<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report(Date of earliest event reported): May 15, 1998
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Axiom Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-22601 51-0356153
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
4000 Midlantic Drive, Mt. Laurel, NJ 08054
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(609) 866-1000
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Item 2. Acquisition of Assets.
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On May 15, 1998, pursuant to an Agreement of Merger and
Plan of Reorganization (the "Agreement of Merger"), dated May 15,
1998, by and among the Registrant, AV Technology, Inc., a
Delaware corporation and a wholly-owned subsidiary of the
Registrant ("Technology"), Innovative Data Technology, a
California corporation ("IDT") and the Shareholders of IDT (the
"Shareholders"), IDT was merged into Technology in accordance
with the relevant provisions of the California General
Corporation Law and the Delaware General Corporation Law. In
exchange for their shares of common stock of IDT, $1.00 par
value, which constituted in the aggregate all of the issued and
outstanding common stock of IDT, the Registrant issued to the
Shareholders an aggregate of 1,290,000 shares of the Common Stock
of Axiom, $0.01 par value (the "Axiom Common Stock") and cash in
the aggregate amount of $2,206,641. Additionally, the Registrant
paid the Shareholders an aggregate of $500,000 as consideration
for entering into covenants not to compete pursuant to the
Agreement of Merger. The Registrant utilized its working capital
as funding for cash portion of the consideration.
The Registrant intends to merge substantially all of
the operations of IDT, which is engaged in the manufacture and
sale of telecommunications switch interface technology, into the
Registrant's existing operations. Certain principals of IDT have
entered into long-term Employment Agreements with the Registrant,
in connection with which the Registrant issued to such persons
options to purchase an aggregate of 123,000 shares of Axiom
Common Stock.<PAGE>
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
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In accordance with Rule 3-05(b)(i) and Article 11 under
Regulation S-X, as referenced by Items 7(a) and 7(b) of Form 8-K,
the Registrant is required to furnish (i) the below-listed
financial statements of IDT and (ii) certain pro forma
information with regard to the Registrant in filing this Form 8-K.
Such financial statements and pro forma information will be
filed as part of an amendment to this Form 8-K as soon as
practicable following the date of filing hereof, but, in
accordance with Item 7(a)(4) of Form 8-K, not later than 60 days
after the date that the initial report on Form 8-K must be filed.
(i) Financial Statements of IDT
- Balance sheets of IDT as of March 31,
1998 (unaudited) and December 31, 1997
and 1996 (audited)
- Statements of Operations, Stockholders'
Equity and Cash Flows of IDT for the three
months ended March 31, 1998 and 1997
(unaudited)and for the years ended December
31, 1997 and 1996 (audited).
(ii) Pro Forma Information
- Unaudited Pro Forma Balance Sheet of the
Registrant as of March 31, 1998; Unaudited
Pro Forma Statement of Operations of the
Registrant for the six months ended March 31,
1998 and for the year ended September 30,
1997.
The Registrant has furnished the exhibit described on
the included Exhibit Index. In accordance with Item 601(b)(2) of
Regulation S-K, the schedules to the document filed herewith as
an exhibit are not filed. Attached to such agreement is a list
of such schedules, a copy of any of which the Registrant agrees
to furnish supplementally to the Securities and Exchange
Commission upon request.<PAGE>
<PAGE>
Signatures
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Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
AXIOM INC.
Dated: May 27, 1998 By: /s/ Andrew P. Maunder
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Andrew P. Maunder
Chief Executive Officer<PAGE>
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Exhibit Index
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The following exhibits are filed as part of this Current Report
on Form 8-K:
Exhibit
No. Item
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2 Agreement of Merger and Plan of Reorganization,
dated as of May 15, 1998, by and among the
Registrant, AV Technology, Inc., Innovative Data
Technology and the Shareholders of Innovative Data
Technology.
Exhibit 2
AGREEMENT OF MERGER
AND
PLAN OF REORGANIZATION
BY AND AMONG
AXIOM INC.,
AV TECHNOLOGY, INC.,
INNOVATIVE DATA TECHNOLOGY
AND
THE SHAREHOLDERS OF
INNOVATIVE DATA TECHNOLOGY
Dated as of May 15, 1998<PAGE>
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
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THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION,
dated as of May 15, 1998 (the "Agreement"), by and among Axiom
Inc., a Delaware corporation ("Axiom"), AV Technology, Inc., a
Delaware corporation ("Acquisition"), Innovative Data Technology,
a California corporation ("IDT"), the individuals listed on the
signature page hereto (each, a "Shareholder" and, collectively,
the "Shareholders").
W I T N E S S E T H:
WHEREAS, IDT presently owns and operates a business
involving the manufacture and sale of telecommunications switch
interface technology located in the State of California (the
"Business");
WHEREAS, the Shareholders own all of the issued and
outstanding capital stock of IDT;
WHEREAS, the respective Boards of Directors of Axiom,
Acquisition and IDT deem it advisable and in the best interest of
each such corporation and their respective shareholders that IDT
be merged with and into Acquisition pursuant to a corporate
reorganization as described in sections 368(a)(1)(A) and
368(a)(2)(D) of the Code as provided herein and that the parties
enter into certain related agreements on the terms set forth
herein; and
WHEREAS, certain terms used in this Agreement are
defined in Section 13.1.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements hereinafter contained, the
parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time of the Merger
(as defined below), IDT shall be merged with and into Acquisition
(the "Merger") upon the terms and conditions hereinafter set
forth as permitted by and in accordance with Chapter 11 of the
California General Corporation Law (the "CGCL") and Chapter I,
Subchapter IX of the Delaware General Corporate Law ("DGCL").
Thereupon, the separate corporate existence of IDT shall cease
and Acquisition, as the surviving corporation, shall continue to
exist under and be governed by the DGCL. (Acquisition, as the
surviving corporation, is sometimes referred to herein as the
"Surviving Corporation.")
1.2 Effects of the Merger. The Merger shall have the
effects set forth in Section 1108 of the CGCL and Section 252 of
the DGCL. The Merger shall take place substantially as described
in the certificate of ownership and agreement and plan of merger
attached as Exhibit A hereto (the "Certificate of Merger"), as
adopted by the boards of directors and the shareholders of IDT
and Acquisition, respectively, in accordance with Sections 1101
and 1201 of the CGCL and Section 252 of the DGCL.
