AGREEMENT AND PLAN OF MERGER
(REVERSE TRIANGULAR MERGER)
BY AND AMONG
ZMAX CORPORATION,
A DELAWARE CORPORATION
XXXXXX ACQUISITION CORPORATION,
A DELAWARE CORPORATION
XXXXXX MANAGEMENT CONSULTANTS, LTD.,
A DELAWARE CORPORATION
AND
WESTMONT NON-GRANTOR TRUST,
AS THE SOLE SHAREHOLDER
AND
XXXXXXX X. XXXXXX AND XXXXXXXX X. XXXXXX,
AS THE TRUST BENEFICIARIES
OCTOBER 1, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01 Definitions....................................................................... 5
ARTICLE II
THE MERGER AND PLAN OF REORGANIZATION
Section 2.01 The Merger......................................................................... 6
Section 2.02 Effects of the Merger............................................................. 6
Section 2.03 Directors and Officers............................................................ 7
Section 2.04 Conversion of Xxxxxx Shares....................................................... 7
Section 2.05 Closing........................................................................... 7
ARTICLE III
CONVERSION OF SHARES
Section 3.01 Conversion of Xxxxxx Shares....................................................... 7
Section 3.02 Adjustments; Delivery of Certificates............................................. 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXX,
THE SOLE SHAREHOLDER AND THE TRUST BENEFICIARIES
Section 4.01 Organization...................................................................... 9
Section 4.02 Capitalization.................................................................... 9
Section 4.03 Authority Relative to this Agreement.............................................. 9
Section 4.04 Consents and Approvals; No Violations............................................. 10
Section 4.05 Financial Statements.............................................................. 10
Section 4.06 Absence of Certain Changes........................................................ 11
Section 4.07 No Undisclosed Liabilities........................................................ 11
Section 4.08 Accuracy of Statements............................................................ 11
Section 4.09 No Default ....................................................................... 11
Section 4.10 Litigation........................................................................ 11
Section 4.11 Compliance with Applicable Law.................................................... 11
Section 4.12 Taxes............................................................................. 12
Section 4.13 ERISA............................................................................. 13
Section 4.14 Intellectual Property............................................................. 13
Section 4.15 Change in Control................................................................. 14
Section 4.16 Brokers; Finders.................................................................. 14
Section 4.17 Operations of Xxxxxx.............................................................. 14
Section 4.18 Insurance......................................................................... 15
Section 4.19 Assets............................................................................ 15
Section 4.20 Improper and Other Payments....................................................... 16
Section 4.21 Additional Representations........................................................ 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ZMAX AND ACQUISITION
Section 5.01 Organization...................................................................... 18
Section 5.02 Capitalization.................................................................... 18
Section 5.03 Authority Relative to this Agreement.............................................. 19
Section 5.04 Consents and Approvals; No Violations............................................. 19
Section 5.05 Reports........................................................................... 19
Section 5.06 Accuracy of Statements............................................................ 20
Section 5.07 No Undisclosed Liabilities........................................................ 20
Section 5.08 No Default........................................................................ 20
Section 5.09 Litigation........................................................................ 20
Section 5.10 Compliance with Applicable Law.................................................... 20
Section 5.11 Brokers; Finders.................................................................. 21
Section 5.12 Interim Operations of Acquisition................................................. 21
ARTICLE VI
COVENANTS
Section 6.01 Covenants of Xxxxxx, the Sole Shareholder and the Trust Beneficiaries............. 21
Section 6.02 Press Releases.................................................................... 23
Section 6.03 No Solicitation................................................................... 23
Section 6.04 Access to Information............................................................. 24
Section 6.05 Best Efforts...................................................................... 24
Section 6.06 Shareholders Meeting.............................................................. 24
Section 6.07 Contact Clients................................................................... 24
Section 6.08 Notice Regarding Change in Circumstances.......................................... 25
Section 6.09 Indemnification................................................................... 25
Section 6.10 Xxxxxx Employment or Consulting Agreements........................................ 28
Section 6.11 Stock Options..................................................................... 28
Section 6.12 Registration Rights............................................................... 29
Section 6.13 Expenses.......................................................................... 29
Section 6.14 Non-Competition Agreements........................................................ 29
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Section 6.15 Employment and Consulting Agreements.............................................. 31
Section 6.16 Limitations on Xxxxxx Liabilities and Certain Assets.............................. 31
ARTICLE VII
CONDITIONS
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger........................ 32
Section 7.02 Conditions of Obligations of ZMAX and Acquisition to Effect the Merger............ 32
Section 7.03 Conditions of Obligation of Xxxxxx to Effect the Merger........................... 34
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination....................................................................... 37
Section 8.02 Effect of Termination............................................................. 37
