AGREEMENT AND PLAN OF MERGER
(REVERSE TRIANGULAR MERGER)
BY AND AMONG
ZMAX CORPORATION,
A DELAWARE CORPORATION
ECLIPSE ACQUISITION CORPORATION,
AN ILLINOIS CORPORATION
ECLIPSE INFORMATION SYSTEMS, INC.,
AN ILLINOIS CORPORATION
AND
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇,
AS THE MAJORITY SHAREHOLDERS
AND
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇ ▇▇▇▇▇▇
AS THE MINORITY SHAREHOLDERS
DECEMBER 14, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01 Definitions..................................................................... 6
ARTICLE II
THE MERGER AND PLAN OF REORGANIZATION
Section 2.01 The Merger...................................................................... 11
Section 2.02 Effects of the Merger........................................................... 11
Section 2.03 Directors and Officers.......................................................... 11
Section 2.04 Conversion of Eclipse Shares.................................................... 12
Section 2.05 Closing and Closing Date ....................................................... 12
ARTICLE III
CONVERSION OF SHARES
Section 3.01 Conversion of Eclipse Shares.................................................... 12
Section 3.02 Adjustments; Delivery of Certificates........................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ECLIPSE
AND THE MAJORITY SHAREHOLDERS
Section 4.01 Organization.................................................................... 14
Section 4.02 Capitalization.................................................................. 14
Section 4.03 Authority Relative to this Agreement............................................ 15
Section 4.04 Consents and Approvals; No Violations........................................... 15
Section 4.05 Financial Statements............................................................ 15
Section 4.06 Absence of Certain Changes...................................................... 16
Section 4.07 No Undisclosed Liabilities...................................................... 16
Section 4.08 Accuracy of Statements.......................................................... 16
Section 4.09 No Default ..................................................................... 16
Section 4.10 Litigation...................................................................... 16
Section 4.11 Compliance with Applicable Law.................................................. 17
Section 4.12 Taxes........................................................................... 17
Section 4.13 ERISA........................................................................... 17
Section 4.14 Intellectual Property........................................................... 18
Section 4.15 Change in Control............................................................... 19
Section 4.16 Brokers; Finders................................................................ 19
Section 4.17 Operations of Eclipse........................................................... 19
Section 4.18 Insurance....................................................................... 20
Section 4.19 Assets.......................................................................... 20
Section 4.20 Improper and Other Payments..................................................... 20
Section 4.21 Additional Shareholder Representations.......................................... 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ZMAX AND ACQUISITION
Section 5.01 Organization.................................................................... 22
Section 5.02 Capitalization.................................................................. 22
Section 5.03 Authority Relative to this Agreement............................................ 23
Section 5.04 Consents and Approvals; No Violations........................................... 23
Section 5.05 Reports......................................................................... 24
Section 5.06 Accuracy of Statements.......................................................... 24
Section 5.07 No Undisclosed Liabilities...................................................... 24
Section 5.08 No Default...................................................................... 24
Section 5.09 Litigation...................................................................... 24
Section 5.10 Compliance with Applicable Law.................................................. 25
Section 5.11 Brokers; Finders................................................................ 25
Section 5.12 Interim Operations of Acquisition............................................... 25
Section 5.13 Merger Representation........................................................... 25
ARTICLE VI
COVENANTS
Section 6.01 Covenants of Eclipse............................................................ 25
Section 6.02 Press Releases.................................................................. 27
Section 6.03 No Solicitation................................................................. 27
Section 6.04 Access to Information........................................................... 28
Section 6.05 Best Efforts.................................................................... 28
Section 6.06 Shareholders Meeting............................................................ 28
Section 6.07 Contact Clients................................................................. 29
Section 6.08 Notice Regarding Change in Circumstances........................................ 29
Section 6.09 Indemnification................................................................. 29
Section 6.10 Eclipse Employment or Consulting Agreements..................................... 31
Section 6.11 Stock Options................................................................... 31
Section 6.12 Registration Rights of ZMAX Shares.............................................. 31
Section 6.13 Expenses........................................................................ 32
2
Section 6.14 Non-competition................................................................. 32
Section 6.15 Appointment of ▇▇▇▇▇ ▇▇▇▇▇▇▇ as ZMAX Director................................... 32
Section 6.16 Employment Agreements........................................................... 32
Section 6.17 Limitation on Eclipse Liabilities............................................... 32
ARTICLE VII
CONDITIONS
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger...................... 33
Section 7.02 Conditions of Obligations of ZMAX and Acquisition to Effect the Merger.......... 34
Section 7.03 Conditions of Obligation of Eclipse to Effect the Merger........................ 36
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination..................................................................... 38
Section 8.02 Effect of Termination........................................................... 38
Section 8.03 Amendment....................................................................... 39
Section 8.04 Extension; Waiver............................................................... 39
ARTICLE IX
POST-EFFECTIVE DATE COVENANTS
Section 9.01 Further Instruments and Actions................................................. 39
Section 9.02 Eclipse 401(k) Plan Contribution................................................ 39
Section 9.03 Appointment of ▇▇▇▇▇ ▇▇▇▇▇▇▇ as ZMAX Director................................... 39
ARTICLE X
MISCELLANEOUS
Section 10.01 Survival of Representations and Warranties; Escrow.............................. 39
Section 10.02 Notices......................................................................... 40
Section 10.03 Descriptive Headings............................................................ 41
Section 10.04 Counterparts.................................................................... 41
Section 10.05 Entire Agreement; Assignment.................................................... 41
Section 10.06 Governing Law; Jurisdiction and Service of Process.............................. 41
Section 10.07 Publicity....................................................................... 42
3
Section 10.08 Parties in Interest............................................................. 42
Section 10.09 Shareholders' Agent............................................................. 42
4
EXHIBITS
Exhibit 2.01 Certificate of Merger
Exhibit 3.01(a) List of Shareholders and Amounts of ZMAX Shares To Be Received
Exhibit 4.02 ECLIPSE Securities Issued and Outstanding; Eclipse Ownership of Other Businesses
Exhibit 4.04 Eclipse Required Consents and Approvals; List of Violations
Exhibit 4.05 Supplemental Disclosures to Financial Statements
Exhibit 4.06 ECLIPSE Material Adverse Changes
Exhibit 4.09 ECLIPSE Defaults
Exhibit 4.10 ECLIPSE Litigation
Exhibit 4.12 ECLIPSE Tax Statutes of Limitations
Exhibit 4.13 ECLIPSE Employee Benefit Plan Obligations
Exhibit 4.14 ECLIPSE's Intellectual Property
Exhibit 4.15 ECLIPSE Change in Control Agreements
Exhibit 4.17 Operations of ECLIPSE
Exhibit 4.18 ECLIPSE Insurance Coverage
Exhibit 4.19 ECLIPSE Assets
Exhibit 4.20 ECLIPSE Improper and Other Payments
Exhibit 4.21(c) Interests in ECLIPSE's Property
Exhibit 4.21(g) Shareholders Agreement as to the ZMAX Shares
Exhibit 5.02 ZMAX's Subsidiaries
Exhibit 5.04 ZMAX Required Consents and Approvals; List of Violations
Exhibit 5.05 ZMAX Reports
Exhibit 5.08 ZMAX Defaults
Exhibit 5.09 ZMAX Litigation
Exhibit 6.10 ECLIPSE Employment, Severance and Consulting Agreements
Exhibit 6.12 Registration Rights Agreement
Exhibit 6.14(a) Non-Competition Agreement for ▇▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit 6.14(b) Non-Competition Agreement for ▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit 6.16(a) Employment Agreement of ▇▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit 6.16(b) Employment Agreement of ▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit 6.16(c) Employment Agreement of ▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit 6.16(d) Employment Agreement of ▇▇▇▇▇ ▇▇▇▇▇
Exhibit 6.16(e) Form of Key Employee Employment Agreement
Exhibit 7.02(e) Opinion of Sugar Friedberg & ▇▇▇▇▇▇▇▇▇▇
Exhibit 7.03(e) Opinion of Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
Exhibit 10.01(b) Escrow Agreement
5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of December 14, 1998, by
and among ZMAX Corporation, a Delaware corporation ("ZMAX"); ECLIPSE
Acquisition Corporation, an Illinois corporation and a wholly-owned subsidiary
of ZMAX ("Acquisition"); Eclipse Information Systems, Inc., an Illinois
corporation ("ECLIPSE"); ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇ (the "Majority Shareholders"); and ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ (the "Minority Shareholders")(with the Majority
Shareholders and the Minority Shareholders being hereinafter collectively
referred to as the "Shareholders").
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms shall have the following meanings
for purposes of this Agreement:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" means this Agreement, all Exhibits hereto, and all
amendments made hereto and thereto by written agreement among the parties.
"Business" means, with respect to ZMAX or ECLIPSE, the provision of
information technology consulting services, and the design, development,
installation, implementation, sale, support, maintenance, marketing and
management of software products relating to information technology and
computer systems.
"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in Washington,
D.C., are generally closed for business.
"Certificates" has the meaning set forth in Section 3.01(a) hereof.
"Certificate of Merger" has the meaning set forth in Section 2.01
hereof.
"Closing" means the consummation of the transactions contemplated
herein, as provided in Section 2.05 hereof.
"Closing Date" has the meaning set forth in Section 2.05 hereof.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
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"Damages" means any and all incurred or asserted claims, actions,
demands, losses, costs, reasonable expenses, liabilities, penalties and
damages (including reasonable attorneys' fees and expenses and costs of
investigation and litigation). In the event any of the foregoing are
indemnifiable hereunder, the term "Damages" shall include any and all
reasonable attorneys' fees and expenses and costs of investigation and
litigation incurred by the Indemnified Person in enforcing such indemnity.
Without limitation, "Damages" shall include reasonable fees and disbursements
of counsel incurred by any Indemnified Party in an action or proceeding
between the Indemnifying Party and the Indemnified Party or between the
Indemnified Party and any third party or otherwise.
"ECLIPSE Benefit Plans" has the meaning set forth in Section 4.13(a)
hereof.
"ECLIPSE Confidential Information" means all confidential information
concerning ECLIPSE or its Affiliates that (i) is not and has not become
ascertainable or obtainable from public or published information, (ii) is not
received from a third party or is received from a third party pursuant to the
authorization of ECLIPSE or the Shareholders in connection with ZMAX's due
diligence review of ECLIPSE, (iii) was not in ZMAX's possession prior to
disclosure thereof to ZMAX in connection with the transactions contemplated
herein, and (iv) was not independently developed by ZMAX.
"ECLIPSE Material Adverse Change" means a change that has or can
reasonably be expected to have a material, adverse impact on the business,
operations, assets, liabilities, results of operations, cash flows or
financial condition of ECLIPSE, taken as a whole.
"ECLIPSE Material Adverse Effect" means an effect on the business,
operations, assets, liabilities, results of operations, cash flows or
financial condition of ECLIPSE that is or can reasonably be expected to be
materially adverse.
"ECLIPSE Permits" has the meaning set forth in Section 4.11 hereof.
"ECLIPSE Shares" means the 170,000 shares of common stock, no par value
per share, of ECLIPSE as held of record by the Shareholders, with the number
of shares held by each Shareholder being set forth in detail on Exhibit
3.01(a) hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Effective Date" has the meaning set forth in Section 2.01 hereof.
"Effective Time" has the meaning set forth in Section 2.01 hereof.