Acquisition will, on the Closing Date, file (i) with
the Secretary of State of the State of California (the
"California State Secretary") the Certificate of Merger in
accordance with Section 1108(d) of the CGCL and (ii) with the
Secretary of State of the State of Delaware (the "Delaware State
Secretary") the Certificate of Merger in accordance with Sections
252 and 103 of the DGCL. As used in this Agreement, the
"Effective Time of the Merger" shall be the time at which the
Certificate of Merger is filed with both the California State
Secretary and the Delaware State Secretary.
ARTICLE II
CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS
2.1 Certificate of Incorporation and By-Laws of the
Surviving Corporation. The Certificate of Incorporation and By-Laws of
Acquisition, as in effect immediately prior to the
Effective Time of the Merger, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by law;
provided, however, that the name of the Surviving Corporation
shall be AV Technology, Inc.
2.2 Board of Directors. From and after the Effective
Time of the Merger, the members of the Board of Directors of the
Surviving Corporation shall consist of the members of the Board
of Directors of Acquisition at the Effective Time of Merger, each
to serve until the expiration of the term for which such director
was elected and until his or her successor is elected or
appointed and qualified or until his or her earlier death,
resignation or removal.
2.3 Officers. From and after the Effective Time of
the Merger, the officers of the Surviving Corporation shall
consist of the officers of Acquisition at the Effective Time of
the Merger, each to serve until his or her successor is elected
or appointed and qualified or until his or her earlier death,
resignation or removal.
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of Acquisition Common Stock. At the
Effective Time of the Merger, all of the eight thousand seven
hundred ninety-nine (8,799) shares of the common stock of IDT,
$1.00 par value (the "IDT Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger (including
5,490 shares under options to be exercised immediately prior to
the Effective Time of the Merger) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be
converted into and exchangeable for the "Merger Consideration
Amount," which shall equal the Consideration Amount (as defined
in Section 4.1) minus the Non-Competition Consideration Amount
(as also defined in Section 4.1). The Merger Consideration
Amount shall be paid in the aggregate as follows, and shall be
allocated among the Shareholders in accordance with Schedule 3.1:
(a) On the Closing Date (as defined below),
certificates evidencing One Million Two Hundred Ninety Thousand
(1,290,000) shares (the "Merger Shares") of the common stock of
Axiom, $0.01 par value (the "Axiom Shares") minus (ii) the Escrow
Shares (which shall be deposited in Escrow as specified on
Schedule 3.1 rather than delivered to the Shareholders) shall be
issued to the Shareholders. For the purposes of this Agreement,
the per share value of the Axiom Shares as of the date of the
Effective Date of the Merger (the "Closing Date") shall be Four
Dollars ($4.00).
(b) On the Closing Date, an amount (the
"Merger Cash Consideration"), shall be paid by Axiom to the
Shareholders by bank treasurer's check or wire transfer, equal to
(A) the Merger Consideration Amount minus the Merger Shares
multiplied by Four Dollars ($4.00) per share, minus (B) the
Escrow Amount, which shall be deducted as specified on Schedule
3.1 from the cash otherwise payable to Shareholders as part of
the Merger Consideration.
(c) On the Closing Date, Axiom shall deposit
the Escrow Amount by bank treasurer's check or wire transfer into
the Escrow Account pursuant to the Escrow Agreement.
3.2 Acquisition Common Stock. Each share of the
common stock of Acquisition, $0.01 par value, issued and
outstanding immediately prior to the Effective Time of the Merger
shall remain outstanding without increase, decrease or
modification.
3.3 Dissenting Shares. Each Shareholder is entitled
to dissent from, and obtain payment of the fair value of such
shareholder's shares, under the CGCL, with regard to the
consummation of the Certificate of Merger. Each Shareholder
waives all dissenter's rights, and notice thereof, to which he is
entitled under the CGCL, and agrees not to assert any such rights
in connection with the Merger. Each Shareholder has executed the
unanimous written consent of the Shareholders attached hereto as
Exhibit C approving this Agreement and the transactions
contemplated hereby.
ARTICLE IV
CONSIDERATION
4.1 Consideration Amount. The "Consideration Amount"
shall be equal to Six Million Eight Hundred and Fifty Thousand
Dollars ($6,850,000), plus (i) the Closing Date Adjustment Amount
(as defined below) (accordingly, if the Closing Date Adjustment
Amount is a negative number, the Consideration Amount shall be
reduced by such amount, while if the Closing Date Adjustment
Amount is a positive number, the Consideration Amount shall be
increased by such amount) and (ii) in the event that the Romania
Adjustment Amount (as defined below) is a negative number, by
twenty-five percent (25%) of the Romania Adjustment Amount, to a
maximum reduction of Seven Hundred Fifty Thousand Dollars
($750,000), or, in the event that the Romania Adjustment Amount
is a positive number, by twenty-five percent of the amount by
which the Romania Adjustment Amount exceeds One Million Dollars
($1,000,000), to a maximum increase of One Hundred Fifty Thousand
Dollars ($150,000).
A portion of the Consideration Amount, to be designated
the "Non-Competition Consideration Amount," shall equal Five
Hundred Thousand Dollars ($500,000).
4.2 Closing Date Adjustment Amount. The "Closing
Date Adjustment Amount" shall be equal to the Closing Date Book
Value minus Four Million Dollars ($4,000,000). Accordingly, if
the Closing Date Adjustment Amount is a positive amount, the
Consideration Amount will be increased by such amount and, if the
Closing Date Adjustment Amount is a negative amount, the
Consideration Amount will be reduced by such amount. The
"Closing Date Book Value" shall be equal to the shareholders'
equity of IDT (on a consolidated basis with any Subsidiaries) on
the Closing Date, determined in accordance with GAAP and
practices applied on a basis consistent with prior years (except
that the amount of inventory of IDT and the Subsidiaries as of
the Closing Date shall be One Million Fifteen Thousand Four
Hundred Seventy-One Dollars ($1,015,471)), and shall reflect
accruals for the payments to Roger Williams, as set forth in
Section 5.22, and all other fees and expenses, legal and
otherwise (including, without limitation, the costs of obtaining
the financial statements contemplated by Section 8.6), incurred
in connection with the transactions contemplated by this
Agreement. The consolidated balance sheet of IDT and its
Subsidiaries as of the Closing Date is hereafter referred to as
the "Closing Balance Sheet." The Closing Date Book Value, for
purposes of the closing of the transactions contemplated by this
Agreement (the "Closing"), shall be estimated by IDT in its
reasonable good faith. IDT shall notify Axiom of its estimate of
the Closing Date Book Value at least five (5) Business Days prior
to the Closing Date. The calculation of Closing Date Book Value
shall not take into account any tax assets resulting from an FAS
109 computation or from any account receivable relating to taxes
or a similar item. Any refund of federal or state income taxes
paid by IDT for periods ending on or before the Closing shall be
paid over by Axiom to the Shareholders' Agent as soon as
practicable following receipt thereof by Axiom.