Section 8.03 Amendment......................................................................... 37
Section 8.04 Extension; Waiver................................................................. 37
ARTICLE IX
POST-EFFECTIVE DATE COVENANTS
Section 9.01 Further Instruments and Actions................................................... 38
Section 9.02 Xxxxxx 401(k) Plan Contribution................................................... 38
ARTICLE X
MISCELLANEOUS
Section 10.01 Survival of Representations and Warranties; Escrow................................ 38
Section 10.02 Notices........................................................................... 39
Section 10.03 Descriptive Headings.............................................................. 40
Section 10.04 Counterparts...................................................................... 40
Section 10.05 Entire Agreement; Assignment...................................................... 41
Section 10.06 Governing Law; Jurisdiction and Service of Process................................ 41
Section 10.07 Publicity......................................................................... 43
Section 10.08 Parties in Interest............................................................... 43
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EXHIBITS
Exhibit 2.01 Certificate of Merger
Exhibit 2.04(c)(ii) Form of Promissory Note
Exhibit 2.04(c)(iii) Form of Warrant
Exhibit 3.01(a) Xxxxxx Bank Wiring Instructions and Account Information
Exhibit 4.02 Xxxxxx Securities Issued and Outstanding; Xxxxxx
Ownership of Other Businesses
Exhibit 4.04 Xxxxxx Required Consents and Approvals; List of
Violations
Exhibit 4.05 Supplemental Disclosures to Xxxxxx Financial Statements
Exhibit 4.06 Xxxxxx Absence of Certain Changes
Exhibit 4.09 Xxxxxx Defaults
Exhibit 4.10 Xxxxxx Litigation
Exhibit 4.12 Xxxxxx Tax Statutes of Limitations
Exhibit 4.13 Xxxxxx Employee Benefit Plan Obligations
Exhibit 4.14 Xxxxxx'x Intellectual Property
Exhibit 4.15 Xxxxxx Change in Control Agreements
Exhibit 4.17 Operations of Xxxxxx
Exhibit 4.18 Xxxxxx Insurance Coverage
Exhibit 4.19 Xxxxxx Assets
Exhibit 4.20 Xxxxxx Improper and Other Payments
Exhibit 4.21(c) Interests in Xxxxxx'x Property
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 Xxxxxx Employment, Severance and Consulting Agreements
Exhibit 6.11(b) ZMAX Stock Options
Exhibit 6.12 Registration Rights Agreement
Exhibit 6.14(a) Non-Competition Agreement for the Sole Shareholder
Exhibit 6.14(b) Non-Competition Agreement for Xxxxxxx X. Xxxxxx
Exhibit 6.14(c) Non-Competition Agreement for Xxxxxxxx X. Xxxxxx
Exhibit 6.15(a) List of Xxxxxx Key Employees
Exhibit 6.15(b) Employment Agreement of Xxxxxxx X. Xxxxxx
Exhibit 6.15(c) Consulting Agreement for Xxxxxxxx X. Xxxxxx
Exhibit 6.15(d) Form of Xxxxxx Key Employee Employment Agreement
Exhibit 6.16 Detailed Schedule of Xxxxxx Backlog of Business
Exhibit 7.02(e) Opinion of Xxxxx & Xxxxxxxxx
Exhibit 7.03(e) Opinion of Freedman, Levy, Xxxxx & Xxxxxxx
Exhibit 10.01(b) Escrow Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of October 1, 1999, by and
among ZMAX Corporation, a Delaware corporation ("ZMAX"); Xxxxxx Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of ZMAX
("Acquisition"); Xxxxxx Management Consultants, Ltd., a Delaware corporation
("Xxxxxx"); Westmont Non-Grantor Trust, a Delaware trust (the "Sole
Shareholder"); and Xxxxxxx X. Xxxxxx and Xxxxxxxx X. Xxxxxx, as beneficiaries
of the Westmont Non-Grantor Trust (the "Trust Beneficiaries").
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 Xxxxxx, 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(b) 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.
"Delaware General Corporation Law" means the General Corporation Law of
the State of Delaware.
"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 6.15
hereof and substantially in the form set forth in EXHIBITS 6.15(B), (C) AND
(D).
"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
Xxxxxx as of December 31, 1998 and 1997, respectively (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, 1998 and 1997, respectively, and ending December 31, 1998
and 1997, respectively; (b) the Interim Financial Statements; (c) the tax
returns of the Sole Shareholder for the years 1998, 1997 and 1996; and (d) the
tax returns of the Trust Beneficiaries for the years 1998, 1997 and 1996.
"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,
6
regulatory or administrative functions of or pertaining to government.
"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 "Xxxxxx'x
Intellectual Property" means any and all Intellectual Property owned by Xxxxxx
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 Xxxxxx for each calendar month during 1999 (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.
"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.
"Non-Competition Agreements" have the meanings set forth in Section 6.14
hereof and substantially in the form set forth in EXHIBITS 6.14(A), (B) AND
(C).
"Xxxxxx Benefit Plans" has the meaning set forth in Section 4.13(a)
hereof.
"Xxxxxx Confidential Information" means all confidential information
concerning Xxxxxx 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 Xxxxxx, the Sole Shareholder or the Trust Beneficiaries in
connection with ZMAX's due diligence review of Xxxxxx, (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.
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"Xxxxxx Material Adverse Change" means a change (or circumstance
involving a prospective 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 condition (financial or otherwise) of
Xxxxxx, taken as a whole.
"Xxxxxx Material Adverse Effect" means an effect (or circumstance
involving a prospective effect) on the business, operations, assets,
liabilities, results of operations, cash flows or condition (financial or
otherwise) of Xxxxxx that is or can reasonably be expected to be materially
adverse.
"Xxxxxx Permits" has the meaning set forth in Section 4.11 hereof.
"Xxxxxx Shares" means the One Thousand Nine Hundred (1,900) shares of
common stock, par value $0.01 per share, of Xxxxxx as held of record by the
Sole Shareholder.
"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.
"Promissory Note" means the form of promissory note substantially in the
form of EXHIBIT 2.04(C)(II) in the principal amount of Three Million Dollars
($3,000,000.00), bearing interest at six percent (6%) per annum and being
subject to possible reduction as provided therein.
"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.
"Subsidiaries" 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,
8
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.
"Warrant" means the form of warrant substantially in the form of EXHIBIT
2.04(C)(III) to purchase Two Hundred Thousand (200,000) shares of ZMAX Common
Stock for a purchase price of Five Dollars ($5.00) per share.
"Working Capital Amount" shall have the meaning set forth in Section
3.01(d) hereof.
