii) all
property of the Constituent Corporations will be the property of the
Surviving Corporation and (iii) the Surviving Corporation will, by operation
of law, Assume all of the liabilities and obligations of the
Constituent Corporations.
(c) The Articles of Incorporation of ISI in effect at and as of the
Effective Time will remain the Articles of Incorporation of the Surviving
Corporation without any modification or amendment in the Merger. The Bylaws
of ISI will remain the Bylaws of the Surviving Corporation.
(d) The existing directors and officers of ISI in office immediately
prior to the Effective Time will remain the directors and officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified.
2.2 Effectiveness of the Merger.
(a) The Certificate of Merger will be filed with the Michigan
Department of Consumer and Industry Services and the Secretary of State of
the State of California on the day of the Closing or as soon thereafter as
is practicable. The Merger will become effective at the time at which the
Certificate of Merger is filed with the Michigan Department of Consumer and
Industry Services (the "Effective Time").
(b) If, at any time after the Effective Time, the Surviving
Corporation will consider or be advised that any further deeds, assignments
or other things are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, the title to any property
or rights of the Constituent Corporations acquired or to be acquired by
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reason or as a result of, the Merger, the Constituent Corporations and the
officers and directors, on behalf of the Constituent Corporations, to the
extent permitted by law, will execute and deliver all such deeds and
assignments and do all things necessary or desirable to vest, perfect or
confirm title to such property or rights in the Surviving Corporation and
otherwise to carry out the purpose of this Agreement, and the officers and
directors of the Surviving Corporation are fully authorized in the name of
the Constituent Corporations or otherwise to take any and all such actions.
3. MERGER CONSIDERATION.
3.1 Merger Consideration and Conversion of Shares. At the Effective
Time, by virtue of the Merger and without any action on the part of any
holder thereof:
(a) Each VTS Share issued and outstanding at the Effective Time,
other than Dissenters' Shares (as defined in Section 3.1(f)), shall be
converted into the right to receive Nematron Shares and cash in accordance
with Section 3.1(d) (the "Merger Consideration"), determined as follows: the
number of Nematron Shares into which each VTS Share shall be converted shall
be determined by dividing 67,300 by the total number of VTS Shares
outstanding at the Effective Time and the amount of cash into which each VTS
Share shall be converted shall be determined by dividing $50,000 by the total
number of VTS Shares outstanding at the Effective Time. At the Effective
Time, each VTS Share shall cease to be outstanding, shall automatically be
canceled and retired and shall cease to exist. Each holder of a stock
certificate (a "Certificate") formerly representing VTS Shares shall cease to
have any rights with respect thereto except the right to receive, without
interest, the Merger Consideration upon the surrender of such Certificate in
accordance with Section 3.1(d).
(b) Each VTS Share issued and held by VTS immediately prior to the
Effective Time, if any, shall cease to be outstanding, shall automatically
be canceled and retired without payment of any consideration therefor and
shall cease to exist.
(c) The shares of ISI Common Stock issued and outstanding
immediately prior to the Effective Time shall remain outstanding, shall be
unaffected by the Merger and shall thereafter constitute all of the issued
and outstanding shares of the capital stock of the Surviving Corporation.
Outstanding certificates representing ISI Shares will continue to represent
the number of shares of common stock of the Surviving Corporation following
the Effective Time and need not be exchanged for new certificates of the
Surviving Corporation by any holders thereof.
(d) Following the Effective Time, each holder of a Certificate or
Certificates surrendering such Certificate or Certificates to Nematron shall
be entitled to receive in exchange therefor the Merger Consideration.
Nematron shall xxxx all Certificates delivered by holders pursuant to this
Section as canceled. If a Certificate is lost or destroyed, the registered
owner thereof shall be entitled to receive the Merger Consideration to which
such registered owner would otherwise be entitled on the surrender of such
Certificate by presenting an affidavit to
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Nematron attesting to the loss or destruction of such Certificate. Nematron
may require such registered owner, as a condition precedent to receiving the
Merger Consideration, to furnish Nematron with a bond or agreement of
indemnity, in such form and amount and with such sureties, or without
sureties, as Nematron may direct or approve. No certificates or scrip
representing a fraction of a Nematron Share shall be issued upon the
surrender of Certificates for exchange pursuant to this Section. In lieu of
any such fractional shares, the number of Nematron Shares to be received by a
holder of VTS Shares (computed based upon the aggregate number of VTS Shares
owned by such holder) shall be rounded to the nearest full Nematron Share.
(e) Certificates representing Nematron Shares issued in the
Merger will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS THE SAME ARE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
APPLICABLE STATE SECURITIES LAWS OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL THAT REGISTRATION UNDER THE ACT AND
SUCH LAWS IS NOT REQUIRED FOR SALE OR TRANSFER. TRANSFER
OF THESE SECURITIES IS ALSO SUBJECT TO A LETTER AGREEMENT
DATED JUNE __, 1997, A COPY OF WHICH IS ON FILE AT THE
REGISTERED OFFICE OF NEMATRON CORPORATION.
(f) Notwithstanding anything in this Agreement to the contrary,
the VTS Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who do not vote in favor of
the approval and adoption of this Agreement and who comply with all of the
relevant provisions of Sections 1300 through 1312 of the CGCL (the
"Dissenters' Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration. Dissenters' Shares shall, from
and after the Effective Time, no longer be outstanding and shall be canceled
and retired and shall cease to exist, and each holder of Dissenters' Shares
shall thereafter cease to have any rights with respect to such Shares except
the right, if any, to receive payment pursuant to the relevant provisions of
Sections 1300 through 1312 of the CGCL. If any holder of VTS Shares shall
fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the VTS Shares held thereby shall thereupon be treated as though
converted into the Merger Consideration pursuant to Section 3.1(a), such
shares shall be deemed not to be Dissenters' Shares and the holder of such
shares shall execute and deliver an Investment Representation Letter to
Nematron. Any Merger Consideration otherwise to have been paid to holders of
Dissenters' Shares shall be retained by Nematron.
(g) No transfers of the VTS Shares shall be made on the stock
transfer books of VTS at or after the Effective Time.
4. REPRESENTATIONS AND WARRANTIES.
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4.1 Representations and Warranties of VTS and the Shareholders. VTS
and the Shareholders, jointly and severally, represent and warrant to
Nematron and ISI as follows:
(a) Authorization of Transaction. VTS has full corporate power and
authority to execute and deliver this Agreement and each Related Agreement
being executed and delivered by VTS and, subject to obtaining the necessary
approval of its shareholders, to consummate the transactions contemplated
hereby and thereby and perform its obligations hereunder and thereunder.