4.3 Axiom's Closing Date Adjustment Amount.
(a) Axiom's Closing Date Adjustment
Statement. As soon as possible following the Closing Date, but
not more than sixty (60) days after the Closing Date, Axiom, at
its expense, may cause to be prepared and provided to
Shareholders' Agent (as defined in Section 8.5) a statement
showing Axiom's calculation of the Closing Due Adjustment Amount
(the "Axiom's Closing Date Adjustment Amount").
(b) Notice of Disagreement. Axiom's Closing
Date Adjustment Amount shall become final and binding upon the
parties unless the Shareholders' Agent gives written notice of
disagreement with Axiom's Closing Date Adjustment Amount (a
"Notice of Disagreement") to Axiom on or before thirty (30) days
following the receipt by the Shareholders of Axiom's Closing Date
Adjustment Amount. A Notice of Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted in
respect of Axiom's Closing Date Adjustment Amount. During a
period of ten (10) days following the receipt by Axiom of a
Notice of Disagreement from the Shareholders, the parties shall
attempt to resolve in writing any differences they may have with
respect to the matters specified in the Notice of Disagreement.
If at the end of the aforesaid ten (10) day period, the parties
have reached written agreement with respect to all matters
covered by a Notice of Disagreement, Axiom's Closing Date
Adjustment Amount shall be adjusted to reflect such written
agreement and shall become final and binding upon the parties
hereto. If at the end of the aforesaid ten (10) day period, the
parties have not reached written agreement with respect to all
matters covered by a Notice of Disagreement, the matter or
matters may be submitted by Axiom or the Shareholders' Agent to
binding arbitration in accordance with Section 13.6 of this
Agreement. The Closing Date Adjustment Amount as finally
determined in accordance with this Section 4.3(b), by arbitration
or otherwise, is referred to herein as the "Final Closing Date
Adjustment Amount."
(c) Payment of Post-Closing Adjustments. If
the Final Closing Date Adjustment Amount shall be less than the
Closing Date Adjustment Amount estimated by IDT pursuant to
Section 4.2 hereof, then the difference shall be paid by the
Shareholders to Axiom in cash or Axiom Shares in the same
proportion that cash or Axiom Shares were part of the
Consideration Amount. Such difference shall be paid first out of
the Adjustment Escrow Amount and by returning Escrow Shares;
then, if necessary, out of the remainder of the Escrow Amount,
and by returning the remainder of the Escrow Shares, and then, if
necessary, by the Shareholders who shall be liable for such
amounts and return of such Axiom Shares, subject to the
limitations set forth in the following proviso, in the same
proportion as they received the Consideration Amount; provided,
that Michael Moore, Frances Penfold and Dale Spencer shall be
jointly and severally liable for such amounts and return of such
Axiom Shares, but the liability of any other Shareholder shall
not exceed such other Shareholders pro rata portion of the Merger
Consideration. If the Final Closing Date Adjustment Amount shall
be greater than the Closing Date Adjustment Amount estimated by
IDT pursuant to Section 4.2 hereof, then the difference shall be
paid to the Shareholders, pro rata based upon their share
ownership, by Axiom, by bank treasurer's check or wire transfer.
Such payment shall be due and owing within five (5) days after
the parties agree to such amount or the amount is established by
the Arbitrators. For purposes of determining the number of Axiom
Shares to be returned to Axiom as a result of the determination
of the Final Closing Date Adjustment Amount, such shares shall be
treated as having a value of Four Dollars ($4.00) per share.
4.4 Romania Adjustment Amount. The
"Romania Adjustment Amount" shall be equal to the Romania Sales
Amount minus Three Million Dollars ($3,000,000). The "Romania
Sales Amount" shall be equal to the dollar amount of orders
placed in support of IDT's business in Romania on or before
September 15, 1998 (the "Romania Calculation Date"). For
purposes of Closing, the Romania Adjustment Amount, shall be
estimated to be zero.
4.5 Romania Adjustment Amount.
(a) Axiom's Romania Adjustment Date
Statement. As soon as possible following the Romania Calculation
Date, but not more than forty-five (45) days after the Romania
Calculation Date, Axiom, at its expense, may cause to be prepared
and provided to Shareholders' Agent (as defined in Section 8.5) a
statement showing Axiom's calculation of the Romania Adjustment
Amount (the "Axiom's Romania Adjustment Amount").
(b) Notice of Disagreement--Romania.
Axiom's Romania Adjustment Amount shall become final and binding
upon the parties unless the Shareholders' Agent gives written
notice of disagreement with Axiom's Romania Adjustment Amount (a
"Notice of Disagreement--Romania") to Axiom on or before thirty
(30) days following the receipt by the Shareholders of Axiom's
Romania Adjustment Amount. A Notice of Disagreement--Romania
shall specify in reasonable detail the nature of any disagreement
so asserted in respect of Axiom's Romania Adjustment Amount.
During a period of ten (10) days following the receipt by Axiom
of a Notice of Disagreement--Romania from the Shareholders, the
parties shall attempt to resolve in writing any differences they
may have with respect to the matters specified in the Notice of
Disagreement--Romania. If at the end of the aforesaid ten (10)
day period, the parties have reached written agreement with
respect to all matters covered by a Notice of Disagreement--Romania, Axiom's
Romania Adjustment Amount shall be adjusted to
reflect such written agreement and shall become final and binding
upon the parties hereto. If at the end of the aforesaid ten (10)
day period, the parties have not reached written agreement with
respect to all matters covered by a Notice of Disagreement--Romania,
the matter or matters may be submitted by Axiom or the
Shareholders' Agent to binding arbitration in accordance with
Section 13.6 of this Agreement. The Romania Adjustment Amount as
finally determined in accordance with this Section 4.5(b), by
arbitration or otherwise, is referred to herein as the "Final
Romania Adjustment Amount."
(c) Payment of Romania Adjustments. If the
Final Romania Adjustment Amount is a negative number, such amount
shall be paid by the Shareholders to Axiom by releasing to Axiom
such number of Romania Escrow Shares as equals in value, as
determined below, the Final Romania Adjustment Amount; provided,
that subsequent to such return, the remainder of the Romania
Escrow Shares, if any, shall be released to the Shareholders. If
the Final Romania Adjustment Amount is a positive amount, (i)
such amount shall be paid to the Shareholders by bank treasurer's
check or wire transfer, pro rata based upon their share
ownership, by Axiom and (ii) all of the Romania Escrow Shares
shall be released to the Shareholders, pro rata based upon their
share ownership. For purposes of determining the number of
Romania Escrow Shares to be returned to Axiom as a result of the
determination of the Final Romania Adjustment Amount, such shares
shall be treated as having a value of Four Dollars ($4.00) per
share. All payments or releases of the Romania Escrow Shares
pursuant to this Section 4.5(c) shall be made within three (3)
days of the final determination of the Final Romania Adjustment
Amount.