"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
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 Xxxxxx, the Sole
Shareholder or the Trust Beneficiaries prior to disclosure thereof to Xxxxxx,
the Sole Shareholder or the Trust Beneficiaries in connection with the
transactions contemplated herein, and (iv) was not independently developed by
Xxxxxx, the Sole Shareholder or the Trust Beneficiaries.
"ZMAX Indemnified Parties" means ZMAX and each of its Affiliates
(including, after the Closing, Xxxxxx) and their respective officers,
directors, employees, agents and representatives, provided that in no event
shall the Sole Shareholder or the Trust Beneficiaries be deemed a ZMAX
Indemnified Party.
"ZMAX Material Adverse Change" means a change (or circumstance involving
a prospective 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 condition (financial or otherwise) of
ZMAX and any of its subsidiaries, taken as a whole.
"ZMAX Material Adverse Effect" means an effect (or circumstance
involving a prospective effect) on the business, operations, assets,
liabilities, results of operations, cash flows or condition (financial or
otherwise) 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 Stock Option" has the meaning set forth in Section 6.11 hereof.
9
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, a certificate of merger in the form attached hereto as
EXHIBIT 2.01 (the "Certificate of Merger") providing for the merger of
Acquisition with and into Xxxxxx (the "Merger") shall be duly prepared,
executed and filed by Xxxxxx, as the surviving corporation (sometimes also
referred to as the "Surviving Corporation"), in accordance with the relevant
provisions of the Delaware General Corporation Law, and the parties hereto
shall take any other actions required by law to make the Merger effective.
Following the Merger, Xxxxxx, 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 Delaware in accordance
with the Delaware General Corporation Law; 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, Xxxxx & Xxxxxxx, 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 the Delaware General Corporation Law. As of the Effective Time,
the Surviving Corporation shall be a wholly-owned subsidiary of ZMAX. At the
Effective Date, the Articles of Incorporation of Xxxxxx shall be amended to
change the total number of shares of stock which Xxxxxx is authorized to issue
to be solely as follows: One Thousand (1,000) shares of Common Stock, par
value $0.01 per share. As so amended, the Articles of Incorporation of Xxxxxx
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 Acquisition as in effect on the Effective Date
shall be deemed to 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, and
with the two (2) remaining persons being the Trust Beneficiaries, 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.
10
Section 2.04 CONVERSION OF XXXXXX SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of ZMAX, Acquisition,
Xxxxxx or the holder of any of the following securities:
(a) Any shares of capital stock of Xxxxxx which are held in the
treasury of Xxxxxx 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 Xxxxxx Shares shall be converted into the right to receive
(i) One Million Five Hundred Thousand Dollars ($1,500,000.00) (subject to
adjustment as to $150,000.00 of such funds to be held in Escrow Fund pursuant
to Section 10.01(b) of this Agreement) in cash, (ii) Three Million Dollars
($3,000,000.00) in principal amount of the Promissory Note in the form
attached hereto as EXHIBIT 2.04(C)(II), and (iii) the Warrant in the form
attached hereto as EXHIBIT 2.04(C)(III) to purchase Two Hundred Thousand
(200,000) shares of ZMAX Common Stock for the purchase price of Five Dollars
($5.00) per share.
Section 2.05 CLOSING. The closing of the merger (the "Closing") will
take place at the offices of Freedman, Levy, Xxxxx & Xxxxxxx, 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 Delaware 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 XXXXXX SHARES.
(a) At the Closing, ZMAX shall (i) deposit One Hundred Fifty
Thousand Dollars ($150,000.00) with Escrow Agent pursuant to Section 10.01(b)
hereof, (ii) deliver One Million Three Hundred Fifty Thousand Dollars
($1,350,000.00) in cash by wire transfer to the bank account of the Sole
Shareholder pursuant to the bank account and wiring instructions provided in
EXHIBIT 3.01(A), (iii) issue the Promissory Note to the Sole Shareholder, and
(iv) issue the Warrant to the Sole Shareholder.
(b) At the Closing, the holder(s) of certificate(s) which
immediately prior to the Effective Time represented all of the Xxxxxx Shares
(the "Certificates") shall deliver the Certificates, and risk of loss and
title to the Certificates shall pass upon delivery of the Certificates, to
ZMAX and the Certificates shall be in such form and have such other provisions
11
as ZMAX and Xxxxxx may reasonably specify. Such holder(s) shall deliver and
execute all necessary and appropriate stock transfer powers and other
documentation to transfer risk of loss and title to the Certificates and the
Xxxxxx Shares to ZMAX. Contemporaneous with the surrender of the Certificates
to ZMAX, together with such stock powers or other documentation duly executed,
the holder(s) of such Certificates shall receive in exchange therefor the cash
amount, Promissory Note and Warrant provided in Section 3.01(a) hereof,
subject to the escrow provisions of Section 10.01(b) hereof, and the
Certificates so surrendered shall forthwith be cancelled.
(c) Following the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of Xxxxxx 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) Within thirty (30) days after the Closing, the Sole
Shareholder shall deliver to ZMAX the closing balance sheet of Xxxxxx as of
September 30, 1999. Within ninety (90) days after the Closing, ZMAX and
Xxxxxxx X. Xxxxxx, as the designated representative of the Sole Shareholder,
shall determine the amount of cash, accounts receivable, note receivable from
Wittnaur Corporation and current liabilities of Xxxxxx, based on generally
accepted accounting principles, as of the Closing (the " Working Capital
Amount"). In the event the total Working Capital Amount as of the Closing is
determined to be less than Eight Hundred Thousand Dollars ($800,000.00), then
ZMAX shall deduct such shortfall from the Escrow Fund of $150,000.00, with
either the remaining balance, if any, of the Escrow Fund being paid by the
Escrow Agent to the Sole Shareholder or with any remaining shortfall amount in
excess of $150,000.00 being reimbursed by the Sole Shareholder to ZMAX within
thirty (30) days after the determination of the Working Capital Amount. If the
total Working Capital Amount as of the Closing is determined to be greater
than Eight Hundred Thousand Dollars ($800,000.00), then ZMAX shall pay such
excess amount in cash to the Sole Shareholder within thirty (30) days after
the determination of the Working Capital Amount and ZMAX shall deduct such
cash payment to the Sole Shareholder from the Promissory Note as provided
under the terms thereof.