This Agreement and each Related Agreement to which VTS is a party
constitutes the valid and legally binding obligation of VTS enforceable in
accordance with its terms and conditions (subject as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting creditors rights, and, with respect to the remedy
of specific performance, equitable doctrines applicable thereto). This
Agreement and each Related Agreement to which any Shareholder is a party
constitutes the valid and legally binding obligation of such Shareholder
enforceable in accordance with its terms and conditions (subject as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors rights, and,
with respect to the remedy of specific performance, equitable doctrines
applicable thereto). Except for the filing of the Certificate of Merger with
the Michigan Department of Consumer and Industry Services and the Secretary
of State of California and as set forth on Schedule 4.1(a), VTS is not
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(b) Organization, Qualification, and Corporate Power. (i) VTS is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California. VTS is duly authorized to conduct business
and is in good standing as a foreign corporation under the laws of each
jurisdiction where the failure to be so authorized and in good standing, in
the aggregate for all such failures, could reasonably be expected to have a
material adverse effect on VTS. Such jurisdictions are listed on Schedule
4.1(b)(i). VTS has all licenses, permits, and authorizations necessary to
carry on the business in which it is engaged and to own and use the
properties owned and used by it. Schedule 4.1(b)(i) lists the directors and
officers of VTS. VTS has delivered to Nematron correct and complete copies
of the Articles of Incorporation and Bylaws of VTS (as amended to the date
hereof). VTS is not in violation of any provision of its Articles of
Incorporation or Bylaws.
(ii) VTS does not own and has never owned, directly or
indirectly, a 50% or greater interest in the outstanding voting securities
of any corporation or other entity.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which VTS is subject or any
provision of the Articles of Incorporation or Bylaws of VTS, or (ii) except
as set forth in Schedule 4.1(c), conflict with, result in a breach of,
constitute a default under, result in the
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acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which VTS is a party or
by which it is bound or to which any of its assets is subject or (iii) result
in the imposition of any Security Interest upon any of VTS's assets.
(d) Capitalization. The entire authorized capital stock of VTS consists
of 10,000,000 shares of VTS Common Stock of which 6,188,000 shares are
issued and outstanding. Each of the holders of VTS Shares owns the VTS
Shares free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws). All of
the issued and outstanding VTS Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the
shareholders and in the amounts listed in Schedule 4.1(d) to this Agreement.
VTS has no outstanding subscriptions, warrants, options or other agreements
or commitments obligating it to issue any additional shares. VTS holds in
treasury none of its own authorized shares.
(e) Equity Interests. VTS does not control, directly or indirectly, or
have any direct or indirect equity participation in any corporation,
partnership, trust, or other business association.
(f) Financial Statements. VTS has previously delivered to Nematron the
following financial statements (collectively the "Financial Statements"):
(i) an unaudited balance sheet and related statements of operations and
retained earnings, and schedules of general and administrative expenses as
of and for the fiscal year ended December 31, 1996 for VTS, and (ii) an
unaudited balance sheet and statements of operations as of March 31, 1997
and for the three months then ended (such unaudited balance sheet and
statements of operations are the "Most Recent Financial Statements") for VTS
prepared on a basis consistent with the preparation of such December 31,
1996 statements. The Financial Statements have been prepared in accordance
with GAAP (except for the lack of footnotes and other presentation items)
and present fairly the financial condition of VTS as of such dates and the
results of operations of VTS for such periods. The Financial Statements are
correct and complete, to the extent required by GAAP, and are consistent
with the books and records of VTS (which books and records are correct and
complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material
individually or in the aggregate) and lack footnotes and other presentation
items.
(g) Subsequent Events. Except as set forth in Schedule 4.1(g), since
March 31, 1997, VTS has not:
(i) issued, sold, purchased or redeemed any shares of its capital
stock; granted any stock options or made any other commitment to issue or
sell shares of its capital stock; otherwise amended its Articles of
Incorporation or Bylaws; or declared, set aside or made any payment or
distribution upon its capital stock;
(ii) incurred any liability or obligation under agreements or
otherwise, except current liabilities entered into or incurred in the
Ordinary Course of Business or in
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connection with the execution and performance of this Agreement; issued any
notes or other corporate debt securities; or, to its Knowledge, waived any of
its rights;
(iii) mortgaged, pledged or subjected to any lien any asset or,
except in the Ordinary Course of Business, entered into any lease of real
property, machinery, equipment or buildings, or sold or transferred any
intangible asset;
(iv) effected any increases in salary, wage or other compensation
of any kind, whether current or deferred, to any officer, employee, agent,
broker or consultant, other than routine increases in the Ordinary Course of
Business; entered into any salary, wage or other compensation agreement with
a term of one year or longer with any employee or made any contribution to
any trust or plan for the benefit of employees except as required by the
terms thereof as now in effect;
(v) entered into any material transaction other than in the Ordinary
Course of Business, except in connection with the execution and performance
of this Agreement, the Related Agreements and the transactions contemplated
hereby and thereby;
(vi) suffered any damage, destruction or loss to any of its
properties or assets (whether or not covered by insurance); or
(vii) suffered any adverse changes which in the aggregate have had
or are reasonably likely to have a material adverse effect on the business,
financial condition or prospects of VTS.
(h) Undisclosed Liabilities. VTS does not have any Liability, except
for (i) Liabilities set forth on the balance sheet of VTS as of March 31,
1997 (the "Balance Sheet") and (ii) Liabilities which have arisen after
March 31, 1997 in the Ordinary Course of Business (none of which liabilities
resulted from, arose out of, relate to, is in the nature of, or was caused
by any breach of contract, breach of warranty, tort, infringement, violation
of law or provisions in the Articles of Incorporation or bylaws of VTS
providing for indemnification of directors, officers or employees).
(i) Legal Compliance; Licenses and Authorizations.
(i) VTS has complied in all material respects with all applicable
laws, statutes, rules, regulations and orders of federal, state, local, and
foreign governments (and all agencies thereof), including, without
limitation, all Environmental, Health and Safety Laws, and, to the Knowledge
of VTS, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against it
alleging any failure so to comply.
(ii) VTS holds all licenses and other permits and authorizations
necessary for the operation of the business of VTS as presently conducted
and such licenses, permits and authorizations will be in full force and
effect for the entire duration of their respective unexpired
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license terms, unimpaired by any acts or omissions of VTS, except for such
licenses, permits and authorizations with respect to which the failure of VTS
to hold such licenses, permits and authorizations would not have a material
adverse effect on VTS. There is not now pending or, to the Knowledge of VTS
and the Shareholders, threatened any action by the grantor of any such
license, permit or authorization to revoke, cancel or refuse to renew any
such license, permit or authorization.