"Employment Agreements" have the meanings set forth in Section 6.16
hereof and substantially in the form set forth in EXHIBITS 6.16(A), (B), (C),
(D) AND (E).
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"Escrow Agent" has the meaning set forth in Section 10.01(b) hereof.
"Escrow Agreement" has the meaning set forth in Section 10.01(b) hereof,
and substantially in the form attached hereto as EXHIBIT 10.01(B).
"Escrow Fund" has the meaning set forth in Section 10.01(b) hereof.
"Escrow Period" has the meaning set forth in Section 10.01(b) hereof.
"Financial Statements" means: (a) the unaudited financial statements of
ECLIPSE as of December 31, 1997 (including all schedules and notes thereto),
consisting of the balance sheets at such dates and the related statements of
income and expenses for the twelve-month period beginning January 1, 1997 and
ending December 31, 1997; (b) the Interim Financial Statements; and (c) the
tax returns of the Majority Shareholders for the years 1995, 1996 and 1997.
"GAAP" means U.S. generally accepted accounting principles in effect
from time to time.
"Governmental Authority" means the government of the United States or
any foreign country or any state or political subdivision thereof and any
entity, agency, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Illinois Corporations Code" means the Illinois Business Corporations
Act of 1983, as amended.
"Indemnified Person" means the Person or Persons entitled to, or
claiming a right to, indemnification.
"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification.
"Intellectual Property" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations, applications,
licenses or rights relating to any of the foregoing), technology, trade
secrets, inventions, know-how, designs, computer programs, processes, and all
other intangible assets, properties and rights. The term "ECLIPSE's
Intellectual Property" means any and all Intellectual Property owned by
ECLIPSE in the conduct of its business, as defined in Section 4.14 hereof and
set forth in EXHIBIT 4.14 attached hereto.
"Interim Financial Statements" means any of the unaudited financial
statements of ECLIPSE for each calendar month during 1998 (including any and
all schedules and notes thereto), consisting of the balance sheet for each
such month and related statements of income and expenses for each such month,
which statements have been delivered to ZMAX pursuant to Section 4.05 hereof.
8
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Lien" means any mortgage, lien (except for any lien for Taxes not yet
due and payable), charge, restriction, pledge, security interest, option,
lease or sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"Merger" has the meaning set forth in Section 2.01 hereof.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, limited liability
partnership, trust, association or other entity, including a government or
government department, agency or instrumentality.
"Registration Rights Agreement" has the meaning set forth in Section
6.12 hereof and substantially in the form in EXHIBIT 6.12.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Shareholders' Agent has the meaning set forth in Section 10.09 hereof.
"Subsidiary" means any Person 50.1% or more of the voting power of which
is controlled by another Person.
"Surviving Corporation" has the meaning set forth in Section 2.01
hereof.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, severance, employee's
income and employment tax withholding, other withholding, unemployment taxes,
interest, penalties and/or additions to tax attributable thereto, which are
imposed by any Governmental Authority.
"Tax Return" means any report, return or other information required to
be supplied to a Governmental Authority in connection with any Taxes.
"ZMAX Common Stock" has the meaning set forth in Section 5.02(a) hereof.
"ZMAX Confidential Information" means all confidential information
concerning ZMAX or its Affiliates that (i) is not and has not become
ascertainable or obtainable from public or published information, (ii) is not
9
received from a third party or is received from a third party pursuant to the
authorization of ZMAX, (iii) was not in the possession of ECLIPSE or the
Shareholders prior to disclosure thereof to ECLIPSE or the Shareholders in
connection with the transactions contemplated herein, and (iv was not
independently developed by ECLIPSE or the Shareholders.
"ZMAX Indemnified Parties" means ZMAX and each of its Affiliates
(including, after the Closing, ECLIPSE) and their respective officers,
directors, employees, agents and representatives, provided that in no event
shall the Shareholders be deemed a ZMAX Indemnified Party.
"ZMAX Material Adverse Change" means a change that has or can reasonably
be expected to have a material, adverse impact on the business, operations,
assets, liabilities, results of operations, cash flows or financial condition
of ZMAX and any of its subsidiaries, taken as a whole.
"ZMAX Material Adverse Effect" means an effect on the business,
operations, assets, liabilities, results of operations, cash flows or
financial condition of ZMAX and any of its subsidiaries, taken as a whole,
that is or can reasonably be expected to be materially adverse.
"ZMAX Permits" has the meaning set forth in Section 5.10 hereof.
"ZMAX SEC Reports" has the meaning set forth in Section 5.05 hereof.
"ZMAX Shares" means the 1,700,000 shares of Common Stock, par value
$.001 per share, of ZMAX, issuable to the Shareholders pursuant to Section
2.04(c) of this Agreement.
"ZMAX Stock Option" has the meaning set forth in Section 6.11 hereof.
10
ARTICLE II
THE MERGER AND PLAN OF REORGANIZATION
Section 2.01 THE MERGER. Upon the terms and subject to the
conditions hereof, as promptly as practicable following the satisfaction or
waiver of the conditions set forth in Articles VI and VII hereof, unless the
parties shall otherwise agree, articles of merger in the form attached hereto
as EXHIBIT 2.01 (the "Certificate of Merger") providing for the merger of
Acquisition with and into ECLIPSE (the "Merger") shall be duly prepared and
executed by ECLIPSE and Acquisition, and filed by ECLIPSE, as the surviving
corporation (sometimes also referred to as the "Surviving Corporation"), in
accordance with the relevant provisions of the Illinois Corporations Code, and
the parties hereto shall take any other actions required by law to make the
Merger effective. Following the Merger, ECLIPSE, with all its purposes,
objects, rights, privileges, powers and franchises, shall continue, and
Acquisition shall cease to exist. The Merger shall be effective at the time
(the "Effective Time") and on the date (the "Effective Date") that a properly
executed Certificate of Merger is duly filed with the Secretary of State of
Illinois in accordance with Section 11.25 of the Illinois Corporations Code;
PROVIDED, HOWEVER, that by mutual consent of the parties, such Certificate of
Merger may provide for a later date of effectiveness of the Merger not more
than thirty (30) days after such filing. After the Effective Time and
Effective Date, a closing shall take place at the offices of Freedman, Levy,
▇▇▇▇▇ & ▇▇▇▇▇▇▇, in Washington, D. C., as set forth in Section 2.05 hereof.
Section 2.02 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 11.50 of the Illinois Corporations Code. As of
the Effective Time, the Surviving Corporation shall be a wholly-owned
subsidiary of ZMAX. At the Effective Date, Article 4 of the Articles of
Incorporation of ECLIPSE shall be amended to change the total number of shares
of stock which ECLIPSE is authorized to issue to be solely as follows: One
Thousand (1,000) shares of Common Stock, no par value per share. As so
amended, the Articles of Incorporation of ECLIPSE shall be the Articles of
Incorporation of the Surviving Corporation after the Effective Date unless and
until amended in accordance with their terms and as provided by law. The
bylaws of ECLIPSE as in effect on the Effective Date shall be the bylaws of
the Surviving Corporation unless and until amended in accordance with their
terms and as provided by law.
Section 2.03 DIRECTORS AND OFFICERS. Immediately after the
Effective Time, the Board of Directors of the Surviving Corporation shall
consist of five (5) persons, with three (3) of such persons being designated
by ZMAX, with one (1) of the two (2) remaining persons being ▇▇▇▇▇ ▇▇▇▇▇▇▇,
and with the fifth (5th) person being designated by the Majority Shareholders,
with each such director of the Surviving Corporation to serve until their
respective successors shall have been duly elected or appointed and shall have
been qualified or until their earlier death, resignation or removal in
accordance with the articles of incorporation and bylaws of the Surviving
Corporation.
11
Section 2.04 CONVERSION OF ECLIPSE SHARES. At the Effective Time,
by virtue of the Merger and without any action on the part of ZMAX,
Acquisition, ECLIPSE or the holder of any of the following securities:
(a) Any shares of capital stock of ECLIPSE which are held in the
treasury of ECLIPSE shall be cancelled.
(b) All issued and outstanding shares of the capital stock of
acquisition shall be converted into and become One Thousand (1,000) issued and
outstanding shares of common stock of the Surviving Corporation.
(c) Subject to Sections 2.01, 2.05, 3.01, 3.02 and 10.01(b) of
this Agreement, the ECLIPSE Shares shall be converted into the right to
receive up to One Million Four Hundred Fifty Thousand Dollars ($1,450,000.00)
(subject to adjustment as to $145,000.00 of such funds to be held in Escrow
Fund pursuant to Section 10.01(b) of this Agreement) and One Million Seven
Hundred Thousand (1,700,000) ZMAX Shares.
Section 2.05 CLOSING. The closing of the merger (the "Closing")
will take place at the offices of Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, Washington,
D. C., at 10:00 A.M. (EDT) no later than four (4) Business Days after the
receipt by ZMAX of confirmation from the Illinois Secretary of State that the
Certificate of Merger has been approved as filed, or at such other place, time
and date as the parties may agree upon in writing (the "Closing Date").
ARTICLE III
CONVERSION OF SHARES
Section 3.01 CONVERSION OF ECLIPSE SHARES.
(a) At the Closing, ZMAX shall (i) deposit $145,000.00 with
Escrow Agent pursuant to Section 10.01(b) hereof, (ii) deliver certificates
for One Million Seven Hundred Thousand (1,700,000) ZMAX Shares to the
Shareholders, registered in the names of the Shareholders and in the amounts
provided in EXHIBIT 3.01(A), and (iii) pay an aggregate of $1,305,000.00 to
the Shareholders in the proportions provided in EXHIBIT 3.01(A). Such
certificates of the ZMAX Shares shall bear the restrictive legend contained in
Section 4.21(f) hereof.
(b) At the Closing, the holders of certificate(s) which
immediately prior to the Effective Time represented all of the ECLIPSE Shares
(the "Certificates") shall deliver the Certificates to ZMAX, and the
Certificates shall be in such form and have such other provisions as ZMAX and
ECLIPSE may reasonably specify. After the Effective Time and upon surrender of
the Certificates to ZMAX, the former shareholders of ECLIPSE shall be entitled
to receive in exchange for such Certificates (i) the certificates representing
whole ZMAX Shares (no fractional shares of ZMAX Common Stock shall be issued)
12
which such holder has the right to receive pursuant to the provisions of this
Agreement, and the Certificates so surrendered shall forthwith be cancelled,
and (ii) the cash amounts provided in Section 3.01(a) hereof, subject to the
escrow provisions of Section 10.01(b) hereof.
(c) Following the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of ECLIPSE Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Article III.
(d) No certificate or scrip representing fractional ZMAX Shares
shall be issued upon the surrender for exchange of Certificates, and any
fractional share interests resulting from the conversion of the ECLIPSE Shares
into the ZMAX Shares shall be rounded to the nearest whole ZMAX Share within
the total maximum number of 1,700,000 ZMAX Shares to be issued in the Merger
to the Shareholders.