Section 3.02 ADJUSTMENTS; DELIVERY OF CERTIFICATES. If, between the date
of this Agreement and the Effective Time, the Xxxxxx 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 Xxxxxx Shares will
be converted in the Merger shall be correspondingly adjusted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXX,
THE SOLE SHAREHOLDER AND THE TRUST BENEFICIARIES
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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, Xxxxxx, the Sole Shareholder and the Trust
Beneficiaries 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. Xxxxxx is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Xxxxxx 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 Xxxxxx
Material Adverse Effect. Xxxxxx 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 Xxxxxx
consists of Fifteen Thousand (15,000) Xxxxxx Shares of which, as of the date
of this Agreement, One Thousand Nine Hundred (1,900) Xxxxxx Shares were issued
and outstanding, with all of such Xxxxxx Shares being owned solely by the Sole
Shareholder. All the issued and outstanding Xxxxxx Shares are validly issued,
fully paid and non-assessable and free of preemptive rights. Xxxxxx 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 Xxxxxx issued or outstanding or any subscriptions, options,
warrants, calls, rights, convertible securities or other agreements or
commitments of any character obligating Xxxxxx to issue, transfer or sell any
of its securities.
(b) Except as disclosed in EXHIBIT 4.02, Xxxxxx 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 Xxxxxx is a party or is bound with respect to the
voting of the capital stock of Xxxxxx.
Section 4.03 AUTHORITY RELATIVE TO THIS AGREEMENT. Xxxxxx 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 Sole
13
Shareholder of Xxxxxx and no other corporate proceedings on the part of Xxxxxx
are necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered
by Xxxxxx and the Sole Shareholder 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 the Delaware General Corporation
Law, no filing with, and no permit, authorization, consent or approval of, any
Governmental Authority is necessary for the consummation by Xxxxxx of the
transactions contemplated by this Agreement. Except as set forth in EXHIBIT
4.04, neither the execution and delivery of this Agreement by Xxxxxx nor the
consummation by Xxxxxx of the transactions contemplated hereby nor compliance
by Xxxxxx 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
Xxxxxx, (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 Xxxxxx 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 Xxxxxx 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 Xxxxxx Material Adverse Event and which will not prevent or delay the
consummation of the transactions contemplated hereby.
Section 4.05 FINANCIAL STATEMENTS. Xxxxxx has delivered to ZMAX copies
of the Financial Statements. The Financial Statements present fairly the
financial position, assets, liabilities, results of the operation and changes
in cash flow for Xxxxxx for the periods presented therein. 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 Xxxxxx 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 Xxxxxx Material Adverse Change, to the extent required 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, 1998, Xxxxxx has not taken any of the
prohibited actions set forth in Section 6.01, suffered any Xxxxxx Material
Adverse Changes or entered into any transaction, or conducted its business or
14
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, Xxxxxx, at August 31, 1999, did not have
any material liabilities not reflected on the balance sheet of Xxxxxx included
in the Interim Financial Statements. Except as and to the extent set forth in
such Financial Statements, since August 31, 1999, through and including the
Effective Date, Xxxxxx has not incurred any liabilities material to the
business, operations or financial condition of Xxxxxx 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 Xxxxxx 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.
Section 4.09 NO DEFAULT. Except as set forth in EXHIBIT 4.09 attached
hereto, Xxxxxx 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 Xxxxxx
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 Xxxxxx, which defaults or violations would, in the aggregate,
result in an Xxxxxx 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
Xxxxxx, investigation pending or, to the knowledge of Xxxxxx, threatened
involving Xxxxxx, at law or in equity, or before any Governmental Authority
which in the aggregate are reasonably likely to result in an Xxxxxx Material
Adverse Effect on the assets or business of Xxxxxx or the Xxxxxx Shares.
Section 4.11 COMPLIANCE WITH APPLICABLE LAW. Xxxxxx holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Authorities necessary for the lawful conduct of its business (the "Xxxxxx
Permits"), except for failures to hold such Xxxxxx Permits which would not, in
the aggregate, result in a Xxxxxx Material Adverse Effect. Xxxxxx is in
compliance with the terms of Xxxxxx Permits, except where the failure so to
comply would not result in a Xxxxxx Material Adverse Effect. The business of
Xxxxxx 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 a Xxxxxx
Material Adverse Effect.
15
Section 4.12 TAXES. Xxxxxx has duly filed all material federal, state,
local and foreign tax returns required to be filed by it, and Xxxxxx 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
Xxxxxx, the Sole Shareholder and the Trust Beneficiaries, none of the income
tax returns required to be filed by Xxxxxx 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 Xxxxxx 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 Xxxxxx.
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
"Xxxxxx Benefit Plans"), maintained or contributed to by Xxxxxx, Xxxxxx 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 Xxxxxx
Benefit Plan, (iii) each trust agreement and group annuity contract, if any,
relating to such Xxxxxx Benefit Plan and (iv) the most recent actuarial report
or valuation relating to a Xxxxxx Benefit Plan subject to Title IV of ERISA.