(j) Tax Returns and Taxes. Except as set forth on Schedule 4.1(j), (i)
VTS has filed all federal, state, local and other Tax returns and reports
which are required to be filed; (ii) VTS has paid all Taxes, interest,
penalties, assessments and deficiencies due or assessed pursuant to such
returns; (iii) VTS has not received any notice of assessment of additional
Taxes or has executed or filed with any taxing authority any agreement
extending the period of assessment of any Taxes; (iv) there are no claims,
examinations, proceedings or proposed deficiencies for Taxes pending or, to
the Knowledge of VTS, threatened against VTS; (v) VTS is current in the
payment of all withholding and other employee taxes which are due and
payable; (vi) there are no Tax liens on any of the assets or properties of
VTS; (vii) the accruals for Taxes contained in the Balance Sheet are
adequate to cover all liabilities for Taxes of VTS for all periods ending on
or before the date of such statement; (viii) all Taxes for periods beginning
after the date of such statement up to the Closing have been paid or are
adequately reserved against on the books of VTS; (ix) VTS has not been
audited by the Internal Revenue Service, has not received any notice of an
audit and has not been threatened with an audit.
(k) Real Property. VTS does not own, or have the obligation to
purchase, any real property. VTS is not a party to any lease of real
property other than as set forth on Schedule 4.1(k). VTS is not under any
obligation to become a party to any lease of real property.
(l) Intellectual Property. VTS does not hold, own or use any domestic
or foreign (A) patents and registered trademarks, tradenames and service
marks, or (B) patent, trademark, tradename and service xxxx applications
filed in connection with the business of VTS ((A) and (B) collectively
referred to herein as the "Issued Rights and Applications"). Set forth on
Schedule 4.1(l) is a correct and complete list of all license and other
agreements allowing VTS to use intellectual property rights of third parties
in the United States or foreign countries entered into by VTS or affecting
the business of VTS (the "License Agreements") and a complete list of the
products of VTS currently existing or under development. Except as set
forth on Schedule 4.1(l), (y) VTS has and owns all right, title and interest
in and to all of the Intellectual Property Rights (including the exclusive
right to use, sell, license or dispose of such rights and to bring actions
for infringement thereof) which are required or necessary for VTS to conduct
its business in the normal course in accordance with past practice, free
and clear of any claims, liens, licenses or encumbrances and (z) no person
or entity has a right to receive a royalty or similar payment in respect of
any of the Intellectual Property Rights. VTS has no Knowledge of and has
not received any notice of any infringements of, or claims or assertions of
infringement of, any of the Intellectual Property Rights, and VTS has not
taken or omitted to take any action which would have the effect of waiving
any of its rights relating to any of the Intellectual Property Rights.
There have been no claims and, to the Knowledge of VTS and the Shareholders,
there is no basis for any claim challenging the scope, validity or
enforceability of any of the Intellectual
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Property Rights which are material to the conduct of VTS's business. The
manufacture, sale or use of any products now or heretofore manufactured or
sold by VTS did not and does not infringe (nor has any claim been made that
any such action infringes) the intellectual property rights of others. Each
of the License Agreements is in full force and effect and there has occurred
no default which is continuing in respect of any License Agreement. VTS'
RT-Win software is a tool designed to allow VxWorks and Windows (3.1x or 95)
to run concurrently on a single properly configured personal computer,
providing a way to develop real-time applications that look and feel like
Windows. The RT-Win software includes components for both the Windows and
VxWorks environments. VTS' RT-Win software performs substantially the tasks
for which it has been designed and has no more defects or bugs than would be
reasonably expected by the industry for software at a similar stage of
development. Such software continues to be developed and enhanced by VTS and
no representation is hereby made that such software, in its present state, is
suitable for all markets intended to be targeted by Nematron.
(m) Tangible Assets. VTS owns or leases all buildings, machinery,
equipment, and other tangible assets used in the conduct of its business as
presently conducted, free and clear of all liens and encumbrances except as
set forth on Schedule 4.1(m). Each such tangible asset is in good operating
condition and repair (subject to normal wear and tear) and is suitable for
the purposes for which it presently is used.
(n) Contracts. Except as set forth on Schedule 4.1(n), VTS is not a
party to any outstanding:
(i) written contract (or collective bargaining agreement) with any
labor union or representative of employees;
(ii) written or oral commitment, contract, or agreement involving an
obligation or liability on the part of VTS of more than $10,000 (excluding
orders for the purchase of standard products from VTS accepted in the
Ordinary Course of Business and providing for prevailing prices and
customary conditions of sale);
(iii) written or oral lease of real property or personal property;
(iv) written or oral agreement, contract or commitment containing
any covenant limiting the freedom of VTS to engage in any line of business or
compete with any person or entity;
(v) written or oral employment, consulting, sales representative,
agency or distributor agreement that is not cancelable by VTS pursuant to
its stated terms on notice of not longer than three months and without
liability, penalty or premium;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plan or arrangement
for the benefit of its current or former directors, officers and employees;
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(vii) written or oral agreement or contract relating to any
indebtedness or the mortgaging, pledging or the placing of a lien on any of the
properties or assets of VTS which is not reflected in the Financial Statements;
(viii) guaranty of any obligation;
(ix) loans to or from officers, directors or affiliates;
(x) any agreement with any shareholder of VTS or any of its
affiliates; or
(xi) any other written or oral agreement which is material to
the operations or business prospects of VTS.
VTS has delivered to Nematron a correct and complete copy of each written
agreement listed in Schedule 4.1(n) (as amended to date) and a written summary
setting forth the terms and conditions of each oral agreement referred to in
Schedule 4.1(n). With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect, (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated by this Agreement and the Related Agreements; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time could constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement and (D) no party has
repudiated any provision of the agreement. Except as set forth in Schedule
4.1(n), no contract or agreement described in Schedule 4.1(n) requires the
consent of any party to the execution of this Agreement or the consummation of
the transactions contemplated by this Agreement.
(o) Notes and Accounts Receivable. All notes and accounts receivable
of VTS are reflected properly on its books and records, are subject to no known
setoffs or counterclaims, are current and collectible, subject only to the
reserve for bad debts set forth on the face of the Balance Sheet (rather than in
any notes thereto) as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of VTS.
(p) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of VTS.
(q) Insurance. Set forth on Schedule 4.1(q) is a complete and correct
list of all policies of insurance of VTS, indicating for each policy the
carrier, risks insured against, coverage limits, deductible amounts, premium
rate, expiration date, all outstanding claims thereunder and whether the terms
of such policy provide for retrospective premium adjustments. All such policies
are outstanding and in full force and effect.
(r) Litigation. None of VTS or, to the Knowledge of VTS, any
director, officer, employee or agent of VTS, is (i) subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) a party or, to
the Knowledge of VTS, threatened to be made a
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party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. No director,
officer, or employee of VTS has any reason to believe that any such action,
suit, proceeding, hearing, or investigation may be brought or threatened against
VTS.