4.6 Consideration For Noncompetition Agreement. On
the Closing Date, Axiom shall pay, by bank treasurer's check or
wire transfer (at the discretion of Axiom), to the Shareholders,
as consideration for such Shareholders' entering into the
noncompetition agreement set forth in Section 8.3 hereof, an
aggregate of Five Hundred Thousand Dollars ($500,000) (the "Non-Competition
Consideration Amount"), allocated among the
Shareholders as specified on Schedule 3.1.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF IDT AND THE SHAREHOLDERS
Except as specifically disclosed in this Agreement or
any schedule attached hereto, IDT and the Shareholders hereby
represent and warrant to Axiom and Acquisition as follows:
5.1 Organization and Good Standing. IDT is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted. IDT is
duly qualified to do business as a foreign corporation in the
jurisdictions specified in Schedule 5.1, which constitute all the
jurisdictions in which such qualification is required. IDT has
an authorized capital consisting of One Million Five Hundred
Thousand (1,500,000) shares of IDT Common Stock, of which Three
Thousand Three Hundred and Nine (3,309) shares are outstanding,
all of which outstanding shares are validly issued, fully paid
and non-assessable. In addition, outstanding options to purchase
an additional Five Thousand Four Hundred And Ninety (5,490)
shares of the IDT Common Stock will be exercised immediately
prior to the Effective Time of the Merger. Except as set forth
in this Section 5.1, no preferred stock is authorized or
outstanding, and there are no options, warrants, rights,
stockholder agreements or other instruments or agreements
outstanding giving any Person the right to acquire any shares of
capital stock of IDT or any Subsidiary or any other equity
interest in IDT or any Subsidiary, nor are there any commitments
to issue or execute any such option, warrants, rights,
instruments or agreements. The minute books and stock records of
IDT and each Subsidiary are complete and accurate and all
signatures included therein are the genuine signatures of the
persons whose signatures are required. IDT has delivered to
Axiom true, correct and complete copies of the Articles of
Incorporation or other organizational documents (certified by the
Secretary of the State of California) and by-laws (certified by
the secretary, assistant secretary or other appropriate officer)
of IDT and each Subsidiary. Neither IDT nor any Subsidiary is in
default under or in violation of any provision of its Articles of
Incorporation or other organizational documents or its By-Laws.
5.2 Authorization of Agreement. Each of IDT, the
Subsidiaries and the Shareholders has all requisite power,
authority and legal capacity to execute and deliver this
Agreement and each other agreement, document or instrument or
certificate contemplated by this Agreement or to be executed by
such Person in connection with the consummation of the
transactions contemplated by this Agreement (collectively, the
"Seller Documents"), and to consummate the transactions
contemplated hereby and thereby. This Agreement and each of the
Seller Documents have been duly and validly executed and
delivered by IDT, the Subsidiaries and the Shareholders and each
other party thereto (other than Axiom and Acquisition) and
(assuming the due authorization, execution and delivery by Axiom
and Acquisition if a party thereto) this Agreement and each of
the Seller Documents constitutes the legal, valid and binding
obligations of IDT, the Subsidiaries, the Shareholders and each
other party thereto (other than Axiom and Acquisition),
enforceable against such Person in accordance with its respective
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at
law or in equity).
5.3 Subsidiaries and Joint Ventures. Except as
disclosed on Schedule 5.3, there is no corporation or other
entity in which IDT owns, directly or indirectly, a controlling
interest or a majority of the outstanding shares or other equity
interest issued by such corporation or entity (a "Subsidiary"),
nor does IDT own any other capital stock, security, partnership
interest or other interest of any kind, either direct or
indirect, in any corporation, partnership, joint venture,
association or other entity. Schedule 5.3 identifies the
jurisdiction of incorporation or organization of each Subsidiary
and the jurisdictions in which it is qualified to do business as
a foreign corporation or entity. Each Subsidiary is qualified in
all jurisdictions in which such qualification is required.
5.4 Conflicts; Consents of Third Parties.
(a) Neither the execution and delivery by
IDT, any Subsidiary or any Shareholder of this Agreement or any
of the Seller Documents, the consummation by any of IDT, any
Subsidiary or any Shareholder of the transactions contemplated
hereby and thereby, nor compliance by IDT, any Subsidiary or any
Shareholder with any of the provisions hereof or thereof will (i)
conflict with, or result in the breach of, any provision of the
Articles of Incorporation or by-laws of IDT or any Subsidiary;
(ii) except as set forth on Schedule 5.4, conflict with, violate,
result in the breach or termination of, constitute a default
under, or give rise to any right of acceleration under, any
Contract to which IDT, any Subsidiary or any Shareholder is a
party or by which any of them or any of their respective
properties or assets is bound; (iii) violate any Law or Order of
any Governmental Body by which IDT, any Subsidiary or any
Shareholder is bound; or (iv) result in the creation of any Lien
upon the properties or assets of IDT, any Subsidiary or any
Shareholder.
(b) Except as set forth on Schedule 5.4, no
waiver, Order or Permit, or declaration or filing with or
notification to, any Person or Governmental Body is required on
the part of IDT, any Subsidiary or any Shareholder in connection
with the execution and delivery of this Agreement or any of the
Seller Documents, the compliance by IDT, any Subsidiary or any
Shareholder, as the case may be, with any of the provisions
hereof or thereof, or the consummation of the Merger or the other
transactions contemplated hereby.
5.5 Officers, Directors; Bank Accounts. Schedule 5.5
is a correct and complete list of all directors of IDT and each
Subsidiary, all officers of IDT and each Subsidiary, all bank
accounts and safe deposit boxes of IDT and each Subsidiary and
all persons authorized to sign checks drawn on such accounts and
to have access to such safe deposit boxes.
5.6 Ownership of IDT Common Stock. Each Shareholder
owns that number of the outstanding shares of IDT Common Stock,
or options to acquire shares of IDT Common Stock, as is set forth
opposite the name of such Shareholder on Schedule 5.6 hereto.
The Shareholders own in the aggregate all of the outstanding
shares of IDT Common Stock. Each Shareholder has good,
marketable and unencumbered title to the shares owned by such
Shareholder, free and clear of all liens, security interests,
pledges, claims, options and rights of others.