None of the Xxxxxx Benefit Plans are multi-employer plans within the meaning
of Section 3(37) of ERISA. Each of the Xxxxxx Benefit Plans covered by ERISA
(a) has been operated in all material respects in accordance with ERISA, (b)
has not engaged in any prohibited 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.
Xxxxxx has never terminated any pension plan or withdrawn from any
multi-employer pension plan.
(b) With respect to Xxxxxx Benefit Plans, in the aggregate, no
event has occurred, and to the knowledge of Xxxxxx, the Sole Shareholder and
the Trust Beneficiaries, there exists no condition or set of circumstances
which are reasonably likely to occur in connection with which Xxxxxx would be
subject to any liability, that would result in a Xxxxxx 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.
16
(c) Except as set forth in EXHIBIT 4.13 attached hereto, with
respect to Xxxxxx 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 a
Xxxxxx Material Adverse Effect.
Section 4.14 INTELLECTUAL PROPERTY.
(a) EXHIBIT 4.14 is an accurate and complete list of all of
Xxxxxx'x Intellectual Property, and reflects Xxxxxx'x Intellectual Property
that has been duly and properly registered in any jurisdiction. Except as
otherwise specified in EXHIBIT 4.14, Xxxxxx owns, has the right to use, sell,
license, dispose of, and to bring actions for the misappropriation of Xxxxxx'x
Intellectual Property, and to the best knowledge of Xxxxxx, the Sole
Shareholder and the Trust Beneficiaries, 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) Xxxxxx 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 Xxxxxx, the Sole Shareholder and the Trust Beneficiaries, no
claim is pending or, to the knowledge of Xxxxxx, the Sole Shareholder or the
Trust Beneficiaries, threatened to the effect that the present or past
operations of Xxxxxx 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 Xxxxxx, the Sole Shareholder and the Trust Beneficiaries,
no contract, agreement or understanding with any party exists which would
materially impede or prevent the continued use by Xxxxxx of the entire right,
title and interest of Xxxxxx in and to the Intellectual Property.
Section 4.15 CHANGE IN CONTROL. Except as set forth in EXHIBIT 4.15,
Xxxxxx 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 Xxxxxx, the Sole Shareholder nor
the Trust Beneficiaries have retained any broker or finder in connection with
the transactions contemplated herein so as to give rise to any valid claim
against Xxxxxx or ZMAX for any brokerage or finder's commission, fee or
similar compensation.
Section 4.17 OPERATIONS OF XXXXXX. Except as set forth in EXHIBIT 4.17
attached hereto, Xxxxxx has not since December 31, 1998:
17
(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) 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;
(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 a Xxxxxx Material Adverse Effect or
Xxxxxx 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 Xxxxxx'x Intellectual Property is to be terminated or substantially
modified other than in accordance with its terms or as reflected in EXHIBIT
4.17.
18
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 Xxxxxx, and
Xxxxxx has heretofore delivered to ZMAX a true and complete copy of all such
policies, including all occurrence-based policies applicable to Xxxxxx for all
periods prior to the Effective Date. To the knowledge of each of Xxxxxx, the
Sole Shareholder and the Trust Beneficiaries, there are no pending claims of
Xxxxxx 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 Xxxxxx are insured for
Xxxxxx'x benefit, in amounts and coverages deemed adequate by the Xxxxxx'x
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
Xxxxxx 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
Xxxxxx, the Sole Shareholder and the Trust Beneficiaries, except as set forth
in EXHIBIT 4.20, none of Xxxxxx, 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 REPRESENTATIONS.
(a) Each of the Sole Shareholder and the Trust Beneficiaries
jointly and severally represents that none of them has entered into any
agreement or understanding to purchase, sell, exchange, pledge, hypothecate,
lien, transfer by gift or otherwise dispose of any Xxxxxx Shares prior to the
date hereof, nor will the Sole Shareholder and/or the Trust Beneficiaries
enter into any such agreement or understanding prior to the Effective Date.
(b) None of the Sole Shareholder, the Trust Beneficiaries or any
of their respective Affiliates has or claims to have any direct or indirect
interest in any tangible or intangible property used in Xxxxxx'x business,
except as a holder of the Xxxxxx Shares. The Sole Shareholder is the sole and
exclusive holder of all the outstanding shares of capital stock of Xxxxxx.
Each of the Sole Shareholder and the Trust Beneficiaries represents that,
except as disclosed on EXHIBIT 4.21(C) attached hereto, none of the Sole
Shareholder and/or the Trust Beneficiaries nor any of their respective
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, Xxxxxx. EXHIBIT 4.21(C) contains a
complete and accurate description of all such Persons, interests, arrangements
and other matters.
19
(c) The Sole Shareholder shall vote in favor of the Agreement and
the transactions contemplated herein at the shareholders' meeting described in
Section 6.06 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ZMAX AND ACQUISITION
ZMAX and Acquisition represent and warrant to Xxxxxx, the Sole
Shareholder and the Trust Beneficiaries 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 a ZMAX Material Adverse Effect. ZMAX has heretofore delivered to
Xxxxxx 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
$0.001 per share ("ZMAX Common Stock"), of which, as of August 2, 1999,
12,949,913 shares were issued and outstanding; and (ii) 10,000,000 authorized
shares of preferred stock, par value $0.001 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.
(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
20
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, and the filing
and recordation of a Certificate of Merger, as required by the Delaware
General Corporation Law, 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 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
cause 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
Xxxxxx.
Section 5.06 ACCURACY OF STATEMENTS. Neither this Agreement nor any
statement, list, certificate or other information furnished or to be furnished
by or on behalf of ZMAX to Xxxxxx 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.
21
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, 1998, 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 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 a 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 a 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 a 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.
22
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.