(s) Employees. No employee has notified VTS of any plans to terminate
employment with VTS. VTS neither is nor has been a party to or bound by any
labor or collective bargaining agreement.
(t) Employee Benefits.
(i) Schedule 4.1(t) to this Agreement lists each Employee Benefit
Plan that VTS maintains or to which it contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all material
respects with its underlying documents, the applicable requirements of ERISA,
the Code, and other applicable laws.
(B) All applicable disclosure and filing requirements have
been timely satisfied in all material respects with respect to each such
Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of
ERISA and of Code Section 4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All premiums or other payments for all periods ending on
or before the Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(D) With respect to each such Employee Benefit Plan, VTS has
delivered to Nematron correct and complete copies of the plan documents and
summary plan descriptions, the most recent Form 5500 Annual Report, if
applicable, and all related insurance contracts, or trust or other funding
agreements which, if applicable, implement each such Employee Benefit Plan.
(ii) VTS does not contribute to, has never contributed to, nor
has ever been required to contribute to any Multiemployer Plan, and has no
Liability (including withdrawal Liability) under any Multiemployer Plan.
(iii) VTS does not maintain, has never maintained, does not
contribute, has never contributed, nor has ever been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
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(iv) There is no litigation, disputed claim (other than routine
claims for benefits), governmental proceeding, audit, inquiry or investigation
pending or, to the Knowledge of VTS, threatened with respect to any such
Employee Benefit Plan, its related assets or trusts, or any fiduciary,
administrator or sponsor of such Employee Benefit Plan.
(v) Except as disclosed in Schedule 4.1(t), with respect to each
Employee Pension Benefit Plan:
(A) each such plan which is intended to qualify as a
tax-qualified retirement plan under Code Section 401(a) has received a favorable
determination letter(s) from the Internal Revenue Service (copies of which have
been delivered to Nematron) as to qualification of such plan covering the period
from its adoption through the Closing Date; all amendments required to maintain
such qualification have been timely adopted; nothing has occurred, whether by
action or failure to act, which has resulted in or could cause the loss of such
qualification (whether or not eligible for review under the Internal Revenue
Service's Closing Agreement Program, Voluntary Compliance Resolution program or
any similar governmental agency program); and each trust thereunder is exempt
from tax pursuant to Code Section 501(a);
(B) no event has occurred and no condition exists relating
to any such plan that would subject VTS, Nematron or ISI to any tax under Code
Sections 4972 or 4979, or to any Liability under ERISA Section 502; and
(C) neither any such plan nor any other person or entity has
engaged in a "prohibited transaction" (as defined in ERISA Section 406 or Code
Section 4975) with respect to such Plan, for which no individual or class
exemption exists.
(u) Inventories.
(i) All inventory of VTS, including, without limitation, raw
materials, work in process, finished goods, returned products, goods in transit
and all other materials used or consumed in their business and reflected on the
Balance Sheet: (A) was acquired and has been maintained in the Ordinary Course
of Business; (B) is of good and merchantable quality; (C) consists substantially
of a quality, quantity and condition usable, leasable or saleable in the
Ordinary Course of Business; (D) is valued at reasonable amounts based on the
Ordinary Course of Business during the past six months; and (E) is not subject
to any write-down or write-off. (ii) VTS is not under any Liability or
obligation with respect to the return of inventory in the possession of
wholesalers, retailers or other customers. (iii) All inventory has been valued
on the Balance Sheet and on VTS's records and books of account at the lower of
cost (determined on a first in, first out basis) or market value on a basis
consistent with that reflected in the Financial Statements. (iv) Obsolete
inventory and inventory of below-standard quality has been written down to
amounts not in excess of realizable market value. (v) All of the
work-in-process, raw materials and supplies inventory can be used or consumed in
the Ordinary Course of Business and are not in amounts in excess of normal
requirements. (vi) Since the date of the Balance Sheet, there has been no
change in the amount of inventory except changes as a result of the purchase and
sale of, or adjustment to, inventory in the Ordinary Course of Business,
including,
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but not limited to, established seasonal patterns.
(v) Insider Interests. Except as set forth on Schedule 4.1(v), (i) no
officer or director of VTS, nor any shareholder of VTS, has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of VTS, and (ii) no such person has any business relationship with VTS,
except as an officer, employee, director or shareholder thereof.
(w) Payments. VTS has not directly or indirectly, nor has any agent,
representative or employee of any of them, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, government official or other party, in the
United States or any other country, which is in any manner related to the
operations of VTS and which is, or may be with the passage of time or discovery,
illegal under any federal, state or local law (including, without limitation,
the U.S. Foreign Corrupt Practices Act) or any other country having
jurisdiction. VTS has not participated, directly or indirectly, in any boycotts
or other similar practices affecting any of its actual or potential customers
and VTS has at all times done business in an open and ethical manner.
(x) Brokers' Fees. VTS has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(y) Disclosure. The representations and warranties contained in this
Section 4.1 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4.1 not misleading in light of the
circumstances under which they were made.
4.2 Representations and Warranties of Nematron and ISI. Nematron
represents on behalf of itself and ISI as follows:
(a) Authorization of Transaction. Nematron and ISI each has full
corporate power and authority to execute and deliver this Agreement and each
Related Agreement being executed and delivered by Nematron or ISI, and to
consummate the transactions contemplated hereby and thereby and perform their
respective obligations hereunder and thereunder. This Agreement constitutes the
valid and legally binding obligation of Nematron and ISI each enforceable in
accordance with its terms and conditions (subject as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors rights, and, with respect to the remedy of
specific performance, equitable doctrines applicable thereto).
(b) Organization and Qualification. Nematron and ISI each is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Michigan. Each of Nematron and ISI is duly authorized to
conduct its business and is in good standing in each jurisdiction where the
failure to so qualify would have a material adverse effect on the
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business of Nematron or ISI.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Nematron or ISI is subject or any
provision of its articles of incorporation or bylaws or (ii) result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Nematron or ISI is a party or by which either is bound or
to which any of their assets is subject.
(d) Nematron SEC Documents. Nematron has delivered to VTS true and
complete copies of its Form 10-KSB, as amended, for the year ended September 30,
1996 and all other documents that Nematron has filed with the SEC since
September 30, 1996 pursuant to the Exchange Act (the "Nematron SEC Documents").
Such reports are complete and correct in all material respects.
(e) Merger Consideration. The shares of Nematron Common Stock to be
issued and delivered pursuant to this Agreement and the Merger are duly
authorized and, when issued and delivered as contemplated herein, will be duly
and validly issued, fully paid and non-assessable.