5.7 Financial Statements. The consolidated balance
sheets of IDT and its Subsidiaries as at December 31, 1997, 1996
and 1995 (December 31, 1997 is hereafter referred to as the
"Balance Sheet Date" and the balance sheet as at December 31,
1997 is hereafter referred to as the "Warranted Balance Sheet")
and the related statements of income (loss) and cash flows for
the fiscal years ended on the dates of such balance sheets, and
all related schedules and notes to the foregoing, copies of all
of which constitute Schedule 5.7, were prepared in accordance
with GAAP and practices consistently applied throughout the
periods reported upon and with past periods, and fairly and
accurately present the consolidated financial position of IDT and
its Subsidiaries as at the dates of such balance sheets, and the
consolidated results of the operations and cash flows of IDT and
its Subsidiaries for the periods ended on such dates. The
financial statements for the three one year periods ended on
December 31, 1997, 1996 and 1995, were audited by Arthur
Andersen, independent accountants, whose reports are included
with such financial statements. IDT has delivered to Axiom true
and correct copies of all correspondence sent by all legal
counsel for IDT and its Subsidiaries to the auditors which
audited such financial statements in response to letters from IDT
to such counsel requesting that such counsel supply the auditors
with certain information regarding pending or threatened
litigation, unasserted claims and other matters relevant to the
auditors' audit of such financial statements.
5.8 No Undisclosed Liabilities. Except as set forth
on Schedule 5.8, neither IDT nor any of its Subsidiaries has any
indebtedness, obligations or liabilities, whether related to tax
or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent, or otherwise,
except as and to the extent reflected in the Warranted Balance
Sheet or in this Agreement or any Schedule.
5.9 Actions since Balance Sheet Date; Shareholders'
Equity. There has been no Material Adverse Change since the
Balance Sheet Date. Except as shown on Schedule 5.9, since the
Balance Sheet Date, neither IDT nor any Subsidiary:
(a) has taken any action outside of the
ordinary and usual course of business;
(b) has borrowed any money or become
contingently liable for any obligation or liability of others;
(c) has failed to pay all of its debts and
obligations as they became due;
(d) has incurred any debt, liability or
obligation of any nature to any party except for obligations
arising from the purchase of goods or the rendition of services
in the ordinary course of business;
(e) has knowingly waived any right of
substantial value; and
(f) has failed to use its best efforts to
preserve its business organization intact, to keep available the
services of its employees, and to preserve its relationships with
its customers, suppliers and others with whom it deals.
5.10 Taxes.
(a) "Taxes" shall mean any tax (whether
income, excise, customs, sales or use, value added, ad valorem,
real or personal property, license, transfer, employment, social
security or any other kind of tax or payment in lieu of tax no
matter how denominated), or any assessment, levy, impost,
withholding, or other governmental charge in the nature of a tax,
and shall include all additions to tax, interest, penalties and
fines with respect thereto; and "Returns" shall mean all reports,
estimates, information statements and returns of any nature,
including amended versions of any of the foregoing, relating to
or required to be filed in connection with any Taxes pursuant to
the statutes or regulations of any federal, state, local or
foreign government taxing authority.
(b) IDT and each Subsidiary has filed all
Returns that are required to be filed by it. All such Returns
are or will be true, correct and complete in all material
respects as of their respective filing dates. All Taxes for
which IDT or any Subsidiary is or will be liable and that are due
(including, without limitation, Taxes shown to be due on all
filed Returns) have been paid, and all Taxes that are required to
be withheld or collected by IDT or any Subsidiary have been duly
withheld and collected and, to the extent required, have been
paid to the appropriate governmental authority or properly
deposited as required by applicable law, rule or regulation. The
federal income tax returns of IDT and each Subsidiary for the
year ended December 31, 1990 have been audited and accepted by
the Internal Revenue Service.
(c) No taxing authority has asserted or, to
the knowledge of IDT, any Subsidiary or any Shareholder,
threatened to assert any adjustment, deficiency or assessment for
any Taxes against IDT; to the knowledge of IDT, each Subsidiary
and each Shareholder, no basis exists for any such adjustment,
deficiency or assessment; and to the knowledge of IDT, each
Subsidiary and each Shareholder, there is no audit or
investigation pending or, to the knowledge of IDT, each
Subsidiary and each Shareholder, threatened by any taxing
authority with respect to any liability for Taxes of IDT or any
Subsidiary, except that the Internal Revenue Service has notified
IDT of its intention to audit the federal income tax returns of
IDT and its Subsidiary for the year ended December 31, 1996,
commencing on or about May 21, 1998, and the California Franchise
Tax Board has audited the California income tax returns of IDT
and its subsidiaries for the year ended December 31, 1993, but
has not yet notified IDT of the results of that audit.
(d) Except as disclosed on Schedule 5.10(d),
Neither IDT nor any Subsidiary has any taxable income or gain
that may be reportable for a period ending after the Closing, but
which is attributable to a transaction occurring, or a change in
accounting method made for a period ending, at or prior to the
Closing, which may result in deferred reporting of income or gain
from such transaction or from such change in accounting method.
(e) There are no currently outstanding
requests made by IDT or any Subsidiary for tax rulings,
determinations or information that could affect the Taxes of IDT
or any Subsidiary.
(f) Schedule 5.10(f) discloses all Returns
filed with respect to IDT or any Subsidiary for taxable periods
ending on or after December 31, 1995, and all Returns (if not for
taxable periods) filed since January 1, 1996. IDT has delivered
to Axiom complete and accurate copies of all such Returns.
(g) Neither IDT nor any Subsidiary has been
obligated to deduct and withhold Taxes under Section 1441 of the
Code.
(h) No consent under Section 341(f) of the
Code has been filed with respect to IDT or any Subsidiary.
(i) Neither IDT nor any Subsidiary is a
party to any agreement or arrangement that would result in the
payment of any "excess parachute payment" within the meaning of
Section 280G of the Code.
(j) IDT is not a member of a consolidated
group of corporations for federal income tax purposes.
(k) IDT is not required to file, and has
never filed, Tax Returns with any foreign governmental taxing
authority, except with respect to (i) Innovative Data Technology
International, which is a wholly subsidiary of IDT, is a Foreign
Sales Corporation, for federal income tax purposes, and is
incorporated in Guam and (ii) Belgian Tax Returns, which were
filed for the period during which IDT maintained an office in
Belgium.
(l) IDT has not disposed of any of its
assets either in contemplation of the transaction described
herein, or in the 6 months preceding execution of this Agreement,
except in the ordinary course of business.