ARTICLE VI
COVENANTS
Section 6.01 COVENANTS OF XXXXXX, THE SOLE SHAREHOLDER AND THE TRUST
BENEFICIARIES. During the period from the date of this Agreement and
continuing until the Effective Date, Xxxxxx, the Sole Shareholder and the
Trust Beneficiaries jointly and severally agree that (except as expressly
contemplated or permitted by this Agreement, or to the extent that the other
party shall otherwise consent in writing):
(a) Xxxxxx 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) Xxxxxx 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) Xxxxxx 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.
(d) Xxxxxx shall not amend or propose to amend its articles of
incorporation or bylaws.
(e) Xxxxxx 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 Xxxxxx taken as a whole,
except pursuant to obligations in effect on the date hereof, or enter into any
23
commitment or transaction outside the ordinary course of business, consistent
with past practice.
(f) Xxxxxx 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 Xxxxxx 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) Xxxxxx 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
of business consistent with past practice.
(h) Xxxxxx shall not change any of the accounting principles or
practices used by it (except as required by GAAP).
(i) Xxxxxx 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) Xxxxxx 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 Xxxxxx
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 Xxxxxx, taken as a
whole, to which Xxxxxx 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 Xxxxxx Material Adverse
Change.
(k) During the period from the date of this Agreement and
continuing until the Effective Time, Xxxxxx 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 Xxxxxx Benefit Plan or other employee benefit plan or any
agreement, arrangement, plan or policy between Xxxxxx and one or more of its
directors or executive officers or (ii) 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.
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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 Xxxxxx, the Sole Shareholder, the
Trust Beneficiaries nor any of their respective 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 Xxxxxx (other than the transactions contemplated by this
Agreement). Xxxxxx, the Sole Shareholder and the Trust Beneficiaries shall
promptly advise 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),
Xxxxxx 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
Xxxxxx 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 October 1, 1999, or as soon as practicable thereafter,
but in any event prior to October 15, 1999, 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, 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. Xxxxxx 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
25
contemplated herein. Xxxxxx 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. The Sole Shareholder agrees to vote all of the
Xxxxxx Shares in approval of this Agreement and the transactions contemplated
herein.
Section 6.07 CONTACT CLIENTS. Xxxxxx shall permit ZMAX, and ZMAX shall
have the right to contact, subject to reasonable conditions, the clients of
Xxxxxx and to make reasonable inquiries of such clients; provided, however,
that ZMAX shall provide Xxxxxx with advance notice of any such contact and
shall permit Xxxxxx to participate in any such contacts with Xxxxxx'x clients.
Section 6.08 NOTICE REGARDING CHANGE IN CIRCUMSTANCES. Xxxxxx, the Sole
Shareholder and the Trust Beneficiaries shall each 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 the representations or warranties of Xxxxxx, the
Sole Shareholder and/or the Trust Beneficiaries as contained in this
Agreement.
Section 6.09 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE SOLE SHAREHOLDER AND THE TRUST
BENEFICIARIES. Except as set forth herein, each of the Sole Shareholder and
the Trust Beneficiaries 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
Xxxxxx, the Sole Shareholder and/or the Trust Beneficiaries under this
Agreement, so long as neither ZMAX nor Acquisition have committed any breach
prior to the Closing under the provisions of this Agreement.
(b) INDEMNIFICATION BY ZMAX. ZMAX agrees to indemnify each of the
Sole Shareholder and the Trust Beneficiaries against, and agrees to hold each
of them harmless from, any breach of any of the representations or warranties
of ZMAX under this Agreement, so long as neither Xxxxxx, the Sole Shareholder
nor the Trust Beneficiaries have committed any breach prior to the Closing
under the 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
26
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 rate of two times Prime
Rate 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.
27
(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, her
or its heirs and representatives.
Section 6.10 XXXXXX 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 Xxxxxx is a party.
Section 6.11 STOCK OPTIONS. (a) At the Effective Time, any outstanding
option, warrant or other right whatsoever to purchase any Xxxxxx Shares shall
terminate.
(b) EXHIBIT 6.11(B) hereto sets forth the name of each person to
whom ZMAX shall grant, as of the Effective Date, a stock option ("ZMAX Stock
Option") issued under the ZMAX 1997 Stock Option Plan to purchase the number
of shares of ZMAX Common Stock set forth next to such person's name, with the
28
exercisability of each such stock option to vest according to the vesting
schedule set forth in EXHIBIT 6.11(B) hereto.
Section 6.12 REGISTRATION RIGHTS. ZMAX and the Sole Shareholder shall
enter into a registration rights agreement substantially in the form attached
hereto as EXHIBIT 6.12 (the "Registration Rights Agreement"), pursuant to
which the Sole Shareholder will receive certain rights to register any shares
of ZMAX Common Stock which the Sole Shareholder may acquire upon the exercise
of the Warrant under the terms thereof.
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 the Sole Shareholder shall bear
all of the costs and expenses (other than taxes) incurred by Xxxxxx in
connection with the preparation, negotiation and performance of this Agreement
(including, without limitation, the letter agreement dated September 13,
1999).
Section 6.14 NON-COMPETITION AGREEMENTS. Each of the Sole Shareholder
and the Trust Beneficiaries shall execute a separate non-compete agreement, in
the forms attached hereto as EXHIBITS 6.14(A), (B) AND (C), which provide that
for the period of five (5) years following the Closing, neither Sole
Shareholder nor either of the Trust Beneficiaries shall solicit or provide any
computer consulting services for any existing or targeted customers, clients
or suppliers of Xxxxxx or ZMAX, nor encourage any existing employees,
consultants or recruits of Xxxxxx or ZMAX to leave or discourage their
employment or consulting relationship with Xxxxxx of ZMAX.