(f) Brokers' Fees. Nematron has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(g) Events Subsequent to March 31, 1997. Except as set forth in
the Nematron SEC Documents, or as otherwise contemplated by this Agreement,
since March 31, 1997, Nematron has not:
(i) incurred any liability or obligation under agreements or
otherwise, except current liabilities entered into or incurred in the ordinary
course of business or in connection with the execution and performance of this
Agreement;
(ii) entered into any material transaction other than in the
ordinary course of its business, except in connection with the execution and
performance of this Agreement;
(iii) entered into any agreement or arrangement that will
need to be filed as an exhibit to a report to be filed pursuant to the Exchange
Act in accordance with the requirements of Regulation S-B promulgated under the
Securities Act or amended its Articles of Incorporation or Bylaws;
(iv) become (A) subject to any outstanding injunction,
judgment, order,
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decree, ruling or charge or (B) a party or, to the Knowledge of Nematron, is
threatened to be made a party, to any action, suit, proceeding, hearing, or
investigation of, in or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction of before any
arbitrator, which, with respect to (A) or (B), would be required to be disclosed
in a report filed by Nematron under the Exchange Act;
(v) suffered any damage, destruction or loss to any of the
properties or assets (whether or not covered by insurance) which in the
aggregate are reasonably likely to have a material adverse effect on Nematron's
business or financial condition; or
(vi) suffered any adverse changes which in the aggregate have had
or are reasonably likely to have a material adverse effect on Nematron's
business or financial condition.
(h) Representations Relating to Tax-Free Reorganization.
(i) Prior to the Merger, all of the shares of capital stock of
ISI are owned beneficially and of record by Nematron.
(ii) Nematron has no current plan or intention to (A) reacquire
any of the Nematron Shares issued as part of the Merger Consideration; (B)
liquidate ISI; (C) merge ISI with or into another corporation; (D) sell or
otherwise dispose of the stock of ISI currently owned by Nematron; (E) cause ISI
to sell or otherwise dispose of any of ISI's assets following the Merger except
in the ordinary course of business; or (F) cause ISI to issue any additional
stock or securities.
(iii) Nematron has never owned any of the capital stock of VTS.
(iv) Neither Nematron nor ISI is an investment company subject to
regulation under the Investment Company Act of 1940.
(i) Disclosure. The representations and warranties contained in this
Section 4.2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4.2 not misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
5.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
5.2 Shareholders' Approval. As soon as practicable following the date
hereof (and in
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no event more than 10 days after the date hereof), VTS, acting through its Board
of Directors, shall in accordance with its Articles of Incorporation and Bylaws
and applicable law duly call, give notice of, convene and hold a special meeting
of its shareholders for the purpose of approving and adopting this Agreement and
the transactions contemplated hereby, or obtain the consent of its shareholders
in lieu of such a meeting, and, subject to its board of directors' fiduciary
duties under applicable law (as determined following consultation with counsel),
include in any materials distributed to holders of VTS Shares entitled to vote
at such meeting or to give such consent the recommendation of its board of
directors that shareholders of VTS vote in favor of, or give their consent to,
and adopting this Agreement and the transactions contemplated hereby and use its
best efforts to solicit votes or consents in favor of the approval and adoption
of this Agreement and the transactions contemplated hereby. The Shareholders
shall vote, or give consent with respect to, all of the shares owned by them in
favor of the approval and adoption of this Agreement and the transactions
contemplated hereby.
5.3 Notices and Consents. Nematron, ISI and VTS will give any notices to
third parties, and use their best efforts to obtain any third-party
authorizations, consents, or approvals required in order to consummate the
transactions contemplated by this Agreement.
5.4 Operation of Business. From the date of this Agreement until the
Effective Time, VTS will operate its business in the Ordinary Course of
Business. VTS will use its best efforts to preserve intact the present business
organization of VTS, maintain in effect all material licenses, permits and
approvals of governmental authorities necessary for the conduct of its present
business and maintain its present operations, physical facilities, working
conditions and relationships with lessors, suppliers, customers, clients and
employees. VTS will not engage in any practice, take any action, or enter into
any transaction outside the Ordinary Course of Business without the prior
written consent of Nematron and ISI. Without limiting the generality of the
foregoing, from the date of this Agreement until the Effective Time, VTS will
not, without the prior written consent of Nematron:
(a) amend its Articles of Incorporation or Bylaws;
(b) pay or declare any cash dividend, or other dividend or
distribution with respect to its capital stock;
(c) issue, transfer, sell or deliver, or commit to issue, transfer,
sell or deliver, any shares of its capital stock (or any options, warrants or
any rights thereto including, without limitation, any securities convertible
into or exchangeable, with or without additional consideration, for such capital
stock);
(d) increase or reduce the number of shares of its capital stock by
split-up, reverse split, reclassification or distribution of stock dividends;
(e) purchase or otherwise acquire for any consideration any
outstanding shares of its capital stock or securities carrying the right to
acquire, or convertible into or exchangeable for such stock, with or without
additional consideration;
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(f) acquire by merger or consolidation with, or merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire any
business of any corporation, partnership, association or other business
organization or division thereof, or make any investment of a capital nature
either by purchase of stock or securities, contributions to capital, property
transfer or otherwise, or by the purchase of any property or assets of any other
individual, partnership, firm or corporation;
(g) incur additional indebtedness for borrowed money in excess of
$10,000 in the aggregate;
(h) adopt or materially modify any bonus, pension, profit-sharing or
other compensation plan or enter into any contract of employment with any
employee which is not terminable at will without cost or other liability;
(i) adopt, enter into or amend in any material respect any collective
bargaining, employment, severance or termination agreement or arrangement with
any person or make any change in its key management structure, including, but
not limited to, the hiring of additional employees or the termination of
existing employees;
(j) discharge or satisfy any lien or encumbrance or pay any obligation
or liability (whether accrued, absolute, contingent or otherwise), except
current liabilities incurred in the Ordinary Course of Business;
(k) mortgage, pledge or subject to lien, charge, security interest or
any other encumbrance any of its assets or property;
(l) transfer or lease any of its assets or property except in the
Ordinary Course of Business;
(m) cancel or compromise any debt or claim other than in the Ordinary
Course of Business in an aggregate amount in excess of $10,000;
(n) waive or release any rights, or settle any claim, in an aggregate
amount which is in excess of $10,000;
(o) transfer or grant any rights under any leases, licenses or other
agreements, other than in the Ordinary Course of Business;
(p) make or grant any general or individual wage or salary increase;
(q) fail to pay or discharge its accounts payable, debts or
liabilities when due;
(r) suffer any material adverse change in its financial condition,
properties or business;
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(s) make or enter into any contract, commitment or transaction which
involves an expenditure in excess of $10,000, or renew, extend, amend or modify
any contract, commitment or transaction involving in excess of $10,000;
(t) enter into or amend any contract, agreement or other transaction
with any officer, director or shareholder of VTS, or any affiliate of such an
officer, director or shareholder, on terms that are less favorable than could be
obtained from an unrelated third party on an arm's length basis.