5.11 Real Property. Neither IDT nor any Subsidiary
has any right, title or interest in, or any obligation or duty
relating to, any real estate or real property, except for its
interest as a tenant, lessee, subtenant or sublessee under the
leases disclosed on Schedule 5.11 (the "Leases"). With respect
to the lease to the premises at 15092 Avenue of Science, San
Diego, California (the "Assumed Lease")
(a) IDT has delivered to Axiom a correct and
complete copy of the Assumed Lease;
(b) The Assumed Lease is in full force and
effect and has not been modified, supplemented or amended in any
way;
(c) Neither the landlord under the Assumed
Lease nor IDT is in breach or default, and no event has occurred
which, with notice or lapse of time, or both, would constitute a
breach or default or permit termination, modification or
acceleration of the assumed Lease;
(d) The term of the Assumed Lease commenced
on August 15, 1997, and shall expire on August 15, 2000;
(e) IDT has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest
in the Assumed Lease or the leasehold thereof; and
(f) All amounts due and payable under the
Assumed Lease, as of the date hereof, have been, and, as of the
Closing Date, will be, paid in full.
5.12 Personal Property.
(a) IDT or a Subsidiary has good, valid and
marketable title to all of the tangible personal property
disclosed on Schedule 5.12(a), all of which is owned by such
entity, free and clear of all liens, mortgages, pledges, security
interests, restrictions, prior assignments, encumbrances and
claims of every kind, except for the security interest in favor
of Dale A. Spencer, which will be released at Closing pursuant to
the documents attached to Schedule 5.12(a). All equipment,
furniture and fixtures, and other tangible personal property used
by IDT or any Subsidiary in its business is in good operating
condition and repair and does not require any repairs other than
normal routine maintenance to maintain such property in good
operating condition and repair.
(b) Schedule 5.12(b) contains a complete and
correct list of each trademark, trade name, logo, service mark,
copyright, patent, pending patent application, shopright, item of
know-how, trade secret, computer program and item of computer
software and the like and other items commonly known as
intellectual property (collectively, the "Intellectual Property")
owned or used by IDT and the Subsidiaries, including without
limitation the names "Innovative Data Technology," "Innovative
Data Technology International" and "IDT-Alston," which are the
only names used by IDT or the Subsidiaries in the operation of
the Business, as well as all registrations thereof and pending
applications therefor, and each license or other agreement
relating thereto. Except as set forth on Schedule 5.12(b), each
of the foregoing is owned by the party shown on such Schedule as
owning the same, free and clear of all Liens and is in good
standing and does not conflict with the rights of any other
Person. There have been no claims made and neither IDT nor any
Subsidiary has received any notice that any of the foregoing is
invalid or conflicts with the asserted rights of others. IDT or
a Subsidiary possesses all patents, patent licenses, trade names,
trademarks, service marks, brand marks, brand names, copyrights,
know-how, formulae and other proprietary and trade rights
necessary for the conduct of its business as now conducted, not
subject to any restrictions and without any conflict with the
rights of others and neither IDT nor any Subsidiary has forfeited
or otherwise relinquished any such patent, patent license, trade
name, trademark, service mark, brand mark, brand name, copyright,
know-how, formulae or other proprietary right necessary for the
conduct of its business as conducted on the date hereof. Neither
IDT, any Subsidiary nor any Affiliate of either is under any
obligation to pay any royalties or similar payments. IDT and the
Subsidiaries are the registered owners of the United States and
foreign Patents listed opposite their respective names on
Schedule 5.12(b) and have applications pending with the U.S.
Patent Office for the patents listed opposite their respective
names on Schedule 5.12(b) as being patents pending. No
Shareholder has any knowledge of any adverse claim of any kind
with respect to any of such patents or patent applications, nor
does any Shareholder have any knowledge, or reason to know, that
a patent will not issue on any such patent application. No
process used by IDT or any Subsidiary or any product manufactured
or sold by IDT or any Subsidiary infringes upon any patent,
patent application, trademark or trade name of any other party.
In the last ten (10) years, neither IDT nor any Subsidiary has
done business at any address other than the following addresses:
15092 Avenue of Science, San Diego, California; 5340 Eastgate
Mall, San Diego, California.
5.13 Material Contracts. Schedule 5.13 sets forth all
Contracts to which IDT or any Subsidiary is a party or by which
it is bound, including, without limitation: (i) Contracts with
any Shareholder (or any Affiliate of any Shareholder) or any
current or former officer or director of IDT; (ii) Contracts with
any labor union or association representing any employee of IDT
or any Subsidiary; (iii) Contracts pursuant to which any Person
is required to purchase or sell a stated portion of its
requirements or output from or to another Person; (iv) Contracts
for the sale or lease (as lessor or lessee) of any real or
personal property whether or not in the ordinary course of
business or for the grant to any Person of any preferential
rights to purchase any of its assets; (v) partnership or joint
venture agreements; (vi) Contracts containing covenants of IDT,
the Subsidiaries or any Affiliate of either not to compete in any
line of business or with any Person in any geographical area or
covenants of any other Person not to compete with IDT, the
Subsidiaries or any Affiliate of either in any line of business
or in any geographical area; (vii) Contracts relating to the
acquisition by IDT or any Subsidiary of any operating business or
the capital stock of any other Person; (viii) customer contracts
or (ix) Contracts relating to the borrowing of money. There have
been made available to Axiom true and complete copies of each of
the Contracts. Except as set forth on Schedule 5.13, each of the
Contracts and other agreements is in full force and effect and is
the legal, valid and binding obligation of each party thereto,
enforceable against such party in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity). Except as set forth on
Schedule 5.13, neither IDT nor any Subsidiary is in default under
any Contract, nor, to the knowledge of any Shareholder, is any
other party to any Contract in default thereunder in any material
respect.
5.14 Labor, Employment Contracts and Employee Benefit
Plans. Except as disclosed on Schedule 5.14:
(a) Neither IDT nor any Subsidiary is a
party to any written or oral employment agreement, consulting
agreement, personal service agreement or agreement with any
independent contractor, and there are no actual or threatened
controversies related to or arising out of any such existing or
alleged agreements. Neither IDT nor any Subsidiary is a party to
any pending or threatened labor dispute. IDT and each Subsidiary
has performed all obligations, given all notices and obtained all
consents necessary under such agreements to consummate this
Agreement.
(b) Neither IDT nor any Subsidiary is a
party to any collective bargaining agreement. With respect to
employees of IDT and its Subsidiaries none of the following
events or circumstances exists and none is threatened: a
controversy, a claim of illegal or improper conduct or
activities, an unresolved grievance or charge of unfair labor
practice, an arbitration proceeding or a union organizing effort.