(e) Within sixty (60) days after the Closing (the "First
Adjustment Date"), ZMAX and ▇▇▇▇▇ ▇▇▇▇▇▇, as the designated representative of
the Shareholders, shall determine the amount of cash, accounts receivable,
accounts payable and sales commissions of ECLIPSE, based on generally accepted
accounting principles, as of the Closing. In the event the cash and accounts
receivable of ECLIPSE as of the Closing Date is determined as of the First
Adjustment Date to have been less than $1,450,000.00 as of the Closing Date,
then ZMAX shall deduct such shortfall from the Escrow Fund at that time. Any
accounts payable and sales commissions of ECLIPSE which are attributable to
the period prior to the Effective Date but which are not included in the
$566,500 of aggregate liabilities of ECLIPSE to be assumed by ZMAX under this
Agreement, shall be deducted from the Escrow Fund on the First Adjustment
Date. The amount of any accounts receivable of ECLIPSE which remain
uncollected on the date which is one hundred twenty (120) days after the
Closing (the "Second Adjustment Date") shall be deducted from the Escrow Fund
at that time. In the event any money remains in the Escrow Fund after the
Second Adjustment Date, the Escrow Agent shall pay such money to the
Shareholders. In the event the $145,000.00 in the Escrow Fund is insufficient
to satisfy all the deductions therefrom as described in this Section 3.02(e),
then such shortfall in the Escrow Fund shall be reimbursed to ZMAX by the
Shareholders within five (5) business days of the Second Adjustment Date.
Section 3.02 ADJUSTMENTS; DELIVERY OF CERTIFICATES. If, between the
date of this Agreement and the Effective Time, the ECLIPSE Shares or the ZMAX
Shares shall have been exchanged into a different number of shares or a
different class by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within such period, the amount into which
the ECLIPSE Shares will be converted in the Merger shall be correspondingly
adjusted.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ECLIPSE
AND THE MAJORITY SHAREHOLDERS
Except as provided in Section 4.21 and except with respect to any
representations or warranties regarding the "knowledge" or "best knowledge" of
any Person for which such representations and warranties shall be made
severally and not jointly, ECLIPSE and the Majority Shareholders jointly and
severally represent and warrant to ZMAX and Acquisition as of the date of this
Agreement and on the Effective Date (except as otherwise provided herein) as
follows; PROVIDED, HOWEVER, that any disclosure or reference set forth in any
Exhibit attached to this Agreement shall apply to and/or qualify any of the
representations or warranties set forth in this Article IV:
Section 4.01 ORGANIZATION. ECLIPSE is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. ECLIPSE is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate result
in an ECLIPSE Material Adverse Effect. ECLIPSE has heretofore delivered to
ZMAX accurate and complete copies of its articles of incorporation and bylaws,
as currently in effect.
Section 4.02 CAPITALIZATION. (a) The authorized capital stock of
ECLIPSE consists of 1,000,000 shares of ECLIPSE common stock, no par value per
share, of which, as of the date of this Agreement, 170,000 ECLIPSE Shares were
issued and outstanding. All the issued and outstanding ECLIPSE Shares are
validly issued, fully paid and non-assessable and free of preemptive rights.
ECLIPSE has issued no other shares of its capital stock nor securities
substantially equivalent to capital stock.
Except as set forth above, in EXHIBIT 4.02 attached hereto, or as
contemplated hereby, there are not now, and at the Effective Time there will
not be, any shares of capital stock (or securities substantially equivalent to
capital stock) of ECLIPSE issued or outstanding or any subscriptions, options,
warrants, calls, rights, convertible securities or other agreements or
commitments of any character obligating ECLIPSE to issue, transfer or sell any
of its securities.
(b) Except as disclosed in EXHIBIT 4.02, ECLIPSE does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity, voting or ownership
interest in any business other than its own. There are not now, and at the
Effective Time there will not be, any voting trusts or other agreements or
understandings to which ECLIPSE is a party or is bound with respect to the
voting of the capital stock of ECLIPSE.
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Section 4.03 AUTHORITY RELATIVE TO THIS AGREEMENT. ECLIPSE has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors and the
Shareholders of ECLIPSE and no other corporate proceedings on the part of
ECLIPSE are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by ECLIPSE and the Shareholders and constitutes a valid
and binding agreement of them, enforceable against them in accordance with its
terms, except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, and (b) rules of law
or equity governing specific performance, injunctive relief and other
equitable remedies.
Section 4.04 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as
otherwise provided in EXHIBIT 4.04 attached hereto and in the filing and
recordation of the Certificate of Merger, as required by Section 11.25 of the
Illinois Corporations Code, no filing with, and no permit, authorization,
consent or approval of, any Governmental Authority is necessary for the
consummation by ECLIPSE of the transactions contemplated by this Agreement.
Except as set forth in EXHIBIT 4.04, neither the execution and delivery of
this Agreement by ECLIPSE nor the consummation by ECLIPSE of the transactions
contemplated hereby nor compliance by ECLIPSE with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
articles of incorporation or bylaws of ECLIPSE, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which ECLIPSE is a party or by which it or any of its properties
or assets may be bound, or (iii) violate any order, writ, injunction, decree,
statute, treaty, rule or regulation applicable to ECLIPSE or any of its
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which would not cause an ECLIPSE Material Adverse Event
and which will not prevent or delay the consummation of the transactions
contemplated hereby.
Section 4.05 FINANCIAL STATEMENTS. ECLIPSE has delivered to ZMAX
copies of the Financial Statements. The unaudited Financial Statements present
fairly the financial position, assets and liabilities of ECLIPSE as of
December 31, 1997, and the results of the operation of ECLIPSE's business and
changes in cash flow for the twelve (12) month period ending December 31,
1997. The unaudited Interim Financial Statements present fairly the financial
position, assets and liabilities of ECLIPSE as of November 30, 1998 and
December 14, , respectively, and the results of the operation of ECLIPSE's
business and changes in cash flow for the periods then ended. The Financial
Statements have been prepared in conformity with GAAP, consistently applied
during the periods. The Financial Statements, including the notes thereto,
make full and adequate disclosure of, and provision for, all material
obligations and liabilities of ECLIPSE to the extent required by GAAP. Except
as set forth in the most recent balance sheet included in the Financial
Statements, there are no liabilities, debts, claims or obligations, whether
accrued, absolute, contingent or otherwise, whether due or to become due,
which would cause an ECLIPSE Material Adverse Change, to the extent required
15
by GAAP to be included in such balance sheet. Except as set forth in EXHIBIT
4.05, none of the Financial Statements or schedules included therein, contain
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
Section 4.06 ABSENCE OF CERTAIN CHANGES. Except as set forth in
EXHIBIT 4.06 attached hereto, since December 31, 1997, ECLIPSE has not taken
any of the prohibited actions set forth in Section 6.01, suffered any ECLIPSE
Material Adverse Changes or entered into any transaction, or conducted its
business or operations, other than in the ordinary and usual course of
business and consistent with past practice.
Section 4.07 NO UNDISCLOSED LIABILITIES. Except as and to the
extent set forth in the Financial Statements, ECLIPSE, at November 30, 1998,
did not have any material liabilities not reflected on the balance sheet of
ECLIPSE included in the Interim Financial Statements. Except as and to the
extent set forth in such Financial Statements, since November 30, 1998,
through and including the Effective Date, ECLIPSE has not incurred any
liabilities material to the business, operations or financial condition of
ECLIPSE taken as a whole, except liabilities incurred in the ordinary and
usual course of business and consistent with past practice and any liabilities
incurred in connection with this Agreement.
Section 4.08 ACCURACY OF STATEMENTS. Neither this Agreement nor any
written statement, list, certificate or other information furnished by or on
behalf of ECLIPSE to ZMAX in connection with this Agreement or any of the
transactions contemplated hereby, taken as a whole, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading; provided, however, that the forecasts
and projections of ECLIPSE which have been provided to ZMAX are only the best
estimates of ECLIPSE and shall not be deemed to have been detrimentally relied
upon by ZMAX for purposes of any claim of breach under this Section.
Section 4.09 NO DEFAULT. Except as set forth in EXHIBIT 4.09
attached hereto, ECLIPSE is not in default or violation (and no event has
occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its articles
of incorporation or its bylaws, (ii) any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which
ECLIPSE is a party or by which it or any of its properties or assets may be
bound or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to ECLIPSE, which defaults or violations would, in the
aggregate, result in an ECLIPSE Material Adverse Effect or which would
materially prevent or delay the consummation of the transactions contemplated
hereby.
Section 4.10 LITIGATION. Except as disclosed in EXHIBIT 4.10
attached hereto, there is no action, suit, proceeding, review or, to the
knowledge of ECLIPSE, investigation pending or, to the knowledge of ECLIPSE,
threatened involving ECLIPSE, at law or in equity, or before any Governmental
16
Authority which in the aggregate are reasonably likely to result in an ECLIPSE
Material Adverse Effect on the assets or business of ECLIPSE or the ECLIPSE
Shares.
Section 4.11 COMPLIANCE WITH APPLICABLE LAW. ECLIPSE holds all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Authorities necessary for the lawful conduct of its business (the
"ECLIPSE Permits"), except for failures to hold such ECLIPSE Permits which
would not, in the aggregate, result in an ECLIPSE Material Adverse Effect.
ECLIPSE is in compliance with the terms of ECLIPSE Permits, except where the
failure so to comply would not result in an ECLIPSE Material Adverse Effect.
The business of ECLIPSE is not being conducted in violation of any applicable
law, ordinance, rule, regulation, decree or order of any Governmental
Authority, except for violations which in the aggregate do not and would not
result in an ECLIPSE Material Adverse Effect.
Section 4.12 TAXES. ECLIPSE has duly filed all material federal,
state, local and foreign tax returns required to be filed by it, and ECLIPSE
has duly paid, caused to be paid or made adequate provision for the payment of
all Taxes required to be paid in respect of the periods covered by such
returns and has made adequate provision for payment of all Taxes anticipated
to be payable in respect of all taxable periods since the periods covered by
such returns and ending with the Effective Date. To the best of the knowledge
of ECLIPSE and the Majority Shareholders, none of the income tax returns
required to be filed by ECLIPSE with Governmental Authorities has ever been
examined by the government agencies responsible for auditing such returns, and
no period during which any assessments may be made by such agencies with
respect to such returns or any Taxes due to such Governmental Authorities has
expired. No issue or claim has been asserted for Taxes by any taxing authority
for any prior period, the adverse determination of which would result in a
deficiency which would result in an ECLIPSE Material Adverse Effect. Except as
set forth in EXHIBIT 4.12 attached hereto, there are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any
income tax return of ECLIPSE.
Section 4.13 ERISA.
(a) With respect to each employee benefit plan (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
ERISA), and any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan, arrangement or
understanding (whether or not legally binding) (all the foregoing being herein
called the "ECLIPSE Benefit Plans"), maintained or contributed to by ECLIPSE,
ECLIPSE has made available to ZMAX a true and correct copy of, where
applicable, (i) the most recent annual report (Form 5500) filed with the IRS,
(ii) such ECLIPSE Benefit Plan, (iii) each trust agreement and group annuity
contract, if any, relating to such ECLIPSE Benefit Plan and (iv) the most
recent actuarial report or valuation relating to a ECLIPSE Benefit Plan
subject to Title IV of ERISA. None of the ECLIPSE Benefit Plans are
multiemployer plans within the meaning of Section 3(37) of ERISA. Each of the
ECLIPSE Benefit Plans covered by ERISA (a) has been operated in all material
respects in accordance with ERISA, (b) has not engaged in any prohibited
17
transactions (as such term is defined in Section 406 of ERISA) and (c) has met
the minimum funding standards of Section 412 of the Code. No material
reportable event (within the meaning of Section 4043 of ERISA) has occurred
and is continuing with respect to any such Plan. ECLIPSE has never terminated
any pension plan or withdrawn from any multiemployer pension plan.