5.5 Full Access to and Provision of Information. VTS will permit Nematron
and ISI and their designees to have full and complete access upon reasonable
notice and during normal business hours, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to VTS. VTS will deliver to Nematron or ISI such other documentation
and information which is reasonably requested. All information so obtained
shall be subject to that certain Non-Disclosure Agreement, dated as of May 1,
1997, between Nematron and VTS.
5.6 Notice of Developments. Upon becoming aware of such facts or
circumstances, each Party will give prompt written notice to the other Parties
of (a) the occurrence or failure to occur of any event the effect of which is
that any representation and warranty made by such Party herein is untrue and (b)
the receipt of any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement. To the extent such facts or
circumstances would cause a Schedule to this Agreement to become incorrect or
incomplete, such Schedule shall be amended and delivered promptly to the other
Parties (and, in any event, prior to the Closing). No disclosure by any Party
pursuant to this Section 5.6, however, will be deemed to amend or supplement
this Agreement or the Schedules, or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant, unless such misrepresentation or
breach is waived in accordance with Section 11.10; provided, however, that if
the Effective Time occurs notwithstanding such disclosure, the representations
and warranties contained in this Agreement shall be deemed amended to include
such disclosure and such misrepresentation or breach shall be deemed waived.
5.7 Exclusivity. VTS and the Shareholders agree not to, and VTS shall use
its best efforts to cause its officers, directors, employees, agents and
shareholders not to, solicit, encourage or participate, directly or indirectly,
in any manner in any discussion with, or furnish or caused to be furnished any
information to, any person other than Nematron or ISI in connection with, or
negotiate for or otherwise pursue, the sale of VTS Shares or any rights thereto,
the sale of all or substantially all of the assets of VTS or any portion of its
business, or any business combination or merger of VTS with any other party
prior to the termination of this Agreement pursuant to Section 9.1. VTS shall
promptly inform Nematron and ISI of any inquiries or proposals with respect to
any of the foregoing. In the event that the agreements in this paragraph are
violated by VTS, the Shareholders or VTS's officers, directors, employees,
agents or shareholders, and VTS does not consummate the Merger, then, in
addition to other
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remedies available to Nematron, Nematron shall be entitled to receive from VTS
all costs and out-of-pocket expenses (including reasonable attorneys' fees and
expenses related to the Merger and any related financing) which Nematron and ISI
may have incurred.
5.8 WARN Act. VTS agrees that, if requested by Nematron, it shall, on
behalf of Nematron and ISI, issue such notices as are required under the Worker
Adjustment and Retraining Notification Act of 1988 ("WARN Act") or any similarly
applicable state or local law. No such notices shall be given without the prior
approval of Nematron.
5.9 Press Releases and Public Announcements. Neither VTS nor the
Shareholders will issue any press release or make any public announcement
relating to the subject matter of this Agreement or any Related Agreement
without the prior written approval of Nematron. Prior to the Effective Time,
Nematron shall not issue any press release relating to the subject matter of
this Agreement or any Related Agreement without prior consultation with and
approval of VTS, which approval shall not be unreasonably withheld.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Closing:
6.1 General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement or any
Related Agreement, each of the Parties will, to the extent permitted by law,
take such further action (including the execution and delivery of such further
instruments and documents and obtaining such further consents) as any other
Party may request, all at the sole cost and expense of the requesting Party.
VTS acknowledges and agrees that from and after the Closing, Nematron will be
entitled to possession of all documents, books, records (including Tax records),
agreements and financial data in VTS's possession of any sort relating to VTS.
6.2 Deposit Nematron Shares in Escrow. Immediately following the
Effective Time, each of the Shareholders shall deposit, with the escrow agent
named in the Escrow Agreement, Nematron Shares received by him in the Merger in
the amount set forth in Schedule 6.2.
7. CONDITIONS TO OBLIGATIONS TO CLOSE THE MERGER.
7.1 Conditions to Obligation of Nematron and ISI to Close the Merger. The
obligation of Nematron and ISI to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction or waiver of the
following conditions:
(a) The representations and warranties set forth in Section 4.1 shall
be true and correct at and as of the Closing Date.
(b) VTS and the Shareholders shall have performed and complied with
all of their covenants under this Agreement in all material respects through the
Closing.
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(c) This Agreement and the transactions contemplated hereby
(including, without limitation, the Merger) shall have been duly approved by the
holders of the requisite number of the VTS Shares in accordance with applicable
law and VTS's Articles of Incorporation and Bylaws.
(d) There shall be no more than 310,000 Dissenters' Shares for which
written demand for payment has been made in accordance with Sections 1300
through 1312 of the CGCL.
(e) VTS shall have delivered to Nematron or ISI an unaudited balance
sheet and related statements of operations for the months subsequent to March
31, 1997 to the Closing Date.
(f) VTS shall have procured all of the third party consents required
in order for it to consummate the transactions contemplated by this Agreement
and the Related Agreements.
(g) All required governmental and regulatory approvals for the Merger,
including any approvals required under federal or state securities laws, shall
have been received.
(h) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or any Related Agreement, (ii) cause any of the transactions as set forth in
this Agreement or any Related Agreement to be rescinded following consummation,
(iii) affect adversely the right of VTS to own its assets and to operate its
business as it currently operates, or (iv) if determined adversely to VTS or any
director, officer, employee or agent of VTS, have a material adverse effect on
the business, financial condition or prospects of VTS and no such injunction,
judgment, order, decree, ruling, or charge described in (i), (ii), (iii) or (iv)
shall be in effect.
(i) All actions to be taken by VTS and the Shareholders in connection
with the consummation of the Merger and all certificates, opinions, instruments,
and other documents delivered at the Closing or required to effect the Merger
shall be satisfactory in form and substance to Nematron and its counsel.
(j) VTS and the Shareholders shall have made, or caused to be made,
all of the deliveries required by Section 8.2(b).
(k) There shall not have occurred since the date hereof any event
which has had or with the passage of time, is reasonably likely to have a
material adverse effect on the condition (financial or otherwise), assets,
liabilities, results of operations or prospects of VTS.
(l) Shareholders shall own and shall have owned, beneficially and of
record, at least 67% of the issued and outstanding VTS Shares at all times from
the record date for determining the VTS Shares entitled to vote or consent to
the approval and adoption of this
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Agreement and the Merger or the date of this Agreement, whichever is earlier,
through the Effective Time.