Neither IDT nor any Subsidiary has received notice of any claim
that it has not complied with any applicable law or regulation
relating to the employment of labor, including any provisions
thereof relating to wages, hours, collective bargaining, the
payment of social security and similar taxes, retirement plans,
health and welfare plans, equal employment opportunity,
employment discrimination and employment safety, or that IDT or
any Subsidiary is liable for any arrears of wages or any taxes or
penalties or interest for failure to comply with any of the
foregoing. Neither IDT nor any Subsidiary has been the subject
of any organizational efforts by any labor organizing, strike,
work stoppage, "sickout" or picketing by any group of persons
(whether or not employees).
(c) IDT and each Subsidiary has complied in
all material respects with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other laws
relating to the employment of labor or provision of employee
benefits, including any provisions thereof relating to wages,
hours, benefits, pensions, safety, discrimination, the filing of
all reports and forms required to be filed with state or federal
agencies, collective bargaining, recognition and dealing with
labor organizations, and the payment of social security and
unemployment compensation taxes, the withholding of income tax,
and the payment and withholding of similar taxes. Neither IDT
nor any Subsidiary is liable for any arrearages of wages, taxes,
benefit payments or contributions, or penalties or interest for
failure to comply with any of the foregoing.
(d) There is no employee benefit plan that
IDT or any Subsidiary maintains or to which it contributes,
except as disclosed in Schedule 5.14. Each employee benefit plan
disclosed in Schedule 5.14, and each related trust, insurance
contract or fund, complies in form and in operation with the
applicable requirements of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws. IDT
has never maintained, sponsored or contributed to an employee
pension plan that is or was subject to Title IV of ERISA.
(e) All reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1s, and
Summary Plan Descriptions) required of IDT or any Subsidiary with
respect to each employee benefit plan disclosed in Schedule 5.14
have been timely filed or distributed in compliance with the
requirements of applicable law. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Section 4980B of the Code
have been met with respect to each such employee benefit plan
which is an employee benefit plan described in Section 3(l) of
ERISA.
(f) All contributions (including all
employer contributions and employee salary reduction
contributions) which may be required to be made in accordance
with the employee benefit plans and, when applicable, Section 302
of ERISA or Section 412 of the Code have been or will be timely
paid to each employee benefit plan disclosed in Schedule 5.14 for
all periods ending on or before the Closing; contributions which
are not yet due have been paid to each such employee benefit plan
or accrued in accordance with the past custom and practice of
IDT. All premiums or other payments for all periods ending on or
before the date hereof have been paid with respect to each such
employee benefit plan that is described in Section 3(l) of ERISA.
(g) Each employee benefit plan disclosed in
Schedule 5.14 that is intended to meet the requirements of a
"qualified plan" under Section 401(a) of the Code satisfies the
requirements of Section 401(a) of the Code and has received a
favorable determination letter from the Internal Revenue Service.
(h) There have been no prohibited
transactions (as defined in ERISA Section 406 and Section 4975 of
the Code) with respect to any employee benefit plan. No
fiduciary (as defined in ERISA) has any liability for breach of
fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of
any employee benefit plan. No action, suit, proceeding, hearing
or investigation with respect to the administration or the
investment of the assets of any employee benefit plan (other than
routine claims for benefits) is pending or, to the knowledge of
IDT, any Subsidiary or any Shareholder, threatened. To the
knowledge of IDT, each Subsidiary and each Shareholder, there is
no basis for any such action, suit, proceeding, hearing or
investigation.
(i) IDT does not maintain, has never
maintained, and does not contribute to, has never contributed to,
and never has been required to contribute to, and no Subsidiary
maintains, has ever maintained, contributes to, has ever
contributed to or has ever been required to contribute to, to any
employee benefit plan providing medical, health, or life
insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their
dependents (other than in accordance with Section 4980B of the
Code). No person who is not a current or former employee (or a
beneficiary thereof) of IDT or any Subsidiary participates or is
entitled to any benefits under any plan disclosed on Schedule
5.14.
(j) Except as set forth on Schedule 5.14(j),
neither IDT nor any Subsidiary has any obligation, whether legal
or otherwise, to pay to any of its current or former employees,
directors, officers or advisors, any salary, fringe benefit or
premium, or to offer any Person employment after the Closing
Date. To the knowledge of IDT, the Subsidiaries or
Shareholders, neither IDT nor any Subsidiary has any obligations
or liabilities arising from the termination or cancellation of
any employment agreements in effect on or prior to the Closing
Date. Except as required by law, neither IDT nor any Subsidiary
is a party to any employment or consulting agreement, whether
written or oral, which cannot be terminated upon notice of thirty
(30) days or less without penalty or premium.
5.15 Environmental Matters.
(a) Each of the Leased Properties and any
properties to which IDT or any Subsidiary held title during the
last five (5) years (collectively, the "Real Properties"), and
all activities thereon comply and for the past five (5) years
have complied in all respects with all applicable foreign,
federal, state and local statutes, ordinances, regulations,
rules, orders and requirements of common law concerning the
protection of human health, safety or the environment, including,
without limitation, those concerning discharges to the air, soil,
surface water or groundwater and concerning the generation,
storage, treatment, disposal or remediation of any waste or any
Hazardous Substances (as defined below) (collectively,
"Environmental Law").
(b) No Contamination is present in, on or
under any of the Real Properties or, to IDT's knowledge or the
knowledge of its Subsidiaries or of any Shareholder, on any
property abutting any of the Real Properties. "Contamination"
shall mean the presence of Hazardous Substances that may require
remediation under any Environmental Law. "Hazardous Substances"
shall mean materials that are or contain "hazardous substances,"
"pollutants or contaminants," as defined pursuant to any
Environmental Law, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. $$9601 et seq., as amended, "regulated substances"
as defined pursuant to any Environmental Law, including, without
limitation, Subtitle I of the Resource Conservation and Recovery
Act, 42 U.S.C. $$6991-6991(I), as amended, or any hazardous
materials, toxic substances, hazardous wastes, or other
substances regulated pursuant to any Environmental Law.
(c) None of the following is present in, on
or under any of the Real Properties: polychlorinated biphenyls
("PCBs") or substances containing PCBs; asbestos or materials
containing asbestos; radon exceeding the action level established
by the U.S. Environmental Protection Agency ("EPA"); urea
formaldehyde foam insulation; or Hazardous Substances storage
tanks.