Section 6.15 EMPLOYMENT AND CONSULTING AGREEMENTS. ZMAX agrees to enter
into an Employment Agreement with Xxxxxxx X. Xxxxxx, a Consulting Agreement
with Xxxxxxxx X. Xxxxxx, and either an Employment Agreement and/or a
Consulting Agreement with each of the key employees of Xxxxxx listed on
EXHIBIT 6.15(A), substantially in the forms attached hereto as EXHIBITS
6.15(B), (C) AND (D).
Section 6.16 LIMITATIONS ON XXXXXX LIABILITIES AND CERTAIN ASSETS. In
the event the total liabilities of Xxxxxx immediately prior to the Effective
Date exceeds the aggregate amount of Five Hundred Thousand Dollars
($500,000.00) plus all obligations (other than due to a breach) arising under
the two (2) office leases of Xxxxxx in Maryland and Texas and one computer
workstation lease of Xxxxxx, then the Sole Shareholder agrees to cause Xxxxxx
prior to the Effective Date to transfer all such excess liabilities to the
Sole Shareholder who shall assume such liabilities so that such liabilities
will not be liabilities of Xxxxxx as of the Effective Date; provided, however,
that (i) such liabilities of Xxxxxx as of the Effective Date shall not include
any automobile lease obligations nor any obligations relating to the airplane
assets of Xxxxxx, and (ii) Xxxxxx shall have accrued and retained a sufficient
amount of cash necessary to pay in full, within thirty (30) days of the
Effective Date, the amount of all income taxes of Xxxxxx for all periods up to
and through the Effective Date. As of the Effective Date, Xxxxxx shall not own
any assets relating to any airplanes and Xxxxxx shall have a minimum amount of
scheduled backlog of business equal to at least Two Million Seven Hundred
29
Fifty Thousand Dollars ($2,750,000.00) as of the Effective Date, with such
backlog being set forth in greater detail on EXHIBIT 6.16.
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 the Sole Shareholder.
(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 a Xxxxxx 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 Sole
Shareholder, ZMAX and the Escrow Agent, which agreement shall be effective as
of the Effective Date.
(e) The Employment Agreements and Consulting Agreements shall have
been duly executed by the Surviving Corporation, ZMAX and each of Xxxxxxx X.
Xxxxxx, Xxxxxxxx X. Xxxxxx and the each of the key employees of Xxxxxx as
listed on EXHIBIT 6.15(A), 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 the Sole Shareholder, Xxxxxxx
X. Xxxxxx and Xxxxxxxx X. Xxxxxx, 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 Sole Shareholder, the Surviving Corporation and ZMAX and shall
be binding on such parties and effective as of the Effective Date.
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:
30
(a) The representations and warranties of Xxxxxx, the Sole
Shareholder and the Trust Beneficiaries 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 a Xxxxxx Material Adverse Effect.
(b) From the date of this Agreement through and including the
Effective Date, except as set forth in EXHIBIT 4.06, Xxxxxx shall not have
suffered any Xxxxxx Material Adverse Change.
(c) Each of Xxxxxx, the Sole Shareholder and the Trust
Beneficiaries shall have performed all obligations required to be performed by
it, him or her 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 a Xxxxxx Material Adverse
Effect, and shall provide a certificate of the President of Xxxxxx to that
effect.
(d) Xxxxxx shall furnish ZMAX with copies of (i) resolutions duly
adopted by the Board of Directors of Xxxxxx approving the execution and
delivery of this Agreement and all other necessary or proper corporate action
to enable Xxxxxx to comply with the terms of this Agreement, (ii) the
resolution duly adopted by the Sole Shareholder approving and adopting this
Agreement and the Merger, such resolutions to be certified by the Secretary or
Assistant Secretary of Xxxxxx.
(e) Opinions of Counsel to Xxxxxx, the Sole Shareholder and the
Trust Beneficiaries. Xxxxxx, the Sole Shareholder and the Trust Beneficiaries
shall furnish ZMAX with an opinion, dated as of the Effective Date, of the law
firm of Xxxxx & Xxxxxxxxx, counsel to Xxxxxx, the Sole Shareholder and the
Trust Beneficiaries, 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) Xxxxxx is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware;
(ii) Xxxxxx has the corporate power corporate power and all
necessary authorizations to carry on its businesses as and where
they are being conducted on the Effective Date;
(iii) the authorized capital stock of Xxxxxx consists of
Fifteen Thousand (15,000) Xxxxxx Shares, and the One Thousand Nine
Hundred (1,900) Xxxxxx Shares issued and outstanding on the date
hereof are validly issued and outstanding, fully paid,
non-assessable and owned solely by the Sole Shareholder, and that
between the date hereof and the Effective Date no additional
shares of capital stock of Xxxxxx have been issued and none of
31
such issued and outstanding Xxxxxx Shares were issued in violation
of any preemptive rights of any shareholders of Xxxxxx;
(iv) Xxxxxx and the Sole Shareholder 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 Xxxxxx,
the Sole Shareholder and/or the Trust Beneficiaries are a party
are valid and binding obligations of Xxxxxx, the Sole Shareholder
and/or the Trust Beneficiaries enforceable against Xxxxxx, the
Sole Shareholder and/or the Trust Beneficiaries, 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 Xxxxxx,
the Sole Shareholder and the Trust Beneficiaries does not, and the
consummation of the transactions contemplated by this Agreement by
Xxxxxx, the Sole Shareholder and the Trust Beneficiaries will not,
constitute (i) a breach or violation of, or a default under, the
Articles of Incorporation or Bylaws of Xxxxxx, 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 Xxxxxx, the Sole Shareholder, the Trust
Beneficiaries or the respective properties of Xxxxxx or the Xxxxxx
Shares, as known to such counsel, or any agreement, indenture,
mortgage, lease or other instrument of Xxxxxx or to which Xxxxxx
is subject and in each case known to such counsel; and
(vi) all filings required to be made by Xxxxxx prior to the
Effective Time with, and all consents, approvals, permits or
authorizations required to be obtained by Xxxxxx prior to the
Effective Date from, Governmental Authorities in connection with
the execution and delivery of this Agreement by Xxxxxx and the
consummation of the transactions contemplated by this Agreement by
Xxxxxx, 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 Xxxxxx, the Sole Shareholder, the
Trust Beneficiaries 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
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.