7.2 Conditions to Obligation of VTS to Close the Merger. The obligation of
VTS to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction or waiver of the following conditions:
(a) The representations and warranties set forth in Section 4.2 shall
be true and correct at and as of the Closing Date.
(b) Nematron and ISI shall have performed and complied with all of
their covenants under this Agreement in all material respects through the
Closing.
(c) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or any Related Agreement, or (ii) cause any of the transactions contemplated by
this Agreement or any Related Agreement to be rescinded following consummation,
and no such injunction, judgment, order, decree, ruling, or charge described in
(i) and (ii) shall be in effect.
(d) Nematron and ISI shall have made all of the deliveries required by
Section 8.2(a).
(e) The last reported sale price of Nematron Common Stock reported by
the Nasdaq National Market on the day prior to the Closing Date shall be $5.00
or more.
(f) This Agreement and the transactions contemplated hereby
(including, without limitation, the Merger) shall have been duly approved by the
holders of the requisite number of the VTS Shares in accordance with applicable
law and VTS's Articles of Incorporation and Bylaws.
(g) All required governmental and regulatory approvals for the Merger,
including any approvals required under federal or state securities laws, shall
have been received.
(h) All actions to be taken by Nematron and ISI in connection with the
consummation of the Merger and all certificates, opinions, instruments, and
other documents delivered at the Closing or required to effect the Merger shall
be satisfactory in form and substance to VTS and its counsel.
(i) There shall not have occurred since the date hereof any event
which has had or with the passage of time, is reasonably likely to have a
material adverse effect on the condition (financial or otherwise), assets,
liabilities, results of operations or prospects of Nematron or its subsidiaries,
taken as a whole.
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8. CLOSING.
8.1 Time and Place. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
will take place at such location, on such date and at such time as the Parties
mutually agree at the earliest practicable time after the satisfaction or waiver
of all conditions to the Merger set forth in Article 7 herein (the "Closing
Date").
8.2 Deliveries at the Closing.
(a) At the Closing, Nematron or ISI will deliver or cause to be
delivered to VTS and the Shareholders the following:
(i) Certified resolutions of Nematron's Board of Directors and
ISI's Board of Directors authorizing the execution and delivery of this
Agreement, the Related Agreements to which Nematron or ISI is a party and the
consummation of the Merger; (ii) A certificate of Nematron, dated the Closing
Date, signed by the President of Nematron, to the effect that the conditions of
Section 7.2 have been fulfilled;
(iii) The written opinion of Xxxxxx Xxxxxxx PLLC, counsel to
Nematron and ISI, dated the Closing Date, in the form attached as Exhibit
8.2(a)(iii);
(iv) The Employment and Noncompetition Agreement executed by
Nematron or ISI; and
(v) The Certificate of Merger executed by ISI.
(b) At the Closing, VTS and the Shareholders will deliver or cause to
be delivered to Nematron and ISI the following:
(i) A certificate as to the (A) resolutions of VTS's Board of
Directors and shareholders authorizing the execution and delivery of this
Agreement, the Related Agreements to which VTS or the Shareholders are parties
and the consummation of the Merger, (B) the authenticity of the bylaws of VTS,
and (C) the incumbency of certain VTS officers;
(ii) A certificate of VTS, dated the Closing Date, signed by the
President of VTS and by the Shareholders, to the effect that the conditions of
Section 7.1 have been fulfilled;
(iii) The opinion of General Counsel Associates LLP, dated the
Closing Date, in the form attached as Exhibit 8.2(b)(iii);
(iv) A copy of the Articles of Incorporation of VTS (certified by
the California Secretary of State) and certificates of good standing from the
appropriate
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governmental officials stating that VTS is in good standing in California and
that VTS is in good standing as a foreign corporation in each jurisdiction
listed in Schedule 4.1(b)(i);
(v) The Employment and Noncompetition Agreement executed by
Xxxxxxx Xxxxxxx;
(vi) The Certificate of Merger executed by VTS;
(vii) The minute books of VTS;
(viii) An Investment Representation Letter from each holder of
VTS Shares (other than holders of VTS Shares not voted in favor of the Merger
and this Agreement and as to which notice has been given by the holders thereof
as provided in Section 1301 of the CGCL);
(ix) the Escrow Agreement executed by the Shareholders; and
(x) Such other information, documents or instruments from VTS or
the Shareholders as Nematron or ISI may reasonably request for the purpose of
effectuating the transactions contemplated by the Agreement and the Related
Agreements.
9. TERMINATION.
9.1 Termination. Notwithstanding the adoption of this Agreement by the
Board of Directors of Nematron, ISI and VTS and the shareholders of VTS, this
Agreement may be terminated, and the Merger abandoned, at any time before the
Effective Time in any of the following ways:
(a) by the mutual written agreement of the Parties;
(b) by Nematron or ISI if any of the conditions set forth in Section
7.1 have not been satisfied at Closing and have not been waived by Nematron or
ISI;
(c) by VTS if any of the conditions set forth in Section 7.2 have not
been satisfied at Closing and have not been waived by VTS; or
(d) by VTS or Nematron if the Closing Date does not occur on or before
June 30, 1997; provided, that the right to terminate this Agreement under this
paragraph (d) shall not be available to any party whose failure to fulfill any
obligations under this Agreement has been the cause of or resulted in the
failure of the consummation of the Merger to occur on or before such date.
A Party desiring to terminate this Agreement must give written notice of such
termination to the other Parties, specifying the paragraph of this Section 9.1
pursuant to which such termination is
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made and the reason(s) therefor.
9.2 Effect of Termination. Upon termination of this Agreement (and the
Merger) pursuant to Section 9.1 above, this Agreement will become void, each
Party will be responsible for its out-of-pocket expenses (including professional
fees and expenses) and the right to terminate shall be the sole remedy for any
failure of any condition of this Agreement except for a breach of Sections 5.7
or 5.9.
10. SURVIVAL OF REPRESENTATIONS; REMEDIES.
10.1 Survival of Representations and Warranties. The representations and
warranties contained in this Agreement and in any certificate furnished or to be
furnished pursuant hereto shall survive the Closing Date for a period of six
months following the Closing Date; provided, however, that the representations
and warranties contained in Section 4.1(l) shall survive the Closing Date for a
period of two years following the Closing Date.
10.2 Remedies. Following the Closing Date, the remedies provided by the
Escrow Agreement shall be the exclusive remedy of Nematron and ISI for any
breach of any representation or warranty made by VTS or any Shareholder in this
Agreement.
11. MISCELLANEOUS.
11.1 Complete Agreement; Amendment. This Agreement and the Related
Agreements, including the Exhibits, the Schedules and other writings referred to
in or delivered pursuant to or simultaneously with this Agreement, contain the
entire understanding of the Parties with respect to the transactions
contemplated by this Agreement. No representation, inducement, agreement,
promise or understanding altering, modifying, taking from or adding to the terms
and conditions hereof will have any force and effect unless the same is in
writing and validly executed by the Parties hereto.