(b) With respect to ECLIPSE Benefit Plans, in the aggregate, no
event has occurred, and to the knowledge of ECLIPSE or the Majority
Shareholders, there exists no condition or set of circumstances which are
reasonably likely to occur in connection with which ECLIPSE would be subject
to any liability, that would result in an ECLIPSE Material Adverse Effect
(except liability for benefits claims and funding obligations payable in the
ordinary course), under ERISA, the Code or any other applicable law.
(c) Except as set forth in EXHIBIT 4.13 attached hereto, with
respect to ECLIPSE Benefit Plans, in the aggregate, there are no funded
benefit obligations for which contributions have not been made or properly
accrued and there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
GAAP on the Financial Statements, which obligations are reasonably likely to
result in an ECLIPSE Material Adverse Effect.
Section 4.14 INTELLECTUAL PROPERTY.
(a) EXHIBIT 4.14 is an accurate and complete list of all of
ECLIPSE's Intellectual Property, and reflects ECLIPSE's Intellectual Property
that has been duly and properly registered in any jurisdiction. Except as
otherwise specified in EXHIBIT 4.14, ECLIPSE owns, has the right to use, sell,
license, dispose of, and to bring actions for the misappropriation of
ECLIPSE's Intellectual Property, and to the best knowledge of ECLIPSE and the
Majority Shareholders, without any conflict with or infringement of the rights
of others, free and clear of all liens, charges or encumbrances or other
restrictions of any kind.
(b) ECLIPSE has taken reasonable steps to safeguard and maintain
the secrecy and confidentiality of, and protect its proprietary rights in, its
Intellectual Property.
(c) Except as set forth in EXHIBIT 4.14 attached hereto and to
the knowledge of ECLIPSE, no claim is pending or, to the knowledge of ECLIPSE
or the Majority Shareholders, threatened to the effect that the present or
past operations of ECLIPSE infringe upon or conflict with the rights of others
with respect to any Intellectual Property and no claim is pending or
threatened to the effect that any of the Intellectual Property is invalid or
unenforceable. To the knowledge of ECLIPSE and the Majority Shareholders, no
contract, agreement or understanding with any party exists which would
materially impede or prevent the continued use by ECLIPSE of the entire right,
title and interest of ECLIPSE in and to the Intellectual Property.
18
Section 4.15 CHANGE IN CONTROL. Except as set forth in EXHIBIT
4.15, ECLIPSE is not a party to any contract, agreement or understanding which
contains a "change in control" provision or "potential change in control"
provision.
Section 4.16 BROKERS; FINDERS. Neither ECLIPSE nor the Shareholders
have retained any broker or finder in connection with the transactions
contemplated herein so as to give rise to any valid claim against ECLIPSE or
ZMAX for any brokerage or finder's commission, fee or similar compensation.
Section 4.17 OPERATIONS OF ECLIPSE. Except as set forth in EXHIBIT
4.17 attached hereto, ECLIPSE has not since November 30, 1998:
(a) amended its articles of incorporation or bylaws or merged
with or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its capital stock or changed or agreed to change in
any manner the rights of its outstanding capital stock or the character of its
business;
(b) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(c) waived any right of material value to its business which in
each instance is worth in excess of $10,000.00 or in the aggregate is worth
greater than $25,000.00;
(d) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted by
it;
(e) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, employees, consultants,
agents or other representatives;
(f) except in the ordinary course of business consistent with
past practices, entered into any lease (as lessor or lessee), sold, abandoned
or made any other disposition of any of its tangible assets, granted or
suffered any lien or other encumbrance on any of its assets or properties,
entered into or amended any contract or other agreement to which it is a
party, or by or to which it or its assets or properties are bound or subject,
or pursuant to which it agrees to indemnify any party or to refrain from
competing with any party, in each instance, worth more than $10,000.00;
(g) except for property or equipment acquired in the ordinary
course of business, made any acquisition of all or any part of the assets,
properties, capital stock or business of any other Person, which is in each
instance valued at more than $10,000.00, or in the aggregate valued at more
than $25,000.00;
19
(h) paid, directly or indirectly, any of its material
liabilities before the same became due in accordance with its terms or
otherwise than in the ordinary course of business;
(i) suffered or incurred any damage, destruction or loss
(whether or not covered by insurance) constituting an ECLIPSE Material Adverse
Effect or ECLIPSE Material Adverse Change;
(j) entered into any other material contract or other agreement
or other material transaction; or
(k) been advised or otherwise become aware that any of its
existing contracts for the performance of services or the license of any
portion of ECLIPSE's Intellectual Property is to be terminated or
substantially modified other than in accordance with its terms or as reflected
in EXHIBIT 4.17.
Section 4.18 INSURANCE. EXHIBIT 4.18 attached hereto is an accurate
and complete list of all policies of fire, liability, workers' compensation,
title and other forms of insurance owned, held by or applicable to ECLIPSE,
and ECLIPSE has heretofore delivered to ZMAX a true and complete copy of all
such policies, including all occurrence-based policies applicable to ECLIPSE
for all periods prior to the Effective Date. To the knowledge of each of
ECLIPSE and the Majority Shareholders, there are no pending claims of ECLIPSE
under any of such policies; such policies (and binders, if any), are valid and
enforceable in accordance with their terms and are in full force and effect;
and all the insurable properties and assets of ECLIPSE are insured for
ECLIPSE's benefit, in amounts and coverages deemed adequate by the ECLIPSE's
management, against all risks usually insured against by persons operating
similar properties and assets in the localities where such properties or
assets are located, under valid and enforceable policies issued by insurers of
recognized responsibility.
Section 4.19 ASSETS. Except as set forth in EXHIBIT 4.19, the
assets of ECLIPSE which are material to its business and operations are in
good operating and/or marketable condition and repair.
Section 4.20 IMPROPER AND OTHER PAYMENTS. To the best knowledge of
ECLIPSE and the Majority Shareholders, except as set forth in EXHIBIT 4.20,
none of ECLIPSE, any of its directors, officers, employees, agents or
representatives, nor any Person acting on behalf of any of them, has made,
paid or received (a) any bribes, kickbacks or other similar payments to or
from any Person, whether lawful or unlawful, (b) any contributions, directly
or indirectly, to a domestic or foreign political party or candidate or (c)
any improper foreign payment (as defined in the U.S. Foreign Corrupt Practices
Act).
Section 4.21 ADDITIONAL SHAREHOLDER REPRESENTATIONS.
(a) Each Shareholder severally and not jointly represents that
such Shareholder has not entered into any agreement or understanding to
purchase, sell, exchange, transfer by gift or otherwise dispose of ECLIPSE
20
Shares prior to the date hereof, nor will such Shareholder enter into any such
agreement or understanding prior to the Effective Date.
(b) Each Shareholder severally and not jointly represents that
he or she is aware of (i) the limitations on resale of the ZMAX Shares and
(ii) the fact that he or she is receiving the ZMAX Shares without registration
under the Securities Act in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act, which Shares are being
acquired for investment and without any view to the sale, resale, or other
distribution thereof in any manner that is in violation of the Securities Act.
(c) None of the Shareholders or any of their Affiliates has or
claims to have any direct or indirect interest in any tangible or intangible
property used in ECLIPSE's business, except as a holder of the ECLIPSE Shares.
The Shareholders are the sole and exclusive holders of all the outstanding
shares of capital stock of ECLIPSE. Each Shareholder represents that, except
as disclosed on EXHIBIT 4.21(C) attached hereto, none of the Shareholders nor
any of their Affiliates has any direct or indirect interest in any other
Person which conducts a business similar to, has any contract or arrangement
with, or does business or is involved in any way with, ECLIPSE. EXHIBIT
4.21(C) contains a complete and accurate description of all such Persons,
interests, arrangements and other matters.
(d) Each Shareholder is capable of evaluating the merits and
risks of the investment in ZMAX Shares, has the capacity to protect his or her
own respective interests, and has the financial ability to bear the economic
risks of the investment.
(e) Each Shareholder has had ample opportunity to discuss ZMAX's
business, management and financial affairs with its management and the
opportunity to review in detail ZMAX's property, books, accounts, records,
contracts and documents and all other information related to such
Shareholder's investment in ZMAX Shares. Such Shareholder's questions
pertaining to ZMAX were answered fully and to the Shareholder's satisfaction.
(f) Each Shareholder shall not sell, pledge, hypothecate or
otherwise transfer any ZMAX Shares unless it is registered under the
Securities Act and applicable state securities laws or is exempt therefrom.
Each Shareholder acknowledges that each certificate representing ZMAX Shares
shall be endorsed with a legend which provides substantially as follows:
"The securities evidenced hereby have not been registered under
the Securities Act of 1933, as amended, or the laws of any other
jurisdiction, and may not be sold, transferred, assigned, pledged
or otherwise distributed unless there is an effective registration
statement under such Act and applicable securities laws covering
such securities, or such sale, transfer, assignment, pledge or
distribution is exempt from registration under such Act and
applicable securities laws. ZMAX Corporation may require an
opinion of counsel for the holder of the securities (reasonably
acceptable to ZMAX Corporation and itscounsel) stating that such
sale, transfer, assignment, pledge or distribution is exempt from
registration under such Act and applicable securities laws. The
21
securities evidenced hereby are further subject to certain
restrictions on voting and transfer as contained in a Shareholders
Agreement, dated as of December 14, 1998."
(g) Each Shareholder shall vote in favor of the Agreement and
the transactions contemplated herein at the shareholders' meeting described in
Section 6.06 hereof. Each Shareholder understands and agrees that the ZMAX
Shares to be issued to him or her shall be the subject of a Shareholders
Agreement, in the form attached hereto as EXHIBIT 4.21(G), and each
Shareholder agrees to execute and deliver to ZMAX prior to the Effective Date
the Shareholders Agreement attached hereto as EXHIBIT 4.21(G).
(h) Each Shareholder has no present intention to dispose of any
of the ZMAX Shares to be issued in the Merger, unless otherwise permitted
under federal or state securities or tax laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ZMAX AND ACQUISITION
ZMAX and Acquisition represent and warrant to ECLIPSE and the
Shareholders as of the date of this Agreement and on the Effective Date
(except as otherwise provided herein) as follows:
Section 5.01 ORGANIZATION. Each of ZMAX and its subsidiaries,
including Acquisition, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of ZMAX and its
subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not in the aggregate
result in an ZMAX Material Adverse Effect. ZMAX has heretofore delivered to
ECLIPSE accurate and complete copies of the articles of incorporation and
bylaws, as currently in effect, of ZMAX and Acquisition.
Section 5.02 CAPITALIZATION. (a) The authorized capital stock of
ZMAX consists of: (i) 50,000,000 authorized shares of common stock, par value
$.001 per share ("ZMAX Common Stock"), of which, as of September 30, 1998,
11,729,714 shares were issued and outstanding (with 479,801 shares being
subject to cancellation agreements); and (ii) 10,000,000 authorized shares of
preferred stock, par value $.001 per share, none of which shares are issued
and outstanding. All the issued and outstanding shares of ZMAX Common Stock
are validly issued, fully paid and non-assessable and free of preemptive
rights. All ZMAX Shares which are to be issued pursuant to the Merger or the
other transactions contemplated hereby, will be, when issued in accordance
22
with the respective terms thereof, duly authorized, validly issued, fully paid
and non-assessable and free of any preemptive rights in respect thereto. As of
September 30, 1998, a total of _________ shares of ZMAX Common Stock were
issuable upon the exercise of options or warrants that have been or may be
granted by ZMAX pursuant to ZMAX's 1997 Stock Option Plan, 1997 Director Stock
Purchase Plan and other stock option and warrant purchase agreements. Other
than such options and warrants, no Person has any right (including preemptive
rights) to acquire any shares of ZMAX Common Stock.