(f) As of the Effective Date, the total liabilities of Xxxxxx
shall not exceed the aggregate amount of $500,000 plus all obligations (other
than due to a breach) arising under the two (2) office leases of Xxxxxx in
32
Delaware and Texas and one computer workstation lease of Xxxxxx.
(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, Xxxxx & Xxxxxxx, 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 XXXXXX TO EFFECT THE MERGER.
The obligation of Xxxxxx to effect the Merger is further subject to the
satisfaction at or prior to the Effective Date of the following conditions,
unless waived by Xxxxxx:
(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 a 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 Xxxxxx 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 Xxxxxx with an opinion, dated as of the
Effective Date, of the law firm of Freedman, Levy, Xxxxx & Xxxxxxx, counsel to
ZMAX and Acquisition, in form and substance satisfactory to Xxxxxx and its
counsel, in the form attached hereto as EXHIBIT 7.03(E), to the effect that:
33
(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 and all necessary
authorizations to carry on its businesses as and where 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 shares of ZMAX Common Stock issued and
outstanding on the date hereof are validly issued and outstanding,
fully paid and non-assessable;
(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.
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 Xxxxxx 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.
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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 Xxxxxx or
Acquisition:
(a) by mutual consent of ZMAX and Xxxxxx;
(b) by either ZMAX or Xxxxxx if the Merger shall not have been
consummated on or before October 15, 1999 (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 Xxxxxx 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 Xxxxxx, 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 Xxxxxx each agree on
behalf of themselves and their respective agents and representatives, to
promptly return to ZMAX all ZMAX Confidential Information and return to Xxxxxx
all Xxxxxx Confidential Information and to refrain from keeping any copies
thereof, or to destroy any such Confidential Information if so requested by
the originating party.
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 Sole Shareholder, but, after any such approval, no
amendment shall be made which by law requires further approval by the Sole
Shareholder 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
35
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, Xxxxxx, the Sole Shareholder and the Trust Beneficiaries
shall execute and deliver to ZMAX such further instruments of sale and
assignment as ZMAX may reasonably request and Xxxxxx, the Sole Shareholder and
the Trust Beneficiaries 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
Xxxxxx Shares and otherwise to carry out the purposes of this Agreement.
Section 9.02 XXXXXX 401(K) PLAN CONTRIBUTION. Prior to the Effective
Date, Xxxxxx shall make a contribution to its 401(k) retirement plan of
________________Dollars ($___________).
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 $150,000.00 (the
"Escrow Fund") with the law firm of Freedman, Levy, Xxxxx & Xxxxxxx in
Washington, D.C. (the "Escrow Agent"), which Escrow Fund shall be governed by
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 Escrow Fund shall be available for a period of up
to one hundred twenty (120) days after the Closing (the "Escrow Period") to
compensate ZMAX and its Affiliates for any shortfall in the Working Capital
Amount of Xxxxxx as provided in Section 3.01(d).
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):
36
(a) if to ZMAX or Acquisition, to
ZMAX Corporation
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, President
Facsimile No.: (000) 000-0000
with a copy to
Xxxxxx X. Xxxxx, Esq.
Freedman, Levy, Xxxxx & Xxxxxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Facsimile No.: (000) 000-0000
and
(b) if to Xxxxxx, to
Xxxxxx Management Consultants, Ltd.
000X Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxxxxx X. Xxxxx, Esq.
Xxxxx & Xxxxxxxxx
0 Xxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
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.
37
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 and the Merger shall be governed
and construed in accordance with the laws of the State of Delaware 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 THE STATE OF MARYLAND, 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
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 Xxxxxx 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
[signatures appear on the following page]
38
IN WITNESS WHEREOF, ZMAX, Acquisition, Xxxxxx, the Sole Shareholder and
the Trust Beneficiaries have each caused this Agreement to be signed and
sealed personally or by their respective officers thereunto duly authorized as
of the date first written above.
ATTEST: ZMAX CORPORATION
____________________________ By:__________________________ [SEAL]
Xxxxx X. XxXxxxxx, Secretary Xxxxxxx X. Xxxxxxx, President
ATTEST: XXXXXX ACQUISITION CORPORATION
____________________________ By:__________________________ [SEAL]
Xxxxx X. XxXxxxxx, Secretary Xxxxxxx X. Xxxxxxx, President
ATTEST/WITNESS: XXXXXX MANAGEMENT
CONSULTANTS, LTD.
_____________________________ By:_______________________ [SEAL]
Xxxxxxxx X. Xxxxxx, Secretary Xxxxxxx X. Xxxxxx, President
ATTEST/WITNESS: WESTMONT NON-GRANTOR TRUST
___________________________ By:_______________________ [SEAL]
Name: Xxxxxxx Xxxxxxx, Sole Trustee
Witness
___________________________ _______________________________
Name: Xxxxxxx X. Xxxxxx, Individually
Witness
___________________________ ________________________________
Name: Xxxxxxxx X. Xxxxxx, Individually
Witness
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