11.2 Notices. All notices or other communications required or permitted
hereunder will be in writing and will be deemed to have been duly given if sent
by registered or certified mail, postage prepaid and return receipt requested,
addressed as follows:
(a) if to Nematron or ISI, to:
Xx. Xxxxx X. Xxxxx, III, President
Nematron Corporation
0000 Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
with a copy to:
Xxxx X. Xxxx, Esq.
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Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(b) If to VTS or Shareholders, to:
Xxxxxxx Xxxxxxx, President
Virtual-Time Software, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxx X. Xxxxxxxx, Esq.
General Counsel Associates LLP
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
or to such other address as will be furnished in writing by any Party, and any
such notice or communication will be deemed to have been given as of the date so
mailed. Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.
11.3 Expenses. Each Party will be responsible for the payment of the fees
and expenses which he or it incurs for counsel, accountants, brokers and
otherwise in connection with this Agreement.
11.4 Assignment. This Agreement will be binding upon and inure to the
benefit of, and be enforceable by, the Parties hereto and their respective
successors and assigns, provided that neither this Agreement nor any of the
rights, interests or obligations under this Agreement will be assigned by VTS or
the Shareholders without the prior written consent of Nematron; and further
provided, that Nematron and/or ISI may assign, in their sole discretion, any or
all of their rights, interests and obligations under this Agreement to each
other or to any direct or indirect wholly owned subsidiary of Nematron.
11.5 Counterparts. This Agreement may be executed in counterparts, all of
which together will be deemed an original of this Agreement.
11.6 Governing Law. This Agreement will be governed by the laws of the
State of Michigan without regard to its rules regarding choice of law.
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11.7 Interpretation. The titles of the Sections have been inserted as a
matter of convenience and reference only and will not control or affect the
meaning or construction of this Agreement. References to Sections refer to
Sections of this Agreement unless otherwise stated. Words such as "herein",
"hereof", "hereby" and "hereunder", and words of similar import, unless the
context requires otherwise, refer to this Agreement. As used in this Agreement,
the masculine, feminine and neuter genders shall be deemed to include the others
if the context requires.
11.8 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof. References to this Agreement herein shall be construed as
references to the Agreement with all Exhibits and Schedules.
11.9 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the Parties and no presumption or burden of proof will
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
11.10 Waivers. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, will be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence. Any waiver of any
obligation contained in this Agreement is freely, knowingly and voluntarily
given by each Party, without any duress or coercion, after each Party has had
opportunity to consult with its counsel and has carefully and completely read
all of the terms and provisions of this Agreement. No Party will be deemed to
have made any waiver unless it has been made in writing and signed by the Party
to be charged with having made such waiver.
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IN WITNESS WHEREOF, the Shareholders and the duly authorized officers of
Nematron, ISI and VTS have hereunto set their hands and delivered this Agreement
as of the date and year first above written.
NEMATRON CORPORATION IMAGINATION SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxx, III By: /s/ Xxxxx X. Xxxxx, III
------------------------ ------------------------
Xxxxx X. Xxxxx, III Xxxxx X. Xxxxx, III
Its: President Its: President
VIRTUAL-TIME SOFTWARE, INC.
By: /s/ Xxxxxxx Xxxxxxx
------------------------
Xxxxxxx Xxxxxxx
Its: President
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/s/ Xxxxxxx Xxxxxxx
----------------------------
XXXXXXX XXXXXXX
STATE OF CALIFORNIA)
COUNTY OF Santa Xxxxx)ss.
The foregoing was executed and acknowledged before me this 13th day of
June, 1997 by Xxxxxxx Xxxxxxx.
Xxxxxxxx X. Xxxxxxx
Notary Public, Santa Xxxxx County, California
My commission expires: July 28, 2000.
/s/ Xxxxxx Xxxxxxxxx
----------------------------
XXXXXX XXXXXXXXX
STATE OF CALIFORNIA)
COUNTY OF Santa Xxxxx)ss.
The foregoing was executed and acknowledged before me this 13th day of
June, 1997 by Xxxxxx Xxxxxxxxx.
Xxxxxxxx X. Xxxxxxx
Notary Public, Santa Xxxxx County, California
My commission expires: July 28, 2000.
/s/ Xxxxxxx Xxxxxxx
-----------------------------
XXXXXXX XXXXXXX
STATE OF CALIFORNIA)
COUNTY OF Santa Xxxxx)ss.
The foregoing was executed and acknowledged before me this 13th day of
June, 1997 by Xxxxxxx Xxxxxxx.
Xxxxxxxx X. Xxxxxxx
Notary Public, Santa Xxxxx County, California
My commission expires: July 28, 2000.
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/s/ Xxxxxxxx Xxxxxxxxx
--------------------------------
XXXXXXXX XXXXXXXXX
STATE OF CALIFORNIA)
COUNTY OF Santa Xxxxx)ss.
The foregoing was executed and acknowledged before me this 13th day of
June, 1997 by Xxxxxxxx Xxxxxxxxx.
Xxxxxxxx X. Xxxxxxx
-------------------
Notary Public, Santa Xxxxx County, California
My commission expires: July 28, 2000.
/s/ J. Xxxx Xxxxxxx
--------------------------------
J. XXXX XXXXXXX
STATE OF CALIFORNIA)
COUNTY OF Santa Xxxxx)ss.
The foregoing was executed and acknowledged before me this 13th day of
June, 1997 by J. Xxxx Xxxxxxx.
Xxxxxxxx X. Xxxxxxx
-------------------
Notary Public, Santa Xxxxx County, California
My commission expires: July 28, 2000.
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Schedules to the Agreement:
4.1(a)Governmental notices, consents, approvals
4.1(b)(i) List of jurisdictions in which qualified as a
foreign corporation and list of officers and
directors
4.1(c)Noncontravention
4.1(d)Shareholders and holdings
4.1(g)Subsequent Events
4.1(j) Taxes
4.1(k) Leases
4.1(l) Intellectual property
4.1(m) Exceptions to tangible assets owned
4.1(n)Contracts
4.1(q)Insurance
4.1(t) Employee benefits
4.1(v)Insider interests
6.2 Number of Nematron Shares to be Deposited in
Escrow
Exhibits to the Agreement:
8.2(a)(iii) Form of Opinion of Xxxxxx Xxxxxxx PLLC
8.2(a)(iv) Form of Employment and Noncompetition Agreement
8.2(b)(iii) Form of Opinion of General Counsel Associates LLP
8.2(b)(viii) Form of Investment Representation Letter
8.2(b)(ix) Form of Escrow Agreement
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