(b) EXHIBIT 5.02 attached hereto sets forth the name,
jurisdiction of incorporation and capitalization of each subsidiary of ZMAX.
Except as disclosed in EXHIBIT 5.02, ZMAX does not own, directly or
indirectly, any capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest in any business. All
of the outstanding shares of capital stock of each of ZMAX's subsidiaries have
been validly issued and are fully paid and non- assessable and, except as set
forth in EXHIBIT 5.02, are owned by ZMAX free and clear of all liens, charges,
claims or encumbrances. Other than such capital stock, no Person has any right
(including preemptive rights) to acquire any shares of capital stock or equity
securities in any of ZMAX's subsidiaries.
Section 5.03 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of ZMAX and
Acquisition has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of ZMAX and Acquisition and by ZMAX as the sole stockholder
of Acquisition and no other corporate proceedings on the part of ZMAX or
Acquisition are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by each of ZMAX and Acquisition and constitutes a valid
and binding agreement of each of ZMAX and Acquisition, enforceable against
each of ZMAX and Acquisition in accordance with its terms.
Section 5.04 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
applicable requirements of the Exchange Act, Securities Act, state Blue Sky
laws, and the filing and recordation of a Certificate of Merger, as required
by the Illinois Corporations Code, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority, is
necessary for the consummation by ZMAX of the transactions contemplated by
this Agreement. Except as set forth in EXHIBIT 5.04 attached hereto, neither
the execution and delivery of this Agreement by ZMAX or Acquisition nor the
consummation by ZMAX or Acquisition of the transactions contemplated hereby
nor compliance by ZMAX or Acquisition with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of the articles of
incorporation or bylaws of ZMAX or Acquisition, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which ZMAX or any of its subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or (iii) violate any
order, writ, injunction, decree, statute, treaty, rule or regulation
23
applicable to ZMAX, any of its subsidiaries or any of their properties or
assets, except in the case of (ii) or (iii) for violations, breaches or
defaults which would not caue a ZMAX Material Adverse Effect and which will
not prevent or delay the consummation of the transactions contemplated hereby.
Section 5.05 REPORTS. Except as provided in EXHIBIT 5.05 attached
hereto, ZMAX has filed all required forms, reports and documents with the SEC
since December 31, 1996 (collectively, the "ZMAX SEC Reports"), all of which
have complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, and copies of which have been supplied to
ECLIPSE.
Section 5.06 ACCURACY OF STATEMENTS. Neither this Agreement, the
ZMAX SEC Reports nor any statement, list, certificate or other information
furnished or to be furnished by or on behalf of ZMAX to ECLIPSE in connection
with this Agreement or any of the transactions contemplated hereby, taken as a
whole, contains or will contain any untrue statement of a material fact
regarding ZMAX or the ZMAX's business, or omits or will omit to state a
material fact necessary to make the statements regarding ZMAX or ZMAX's
business contained herein or therein, in light of the circumstances in which
they are made, not misleading.
Section 5.07 NO UNDISCLOSED LIABILITIES. Except as and to the
extent set forth in the ZMAX SEC Reports, neither ZMAX nor any of its
subsidiaries had at December 31, 1997, any liabilities required by GAAP to be
reflected on a consolidated balance sheet of ZMAX and its subsidiaries. Except
as and to the extent set forth in such ZMAX SEC Reports, since such date and
through and including the Effective Date, neither ZMAX nor any of its
subsidiaries has incurred any liabilities material to the business, operations
or financial condition of ZMAX and its subsidiaries taken as a whole, except
liabilities incurred in the ordinary and usual course of business and
consistent with past practice and liabilities incurred in connection with this
Agreement.
Section 5.08 NO DEFAULT. Except as set forth in EXHIBIT 5.08
attached hereto, neither ZMAX nor any of its subsidiaries is in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its articles of incorporation or its bylaws, (ii) any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which ZMAX or any of its subsidiaries is a party or by which
they or any of their properties or assets may be bound or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to ZMAX or
any of its subsidiaries, which defaults or violations would, in the aggregate,
result in an ZMAX Material Adverse Effect or which would prevent or delay the
consummation of the transactions contemplated hereby.
Section 5.09 LITIGATION. Except as disclosed in the ZMAX SEC
Reports or in EXHIBIT 5.09 attached hereto, there is no action, suit,
proceeding, review or, to the best knowledge of ZMAX or Acquisition,
investigation pending or, to the best knowledge of ZMAX or Acquisition,
threatened involving ZMAX or any of its subsidiaries, at law or in equity, or
before any Governmental Authority which in the aggregate are reasonably likely
24
to result in an ZMAX Material Adverse Effect.
Section 5.10 COMPLIANCE WITH APPLICABLE LAW. ZMAX and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Authorities necessary for the lawful conduct of
their respective business (the "ZMAX Permits"), except for failures to hold
such ZMAX Permits which would not, in the aggregate, constitute an ZMAX
Material Adverse Effect. ZMAX and its subsidiaries are in compliance with the
terms of the ZMAX Permits, except where the failure so to comply would not
result in an ZMAX Material Adverse Effect. The businesses of ZMAX and its
subsidiaries are not being conducted in violation of any applicable law,
ordinance, rule, regulation, decree or order of any Governmental Authority,
except for violations which or in the aggregate do not and would not result in
an ZMAX Material Adverse Effect.
Section 5.11 BROKERS; FINDERS. ZMAX has not retained any broker or
finder in connection with the transactions contemplated herein so as to give
rise to any valid claim for any brokerage or finder's commission, fee or
similar compensation.
Section 5.12 INTERIM OPERATIONS OF ACQUISITION. Acquisition was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
Section 5.13 MERGER REPRESENTATION. The Merger of Acquisition with
and into ECLIPSE is a statutory merger under applicable state law. After the
Merger, ECLIPSE will hold substantially all of its assets (at least 90% of the
fair market value of the net assets and at least 70% of the fair market value
of the gross assets) and substantially all of the assets of Acquisition. In
the Merger, the ECLIPSE Shareholders will exchange an amount of ECLIPSE stock
constituting control of ECLIPSE (within the meaning of Code Section 368(c))
solely for ZMAX voting stock and the Merger will constitute a reorganization
within the meaning of Code Sections 368(a)(1)(A) and 368(a)(2)(E). ZMAX
acknowledges that this representation is a significant inducement to ECLIPSE
and its Shareholders in entering into this Agreement and the Merger. There is
no plan or intention on the part of ZMAX or any of its Affiliates to sell or
otherwise dispose of the assets of Acquisition or ECLIPSE after the Merger,
except in the ordinary course of business.
ARTICLE VI
COVENANTS
Section 6.01 COVENANTS OF ECLIPSE. During the period from the date
of this Agreement and continuing until the Effective Date, ECLIPSE agrees that
(except as expressly contemplated or permitted by this Agreement, or to the
extent that the other party shall otherwise consent in writing):
25
(a) ECLIPSE shall carry on its business in the usual, regular
and ordinary course, consistent with past practice, and use its best efforts,
consistent with past practice, to preserve intact its present business
organization, maintain its corporate existence and good standing in its state
of incorporation, keep available the services of its present officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it.
(b) ECLIPSE shall not, nor shall it propose to, (i) declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of any of its capital stock,
(ii) 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 or (iii)
repurchase, redeem or otherwise acquire any of its securities.
(c) ECLIPSE shall not authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any stock of any class or any other securities
(including indebtedness having the right to vote) or equity equivalents
(including, without limitation, stock appreciation rights), except as required
pursuant to the agreements and instruments outstanding on the date hereof and
disclosed in Section 4.02, or amend in any material respect any of the terms
of any such securities or agreements outstanding on the date hereof, other
than the termination prior to Effective Date of the ECLIPSE Performance Share
Plan.
(d) ECLIPSE shall not amend or propose to amend its articles of
incorporation or bylaws.
(e) ECLIPSE shall not acquire, sell, lease, encumber, transfer
or dispose of any assets outside the ordinary course of business, consistent
with past practice, or any assets which are material to ECLIPSE taken as a
whole, except pursuant to obligations in effect on the date hereof, or enter
into any commitment or transaction outside the ordinary course of business,
consistent with past practice.
(f) ECLIPSE shall not incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of ECLIPSE or guarantee (or
become liable for) any debt of others or make any loans, advances or capital
contributions or mortgage, pledge or otherwise encumber any material assets or
create or suffer any material lien thereupon other than in each case in the
ordinary course of business consistent with prior practice.
(g) ECLIPSE shall not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the Financial Statements or incurred in the ordinary course
26
of business consistent with past practice.
(h) ECLIPSE shall not change any of the accounting principles or
practices used by it (except as required by GAAP).
(i) ECLIPSE shall not agree to take any of the foregoing actions
or knowingly take or agree to take any action that would or is reasonably
likely 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 VII not being satisfied.
(j) ECLIPSE shall give ZMAX prompt notice of: (a) any notice of,
or other communication relating to, a default or event which, with notice or
the lapse of time or both, would become a default, if received by ECLIPSE
subsequent to the date of this Agreement and prior to the Effective Time,
under any agreement, indenture or instrument material to the financial
condition, properties, business or results of operations of ECLIPSE, taken as
a whole, to which ECLIPSE is a party or is subject; (b) 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, which consent, if required, would breach the
representations contained in Article IV; and (c) any ECLIPSE Material Adverse
Change.
(k) During the period from the date of this Agreement and
continuing until the Effective Time, ECLIPSE agrees that it will not, without
the prior written consent of ZMAX, except as contemplated by this Agreement,
including Section 6.11 hereof, or required by law (i) enter into, adopt, amend
or terminate any ECLIPSE Benefit Plan or other employee benefit plan or any
agreement, arrangement, plan or policy between ECLIPSE and one or more of its
directors or executive officers or (ii) excep for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to ECLIPSE, increase in any manner the compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by any
plan and arrangement as in effect as of the date hereof or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
Section 6.02 PRESS RELEASES. From the date of this Agreement
through and including the Effective Date, the parties shall consult with each
other before issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and in making any filings
with any Governmental Authority with respect thereto.
Section 6.03 NO SOLICITATION. Neither ECLIPSE nor any of its
Affiliates, officers, directors, representatives or agents shall, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) any person, entity or group concerning any merger, sale of
substantial assets outside the ordinary course of business, sale of shares of
capital stock or similar transaction involving ECLIPSE (other than the
transactions contemplated by this Agreement). ECLIPSE shall promptly advise
27
ZMAX of any such inquiries or proposals it receives from third parties.
Section 6.04 ACCESS TO INFORMATION. Upon reasonable notice and
subject to restrictions contained in confidentiality agreements to which such
party is subject (from which such party shall use reasonable efforts to be
released), ECLIPSE and ZMAX shall each (and shall cause each of their
respective subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of the other, access, during normal business
hours during the period prior to the Effective Time, to its pertinent
properties, books, contracts, commitments and records and, during such period,
each of ECLIPSE and ZMAX shall furnish promptly to the other all information
concerning its business, properties and personnel as such other party may
reasonably request. Unless otherwise required by law or court order, the
parties will hold any such information which is nonpublic in confidence until
such time as such information otherwise becomes publicly available through no
wrongful act of either party, and in the event of termination of this
Agreement for any reason each party shall promptly return all nonpublic
documents obtained from any other party, and any copies or summaries made of
such documents, to such other party.
Section 6.05 BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use its best efforts to
have the Closing occur by December 14, 1998, or as soon as practicable
thereafter, but in any event prior to December 31, 1998, and to take, or cause
to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
including, without limitation, (i) such actions as may be required to be taken
under applicable state securities or Blue Sky laws in connection with the
issuance of ZMAX Shares contemplated hereby, and (ii) the preparation and
filing of all other forms, registrations and notices required to be filed to
consummate the transactions contemplated hereby and the taking of such actions
as are necessary to obtain any requisite approvals, consents, orders,
exemptions, waivers by any public or private third party. Each party shall
promptly consult with the other with respect to, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
Section 6.06 SHAREHOLDERS MEETING. ECLIPSE shall duly call, give
notice of, convene and hold a meeting of its shareholders as promptly as
practicable for the purpose of voting upon this Agreement and the transactions
contemplated herein. ECLIPSE will, through its Board of Directors, recommend
to its shareholders approval of such matters and will coordinate and cooperate
with respect to the timing of such meeting and shall use its best efforts to
hold such meeting on the same day or as soon as practicable after the date
hereof, and shall use its best efforts to secure the approval of this
Agreement and the transactions contemplated herein, subject to its fiduciary
duties under applicable law.
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Section 6.07 CONTACT CLIENTS. ECLIPSE shall permit ZMAX, and ZMAX
shall have the right to contact, subject to reasonable conditions, ECLIPSE's
clients under contract with ECLIPSE and to make reasonable inquiries of such
clients; provided, however, that ZMAX shall provide ECLIPSE with advance
notice of any such contact and shall permit ECLIPSE to participate in any such
contacts with ECLIPSE's clients.
Section 6.08 NOTICE REGARDING CHANGE IN CIRCUMSTANCES. ECLIPSE
shall give ZMAX written notice promptly upon the occurrence of or becoming
aware of the impending or threatened occurrence of any event which would cause
or constitute a breach or would have caused a breach had such event occurred
or been known to ZMAX prior to the date hereof, of any of ECLIPSE's
representations or warranties contained in this Agreement.
Section 6.09 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE MAJORITY SHAREHOLDERS. Except as
explicitly set forth elsewhere herein, the indemnification provided under this
Section 6.09 shall serve as the exclusive remedy for a breach of this
Agreement. Any claim for indemnification under this Section 6.09 must be
brought during the ten (10) year period immediately following the Effective
Date, with each of the Majority Shareholders jointly and severally agrees to
indemnify ZMAX against, and agrees to hold ZMAX harmless from, any and all
Damages incurred by or asserted against ZMAX as a result of, relating to or
arising out of or in connection with any breach of any of the representations
or warranties of ECLIPSE or the Shareholders under this Agreement; provided,
however, that such indemnification shall be limited to (i) an aggregate of
Eight Million Dollars ($8,000,000.00) in the event of a willful breach by a
Majority Shareholder and (ii) an aggregate of Two Million Dollars
($2,000,000.00) in the event of any other breach or misrepresentation by a
Majority Shareholder for which indemnification of ZMAX is available under this
Agreement. Notwithstanding the foregoing, the Majority Shareholders shall not
be subject to any claim by ZMAX for indemnification unless and until Damages
exceed an aggregate of Fifty Thousand Dollars ($50,000.00).
(b) INDEMNIFICATION BY ZMAX. ZMAX agrees to indemnify each
Shareholder against, and agrees to hold each of them harmless from, (i) any
breach of any of the representations or warranties of ZMAX under this
Agreement and (ii) any and all personal liability under the obligations owed
by ECLIPSE to its bank, its commercial office space landlord, its equipment
lessors and its vendors, other than with respect to a breach by ECLIPSE and/or
a Majority Shareholder which occurs prior to the Closing to any such bank,
landlord, lessor or vendor, and subject to all other provisions of this
Agreement.
(c) CLAIMS. The provisions of this Section 6.09(c) shall be
subject to Section 6.09(d) below. As soon as is reasonably practicable after
becoming aware of a claim for indemnification under this Agreement, the
indemnified person ("Indemnified Person") shall promptly give notice to the
indemnifying person ("Indemnifying Person") of such claim and the amount the
Indemnified Person reasonably believes it will be entitled to receive
hereunder from the Indemnifying Person; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying
29
Person of its obligations except to the extent (if any) that the Indemnifying
Person shall have been prejudiced thereby. If the Indemnifying Person does not
object in writing to such indemnification claim within thirty (30) days of
receiving notice thereof, the Indemnified Person shall be entitled to recover,
on the thirty-fifth (35th) day after such notice was given, from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted; if the Indemnifying Person agrees that
it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the Indemnified Person shall nevertheless be entitled to
recover, on the thirty-fifth (35th) day after such notice was given, from the
Indemnifying Person the lesser amount, without prejudice to the Indemnified
Person's claim for the difference. In addition to the amounts recoverable by
the Indemnified Person from the Indemnifying Person pursuant to the foregoing
provisions, the Indemnified Person shall also be entitled to recover from the
Indemnifying Person interest on such amounts at the prime rate (as printed in
the Wall Street Journal, eastern edition) plus two percent (2%) from, and
including, the thirty-fifth (35th) day after such notice of an indemnification
claim is given to, but not including, the date such recovery is actually made
by the Indemnified Person.
(d) NOTICE OF THIRD-PARTY CLAIMS; ASSUMPTION OF DEFENSE. The
Indemnified Person shall give notice as promptly as is reasonably practicable
to the Indemnifying Person of the assertion of any claim, or the commencement
of any suit, action or proceeding, by any Person not a party hereto in respect
of which indemnity may be sought under this Agreement; provided that the
failure of the Indemnified Person to promptly give notice shall not relieve
the Indemnifying Person of its obligations except to the extent (if any) that
the Indemnifying Person shall have been prejudiced thereby. The Indemnifying
Person may, at its own expense, (a) participate in the defense of any claim,
suit, action or proceeding and (b) upon notice to the Indemnified Person and
the Indemnifying Person's delivering to the Indemnified Person a written
agreement that the Indemnified Person is entitled to indemnification for all
Damages arising out of such claim, suit, action or proceeding and that the
Indemnifying Person shall be liable for the entire amount of any Damages, at
any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof; provided, however, that (i) the Indemnifying
Person's counsel is reasonably satisfactory to the Indemnified Person, and
(ii) the Indemnifying Person shall thereafter consult with the Indemnified
Person upon the Indemnified Person's reasonable request for such consultation
from time to time with respect to such claim, suit, action or proceeding. If
the Indemnifying Person assumes such defense, the Indemnified Person shall
have the right (but not the duty) to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Person. If, however, the Indemnified Person reasonably determines
in its judgment that representation by the Indemnifying Person's counsel of
both the Indemnifying Person and the Indemnified Person would present such
counsel with a conflict of interest, then such Indemnified Person may employ
separate counsel to represent or defend it in any such claim, action, suit or
proceeding and the Indemnifying Person shall pay the fees and disbursements of
such separate counsel. Whether or not the Indemnifying Person chooses to
defend or prosecute any such claim, suit, action or proceeding, all of the
parties hereto shall cooperate in the defense or prosecution thereof.
30
(e) SETTLEMENT OR COMPROMISE. Any settlement or compromise made
or caused to be made by the Indemnified Person or the Indemnifying Person, as
the case may be, of any claim, suit, action or proceeding shall also be
binding upon the Indemnifying Person or the Indemnified Person, as the case
may be, in the same manner as if a final judgment or decree had been entered
by a court of competent jurisdiction in the amount of such settlement or
compromise; provided, however, that no obligation, restriction, injunction,
agreement with the effect of an injunction, or Damages shall be imposed on the
Indemnified Person as a result of such settlement without its prior written
consent. The Indemnified Person will give the Indemnifying Person at least
thirty (30) days' notice of any proposed settlement or compromise of any
claim, suit, action or proceeding it is defending, during which time the
Indemnifying Person may reject such proposed settlement or compromise;
provided, however, that from and after such rejection, the Indemnifying Person
shall be obligated to assume the defense of and full and complete liability
and responsibility for such claim, suit, action or proceeding and any and all
Damages in connection therewith in excess of the amount of unindemnifiable
Damages which the Indemnified Person would have been obligated to pay under
the proposed settlement or compromise.
(f) FAILURE OF INDEMNIFYING PERSON TO ACT. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or
to participate in the defense of any such claim, suit, action or proceeding or
to cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
(g) CURE FOR BREACHES OF COVENANTS. In the event any party to
this Agreement breaches any of its covenants or obligations made hereunder
(other than covenants and obligations made under Section 6.01 or 6.09 hereof),
he/it shall be given ten (10) calendar days within which to cure such breach,
following receipt by the breaching party of written notice from the
non-breaching party of the existence and the extent of each such breach. The
parties acknowledge and agree that the foregoing cure period is reasonable in
relation to the covenants and obligations they have undertaken pursuant to
this Agreement.
(h) The provisions of this Section 6.09 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Person and his
or its heirs and representatives.
Section 6.10 ECLIPSE EMPLOYEE OR CONSULTANT AGREEMENTS. (a)
Attached to EXHIBIT 6.10 hereto are true and correct copies of all employment,
severance and consulting agreements to which ECLIPSE is a party.
Section 6.11 STOCK OPTIONS. At the Effective Time, any outstanding
option to purchase shares of ECLIPSE common stock, no par value per share,
shall terminate.
Section 6.12 REGISTRATION RIGHTS OF ZMAX SHARES. ZMAX and the
Shareholders shall enter into a registration rights agreement substantially in
the form attached hereto as EXHIBIT 6.12 (the "Registration Rights
31
Agreement"), pursuant to which the Shareholders will receive certain rights to
register their ZMAX Shares in accordance with the terms of such agreement.
Section 6.13 EXPENSES. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses; PROVIDED, HOWEVER, that ECLIPSE shall bear all of the
costs and expenses (other than taxes) incurred by the Shareholders and ECLIPSE
in connection with the preparation, negotiation and performance of this
Agreement (including, without limitation, the letter agreement dated November
19, 1998); and, further PROVIDED, HOWEVER, that the total costs and expenses,
including legal, accounting and other professional fees and costs of ECLIPSE
and the Shareholders, as well as the total amount of accounts payable of
ECLIPSE as of the Closing, shall not in the aggregate exceed the maximum
amount of Eighty Five Thousand Dollars ($85,000.00), unless the Majority
Shareholders first satisfy and pay any amount in excess of such $85,000.00
maximum amount.
Section 6.14 NON-COMPETITION. Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇ shall execute a separate non-compete agreement, in the forms attached
hereto as EXHIBITS 6.14(A) AND (B), which provide that in the event his
employment with ECLIPSE after the Closing is either terminated by him or
terminated by ECLIPSE with cause, then he shall not engage in the computer
consulting business within a fifty (50) mile radius of any office of ECLIPSE,
nor solicit or provide any computer consulting services for any existing or
targeted customers or clients of the Company, nor encourage any other existing
employees or recruits of ECLIPSE to leave their employment with ECLIPSE, all
for a period of five (5) years following the Closing.
Section 6.15 APPOINTMENT OF ▇▇▇▇▇ ▇▇▇▇▇▇▇ AS ZMAX DIRECTOR.
Promptly after the Closing, ZMAX shall appoint ▇▇▇▇▇ ▇▇▇▇▇▇▇ to its Board of
Directors. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall remain on the ZMAX Board of Directors as long
as he is elected at the annual meetings of shareholders of ZMAX. So long as
▇▇▇▇▇ ▇▇▇▇▇▇▇ does not breach the Shareholders Agreement attached hereto as
EXHIBIT 4.21(G), ZMAX (through its Nominating Committee) shall, at each annual
meeting of the ZMAX shareholders, recommend ▇▇▇▇▇ ▇▇▇▇▇▇▇ as a nominee to its
Board of Directors, and its Board of Directors shall select ▇▇▇▇▇ ▇▇▇▇▇▇▇ as a
nominee for election to the Board, provided that ▇▇▇▇▇ ▇▇▇▇▇▇▇ remains in
compliance with the terms of the Shareholders Agreement attached hereto as
EXHIBIT 4.21(G). ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be entitled to all of the rights and
benefits generally available to other members of the ZMAX Board of Directors.
Section 6.16 EMPLOYMENT AGREEMENTS. ZMAX agrees to enter into an
Employment Agreement with each of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ and certain key employees of ECLIPSE, substantially in the forms
attached hereto as EXHIBITS 6.16(A), (B), (C), (D) AND (E).
Section 6.17 LIMITATION ON ECLIPSE LIABILITIES. In the event the
total liabilities of ECLIPSE immediately prior to the Effective Date exceeds
the aggregate amount of $566,500 plus a maximum of up to $101,100 in ECLIPSE
accrued vacation expense and all obligations (other than due to a breach)
arising under the office leases and equipment leases of ECLIPSE, then the
32
Majority Shareholders agree to cause ECLIPSE prior to the Effective Date to
transfer all such excess liabilities to the Majority Shareholders who shall
assume such liabilities so that such liabilities will not be liabilities of
ECLIPSE as of the Effective Date. To the extent that the aggregate amount of
the liabilities of ECLIPSE do not exceed the subject limitation immediately
prior to the Effective Date, then ZMAX shall fully retire promptly after the
Closing the indebtedness owed by ECLIPSE under its line-of-credit obligation
to West Suburban Bank.
ARTICLE VII
CONDITIONS
Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Date of the following
conditions:
(a) This Agreement shall have been approved and adopted by the
affirmative vote of all of the Shareholders.
(b) Other than the filing provided for by Section 2.01, all
authorizations, consents, orders or approvals of, or declarations or filings
with, any Governmental Authority, and all required third party consents, the
failure to obtain which would result in an ZMAX Material Adverse Effect, shall
have been filed, occurred or been obtained.
(c) No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits the consummation of the Merger and
shall be in effect.
(d) The Escrow Agreement shall have been duly executed by the
Shareholders, ZMAX and the Escrow Agent, which agreement shall be effective as
of the Effective Date.
(e) The Employment Agreements shall have been duly executed by
the Surviving Corporation, ZMAX and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, and shall be binding on such parties and effective as
of the Effective Date.
(f) The Non-Competition Agreements shall have been duly executed
by the Surviving Corporation, ZMAX and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇, and shall be binding on such parties and effective as of the
Effective Date.
(g) The Registration Rights Agreement shall have been duly
executed by the Shareholders, the Surviving Corporation and ZMAX and shall be
binding on such parties and effective as of the Effective Date.
33
(h) The Shareholders Agreement shall have been duly executed by
ZMAX and the Shareholders, and ZMAX shall also cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to
execute the Shareholders Agreement for the purposes as provided therein.
Section 7.02 CONDITIONS OF OBLIGATIONS OF ZMAX AND ACQUISITION TO
EFFECT THE MERGER. The obligations of ZMAX and Acquisition to effect the
Merger are further subject to the satisfaction at or prior to the Effective
Date of the following conditions, unless waived by ZMAX and Acquisition:
(a) The representations and warranties of ECLIPSE and the
Shareholders set forth in this Agreement shall be true and correct as of the
date of this Agreement, and shall also be true in all material respects on and
as of the Effective Date with the same force and effect as though made on and
as of the Effective Date, except if and to the extent any failures to be true
and correct would not, in the aggregate, result in an ECLIPSE Material Adverse
Effect.
(b) From the date of this Agreement through and including the
Effective Date, except as set forth in EXHIBIT 4.06, ECLIPSE shall not have
suffered any ECLIPSE Material Adverse Change.
(c) ECLIPSE shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Effective Date, and
all representations and warranties shall be true and correct as of the
Effective Date, except where any failures to perform or breaches of such
representations or warranties would not, in the aggregate, result in an
ECLIPSE Material Adverse Effect, and shall provide a certificate of the
President of ECLIPSE to that effect.
(d) ECLIPSE shall furnish ZMAX with copies of (i) resolutions
duly adopted by the Board of Directors of ECLIPSE approving the execution and
delivery of this Agreement and all other necessary or proper corporate action
to enable ECLIPSE to comply with the terms of this Agreement, (ii) the
resolution duly adopted by the holders of ECLIPSE Shares approving and
adopting this Agreement and the Merger, such resolutions to be certified by
the Secretary or Assistant Secretary of ECLIPSE.
(e) Opinions of Counsel to ECLIPSE and the Shareholders. ECLIPSE
and the Shareholders shall furnish ZMAX with an opinion, dated as of the
Effective Date, of Sugar, Friedberg & ▇▇▇▇▇▇▇▇▇▇, counsel to ECLIPSE and the
Shareholders, in form and substance satisfactory to ZMAX and its counsel, in
the form attached hereto as EXHIBIT 7.02(E), to the effect that:
(i) ECLIPSE is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Illinois;
(ii) ECLIPSE has the corporate power to carry on its
business as it is being conducted on the Closing Date;
34
(iii) the authorized capital stock of ECLIPSE consists of
1,000,000 shares of ECLIPSE common stock, no par value per share,
of which the 170,000 ECLIPSE Shares issued and outstanding on the
date hereof are validly issued and outstanding, fully paid and
non-assessable and that between the date hereof and the Effective
Date no additional shares of capital stock of ECLIPSE have been
issued and none of such issued and outstanding ECLIPSE Shares were
issued in violation of any preemptive rights of shareholders of
ECLIPSE;
(iv) ECLIPSE and the Shareholders have taken all required
corporate and shareholder action to approve and adopt this
Agreement and the related agreements and contracts contemplated
hereby and this Agreement and all Exhibits hereto to which ECLIPSE
and/or the Shareholders are a party are valid and binding
obligations of ECLIPSE and/or the Shareholders enforceable against
ECLIPSE and/or the Shareholders, as the case may be, in accordance
with its terms, subject as to enforcement to bankruptcy,
reorganization, moratorium, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(v) the execution and delivery of this Agreement by
ECLIPSE and the Shareholders does not, and the consummation of the
transactions contemplated by this Agreement by ECLIPSE and the
Shareholders will not, constitute (i) a breach or violation of, or
a default under, the Articles of Incorporation or Bylaws of
ECLIPSE, or (ii) a breach, violation or impairment of, or a
default under, any judgment, decree, order, statute, law,
ordinance, rule or regulation now in effect applicable to ECLIPSE,
the Shareholders or the respective properties of ECLIPSE or the
ECLIPSE Shares, as known to such counsel, or any agreement,
indenture, mortgage, lease or other instrument of ECLIPSE or to
which ECLIPSE is subject and in each case known to such counsel;
and
(vi) all filings required to be made by ECLIPSE prior to
the Effective Time with, and all consents, approvals, permits or
authorizations required to be obtained by ECLIPSE prior to the
Effective Date from, Governmental Authorities in connection with
the execution and delivery of this Agreement by ECLIPSE and the
consummation of the transactions contemplated by this Agreement by
ECLIPSE, have been so made or obtained, as the case may be.
In rendering the foregoing opinion, such counsel may rely on
certificates of officers and other agents of ECLIPSE, the Shareholders and
public officials as to matters of fact and, as to matters relating to the law
of jurisdictions other than Illinois, upon opinions of counsel of such other
jurisdictions reasonably satisfactory to ZMAX and its counsel, provided such
reliance is expressly noted in such counsel's opinion and the opinions of such
other counsel and the certificates of such officers, agents and public
officials relied on are attached to such counsel's opinion.
35
(f) As of the Effective Date, the total liabilities of ECLIPSE
shall not exceed the aggregate amount of $566,500 plus a maximum of up to
$101,100 in ECLIPSE accrued vacation expense and all obligations (other than
due to a breach) arising under the office leases and equipment leases of
ECLIPSE.
(g) All actions, proceedings, instruments and documents required
to carry out this Agreement, or incidental hereto, and all other legal matters
shall have been approved by Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to ZMAX,
and such counsel shall have received all documents, certificates and other
papers reasonably requested by it in connection therewith.
Section 7.03 CONDITIONS OF OBLIGATION OF ECLIPSE TO EFFECT THE
MERGER. The obligation of ECLIPSE to effect the Merger is further subject to
the satisfaction at or prior to the Effective Date of the following
conditions, unless waived by ECLIPSE:
(a) The representations and warranties of ZMAX set forth in this
Agreement shall be true and correct as of the date of this Agreement, and
shall also be true in all material respects on and as of the Effective Date
with the same force and effect as though made on and as of the Effective Date,
except if and to the extent any failures to be true and correct would not, in
the aggregate, result in an ZMAX Material Adverse Effect.
(b) From the date of this Agreement through and including the
Effective Date, except as set forth in EXHIBIT 5.06, ZMAX shall not have
suffered any ZMAX Material Adverse Changes (other than changes generally
affecting the industries in which ZMAX operates, including changes due to
actual or proposed changes in law or regulation).
(c) ZMAX shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Effective Date, and
all representations and warranties shall be true and correct as of the
Effective Date, except where any failures to perform or breaches of such
representations or warranties would not, in the aggregate, have a material
adverse effect on ZMAX and its subsidiaries taken as a whole, and shall
provide a certificate of the President of ZMAX to that effect.
(d) ZMAX and Acquisition shall furnish ECLIPSE with copies of
(i) resolutions duly adopted by their respective Boards of Directors approving
the execution and delivery of this Agreement and all other necessary or proper
corporate action to enable them to comply with the terms of this Agreement,
(ii) the resolutions duly adopted by ZMAX as the sole shareholder of
Acquisition approving of the Merger and the transactions contemplated in this
Agreement, such resolutions to be certified by the President, Secretary or
Assistant Secretary of ZMAX.
(e) ZMAX shall furnish ECLIPSE with an opinion, dated as of the
Effective Date, of Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to ZMAX and
Acquisition, in form and substance satisfactory to ECLIPSE and its counsel, in
36
the form attached hereto as EXHIBIT 7.03(E), to the effect that:
(i) each of ZMAX and Acquisition is a corporation duly
incorporated, validly existing and in good standing under the laws
of the state in which such corporations were incorporated;
(ii) each has the corporate power to carry on its
businesses as they are being conducted on the Effective Date;
(iii) the authorized capital stock of ZMAX consists of
50,000,000 shares of ZMAX Common Stock and 10,000,000 shares of
preferred stock, and the ZMAX Shares and the shares of ZMAX Common
Stock issued and outstanding on the date hereof are validly issued
and outstanding, fully paid and non-assessable and that between
September 30, 1998, and the Effective Date no additional shares of
ZMAX Common Stock have been issued (other than shares issued upon
the exercise of stock options or warrants granted under ZMAX's
stock option plans or warrant agreements referred to in Section
5.02) and none of such issued and outstanding shares of ZMAX
Common Stock were issued in violation of any preemptive rights of
shareholders of ZMAX;
(iv) ZMAX and Acquisition has each taken all required
corporate action to approve and adopt this Agreement and the
related agreements and contracts contemplated hereby (including,
without limitation, the Registration Rights Agreement) and this
Agreement is a valid and binding obligation of the each,
enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, reorganization, moratorium, insolvency
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(v) the execution and delivery of this Agreement by each
of ZMAX and Acquisition do not, and the consummation of the
transactions contemplated by this Agreement by each will not,
constitute (i) a breach or violation of, or a default under, the
articles of incorporation or bylaws of either, or (ii) a breach,
violation or impairment of, or a default under, any judgment,
decree, order, statute, law, ordinance, rule or regulation now in
effect applicable to either or their respective properties known
to such counsel, or any agreement, indenture, mortgage, lease or
other instrument of either or to which either is subject and in
each case known to such counsel and
(vi) all filings required to be made by each prior to the
Effective Date with, and all consents, approvals, permits or
authorizations required to be obtained by each prior to the
Effective Date from, Governmental Authorities in connection with
the execution and delivery of this Agreement by ZMAX and
Acquisition, and the consummation of the transactions contemplated
by this Agreement by each, have been so made or obtained, as the
case may be.
37
In rendering the foregoing opinion, such counsel may rely on
certificates of officers and other agents of ZMAX or Acquisition and public
officials as to matters of fact and, as to matters relating to the law of
jurisdictions other than Delaware, upon opinions of counsel of such other
jurisdictions reasonably satisfactory to ECLIPSE and its counsel, provided
such reliance is expressly noted in the opinion of such counsel and the
opinions of such other counsel and the certificates of such officers, agents
and public officials relied on are attached to the opinion of such counsel to
ZMAX and Acquisition.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of ECLIPSE
or Acquisition:
(a) by mutual consent of ZMAX and ECLIPSE;
(b) by either ZMAX or ECLIPSE if the Merger shall not have been
consummated on or before December 31, 1998 (unless the failure to consummate
the Merger by such date shall be due to the action or failure to act of the
party seeking to terminate this Agreement); or
(c) by either ZMAX or ECLIPSE if (i) the conditions to such
party's obligations shall have become impossible to satisfy or (ii) any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable (unless either (i) or (ii) above shall be the result of any
improper action or inaction on the part of either ZMAX or ECLIPSE, as the case
may be).
Section 8.02 EFFECT OF TERMINATION. (a) In the event of the
termination and abandonment of this Agreement pursuant to Section 8.01 hereof,
this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its Affiliates, directors,
officers or stockholders, except as provided below in Section 8.02(b). Nothing
contained in this Section 8.02 shall relieve any party from liability for any
breach of this Agreement.
(b) In the event of the termination and abandonment of this
Agreement pursuant to Section 8.01 hereof, ZMAX and Eclipse each agree on
behalf of themselves and their respective agents and representatives, to
promptly return to ZMAX all ZMAX Confidential Information and return to
Eclipse all Eclipse Confidential Information and to refrain from keeping any
copies thereof, or to destroy any such Confidential Information if so
requested by the originating party.
38
Section 8.03 AMENDMENT. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the Shareholders, but, after any such approval,
no amendment shall be made which by law requires further approval by the
Shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.04 EXTENSION; WAIVER. At any time prior to the Effective
Date, the parties hereto may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE IX
POST-EFFECTIVE DATE COVENANTS
Section 9.01 FURTHER INSTRUMENTS AND ACTIONS. From time to time
after the Effective Date, ECLIPSE and the Shareholders shall execute and
deliver to ZMAX such further documents as ZMAX may reasonably request and
ECLIPSE and the Shareholders shall take all other actions, as required by
ZMAX, in order to fully vest and confirm in ZMAX all right, title and interest
of the ECLIPSE Shares and otherwise to carry out the purposes of this
Agreement.
Section 9.02 ECLIPSE 401(K) PLAN CONTRIBUTION. In January 1999, the
Surviving Corporation shall make a contribution to its 401(k) retirement plan
of One Hundred Fifty Thousand Dollars ($150,000.00).
Section 9.03 APPOINTMENT OF ▇▇▇▇▇ ▇▇▇▇▇▇▇ AS ZMAX DIRECTOR.
Promptly after the Closing, ZMAX shall appoint ▇▇▇▇▇ ▇▇▇▇▇▇▇ to its Board of
Directors.
ARTICLE X
MISCELLANEOUS
Section 10.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
ESCROW.
(a) SURVIVAL. All of the representations, warranties and
covenants made herein shall continue to survive the Effective Date.
(b) ESCROW. At the Closing, ZMAX shall deposit $145,000.00 (the
"Escrow Fund") with the law firm of Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ in
Washington, D.C. (the "Escrow Agent"), which Escrow Fund shall be governed by
39
the terms of the Escrow Agreement dated as of the Effective Date and attached
hereto as EXHIBIT 10.01(B). All costs and expenses of the Escrow Agent shall
be paid solely by ZMAX. The portion of the Escrow Fund deposited on behalf of
each of the Shareholders is listed opposite such Shareholder's name on the
attached EXHIBIT 10.01(B)(I). The Escrow Fund shall be available for a period
of up to one hundred twenty (120) days after the Closing (the "Escrow Period")
as an initial amount, with the Shareholders being liable for any amounts due
in excess of the amount of the Escrow Fund, to compensate ZMAX and its
Affiliates for any shortfall in the cash and accounts receivable of ECLIPSE as
provided in Section 3.01(e), as well as any accounts payable amounts of
ECLIPSE attributable to the period prior to the Effective Date and for which
ECLIPSE has not received an invoice as of the Effective Date but for which
ECLIPSE receives an invoice after the Effective Date, and any sales commission
liabilities of ECLIPSE which remain unpaid as of the Effective Date. Although
ZMAX shall not be liable for any such shortfall in the cash or accounts
receivable of ECLIPSE or any such accounts payable or sales commission
liabilities of ECLIPSE, ZMAX agrees to first offset any such amounts against
the Escrow Fund prior to seeking reimbursement for such amounts from the
Shareholders.
Section 10.02 NOTICES. All notices and other communications
hereunder shall be in writing (and shall be deemed given upon receipt) if
delivered personally, telecopied (which is confirmed), mailed by registered or
certified mail (return receipt requested), or delivered by a national
overnight delivery service (e.g., Federal Express) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to ZMAX or Acquisition, to
ZMAX Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
40
(b) if to ECLIPSE or to the Shareholders, to
Eclipse Information Systems, Inc.
▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Facsimile No.: ______________
with a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Sugar, Friedberg & Felsenthal
▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.03 DESCRIPTIVE HEADINGS. The descriptive headings herein
are inserted for convenience only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Section 10.04 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
Section 10.05 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof (other than any confidentiality agreement between the
parties; any provisions of such agreements which are inconsistent with the
transactions contemplated by this Agreement being waived hereby) and (b) shall
not be assigned by operation of law or otherwise, provided that ZMAX may cause
Acquisition to assign its rights and obligations to ZMAX or any other wholly
owned subsidiary of ZMAX, but no such assignment shall relieve Acquisition of
its obligations hereunder if such assignee does not perform such obligations.
Section 10.06 GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS.
(a) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Illinois without regard
to any applicable principles of conflicts of law.
(b) JURISDICTION AND SERVICE OF PROCESS. ANY ACTION OR
PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON ANY RIGHT ARISING
OUT OF, THIS AGREEMENT SHALL BE BROUGHT AGAINST ANY OF THE PARTIES HERETO IN
THE APPROPRIATE FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS, WITH EACH PARTY
HERETO AGREEING TO SUBJECT MATTER JURISDICTION, PERSONAL JURISDICTION AND
VENUE IN SUCH COURT. EACH OF THE PARTIES HERETO CONSENTS TO THIS JURISDICTION
41
PROVISION IN ANY SUCH ACTION OR PROCEEDING AND WAIVES ANY OBJECTION TO VENUE
LAID THEREIN. PROCESS IN ANY ACTION OR PROCEEDING REFERRED TO IN THE PRECEDING
SENTENCE MAY BE SERVED ON ANY PARTY HERETO ANYWHERE IN THE WORLD.
Section 10.07 PUBLICITY. Except as otherwise required by law or the
rules or regulations of the SEC or any national securities exchange, for so
long as this Agreement is in effect, neither ECLIPSE nor ZMAX shall, or shall
permit any of its subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without prior consultation with the other
party.
Section 10.08 PARTIES IN INTEREST. 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 or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement
Section 10.09 SHAREHOLDERS' AGENT. Each Shareholder hereby appoints
▇▇▇▇▇ ▇▇▇▇▇▇▇ as attorney-in-fact for the Shareholders (the Shareholders'
Agent") for purposes of representing the interests of the Shareholders in the
resolution of claims for indemnification hereunder and otherwise with respect
to this Agreement. Each Shareholder hereby authorizes the Shareholders' Agent
to take any and all actions on behalf of all the Shareholders in connection
with this Agreement, including but not limited to amending this Agreement, and
each Shareholder consents to and agrees to be bound by any and all actions
taken by the Shareholders' Agent. The Shareholders' Agent ▇▇▇▇ not be liable
to any of the Shareholders for any error in judgement, amuy mistake of fact or
law or any act done or omitted by him as the Shareholders' Agent in good
faith, unless as the result of his willful misconduct. In case of the
resignation, death or inability of ▇▇▇▇▇ ▇▇▇▇▇▇▇ to serve as the Shareholders'
Agent, then ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall become the Shareholders' Agent. If ▇▇▇▇
▇▇▇▇▇▇▇▇ is unable or unwilling to act as a successor, a successor shall be
designated by the Shareholders who holding a majority of the ECLIPSE Shares
immediately prior to the Effective Date. Any such designation by the
Shareholders shall be evidenced by a writing signed by the Shareholders making
such designation.
IN WITNESS WHEREOF, ZMAX, Acquisition, ECLIPSE and the Shareholders have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ATTEST: ZMAX CORPORATION
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------- ---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Assistant Secretary President
42
ATTEST: ECLIPSE ACQUISITION CORPORATION
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------- ---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary President
ATTEST/WITNESS: ECLIPSE INFORMATION SYSTEMS, INC.
By:/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------- -------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Secretary President
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇ ▇▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇▇ ▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇▇ ▇▇▇▇▇, Individually
/s/▇▇▇▇ ▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇ ▇▇▇▇▇, Individually
/s/▇▇▇ ▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇ ▇▇▇▇▇▇▇▇, Individually
43
/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇ ▇▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Individually
/s/▇▇▇ ▇▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇ ▇▇▇▇▇▇▇, Individually
/s/▇▇▇▇ ▇▇▇▇▇▇
---------------------------- -------------------------
Witness ▇▇▇▇ ▇▇▇▇▇▇, Individually
44