(d) Neither IDT nor any Subsidiary nor any
Shareholder has been notified by any governmental authority,
agency or third party of, or has knowledge of, any violation,
either existing or future due to lapse of time or failure to take
curative action, by IDT or any Subsidiary of, or any liability of
or any condition that could give rise to, any liability of IDT or
any Subsidiary under, any Environmental Law. No civil, criminal
or administrative action, claim, or other legal proceeding
pursuant to any Environmental Law has been filed against IDT or
any Subsidiary, or is anticipated or threatened. Neither IDT nor
any Subsidiary nor any Shareholder has entered into any consent
order, consent decree, administrative order, judicial order or
settlement pursuant to any Environmental Law.
(e) Schedule 5.15 discloses a correct and
complete list of all of the registrations by IDT and any
Subsidiary with, licenses from, or permits or other approvals
issued by, governmental agencies pursuant to any Environmental
Law (collectively, "Approvals"), copies of which have been
delivered to Axiom. The Approvals listed on Schedule 5.15 are
all Approvals that are necessary to conduct the business of IDT
or any Subsidiaries in compliance with Environmental Laws, are in
full force and effect, and all fees payable in connection
therewith have been paid. Neither the execution and delivery of
this Agreement nor any of the transactions contemplated herein
will cause any of the Approvals to be invalidated, violated or
otherwise adversely affected.
(f) IDT has delivered to Axiom copies of
all: (a) applications, reports or other materials submitted to
any governmental agency by or on behalf of IDT or any Subsidiary
in compliance with Environmental Law; (b) records or manifests
required to be maintained by IDT or any Subsidiary pursuant to
Environmental Law; (c) notices of violation, summonses, orders,
complaints or other documents received by or on behalf of IDT or
any Subsidiary relating to compliance with or liability under
Environmental Law or the discharge, emission or release of any
Hazardous Substances at, affecting or in any way relating to the
Real Properties; and (d) records of analyses of any environmental
tests pertaining to the Real Properties, including, without
limitation, the results of any air, water or soil analyses, tank
integrity testing, or radon testing.
(g) All chemical substances contained in
products sold by IDT or any Subsidiary are on the inventory list
promulgated under the Toxic Substances Control Act, 15 U.S.C.
$$2601 et seq., as amended ("TSCA"), or are the subject of a
premanufacturing notice filed with the EPA under TSCA. Schedule
5.15 discloses an accurate list of all premanufacturing notices
filed by IDT or any Subsidiary with the EPA. Neither IDT nor any
Subsidiary has filed or been under a duty to file any reports
required by Section 8(h) of TSCA.
(h) Schedule 5.15 discloses a correct and
complete listing of all facilities at which: (i) IDT or any
Subsidiary has generated, treated, stored or disposed of
Hazardous Substances; or (ii) any third party under contract with
IDT or any Subsidiary generates, treats, stores or disposes of or
has generated, treated, stored or disposed of Hazardous
Substances received from IDT or any Subsidiary.
(i) The generation, treatment, storage,
transportation or disposal by or on behalf of IDT or any
Subsidiary of any Hazardous Substance was and is in compliance
with Environmental Law applicable at the time of such generation,
treatment, storage, transportation or disposal. Neither any
facility at which such Hazardous Substances were or are
generated, treated, stored or disposed of nor any of the Real
Properties, has been or is the subject of any listing by any
governmental body or agency as a targeted hazardous site under
any Environmental Law. No legal action under any Environmental
Law has been brought against IDT or any Subsidiary or any Real
Property by any governmental body, agency or third party,
including, without limitation, any action relating to violations
of or liability under any Environmental Law or the performance of
any removal or remedial action pursuant to any Environmental Law.
(j) Nothing has occurred prior to the date
of this Agreement, and nothing will occur prior to the Closing
Date, that could give rise to expenditures by, and/or the filing
of any lien by any governmental authority against, IDT or any
Subsidiary or any of the Real Properties pursuant to any
Environmental Law.
(k) Neither IDT, any Subsidiary nor any
Shareholder is required to obtain any consent or approval or file
or record any environmental disclosure statement under any
Environmental Law in connection with the transactions
contemplated by this Agreement for any of the Properties or with
respect to any Hazardous Substances.
(l) Neither IDT nor any Subsidiary has
retained or assumed, either contractually, by operation of law or
otherwise, the liability of any other Person under any
Environmental Law.
5.16 Litigation. Except as set forth in Schedule
5.16, there is no suit, action, proceeding, investigation, claim
or order pending or, to the knowledge of IDT, the Subsidiaries
and each Shareholder, threatened against IDT or any Subsidiary
(or to the knowledge of IDT, the Subsidiaries and each
Shareholder, pending or threatened, against any of the officers,
directors or key employees of IDT or any Subsidiary with respect
to their business activities on behalf of IDT or any Subsidiary),
or to which IDT or any Subsidiary is otherwise a party, before
any court, or before any Governmental Body; nor, to the knowledge
of IDT, the Subsidiaries and each Shareholder, is there any
reasonable basis for any such action, proceeding, or
investigation. Neither IDT nor any Subsidiary is subject to any
judgment or Order of any Governmental Body and neither IDT nor
any Subsidiary is engaged in any legal action to recover monies
due it or for damages sustained by it.
5.17 Compliance with Laws. IDT and each Subsidiary
possesses all Permits of and from all Governmental Bodies
necessary to own or lease its respective properties and assets
and to conduct the business in which it is engaged. Except as
set forth on Schedule 5.17, no proceeding has been threatened or
commenced which seeks to, or could reasonably be anticipated to,
cause the suspension, modification, revocation or withdrawal of
any Permit. IDT and each Subsidiary is currently, and at all
times has been, in material compliance with all Laws applicable
to it. Neither IDT nor any Subsidiary has received any written or
oral communication alleging that either IDT or any Subsidiary or
the operations thereof may be in violation of any Law or any
Permit, or may have any liability under any Law.
5.18 Insurance. Schedule 5.18 sets forth a complete
and accurate list of all policies of insurance of any kind or
nature covering IDT, each Subsidiary and any of their respective
employees, properties or assets, including, without limitation,
policies of life, disability, fire, theft, workers compensation,
employee fidelity and other casualty and liability insurance.
All such policies are in full force and effect and neither IDT
nor any Subsidiary is in default of any provision thereof.
Neither IDT nor any Subsidiary has received notice from any
issuer of any of such policies of such issuer's intention to
cancel or refusal to renew any policy issued by it.
5.19 Related Party Transactions. Except as set forth
on Schedule 5.19, neither IDT nor any Subsidiary has borrowed any
moneys from and has no outstanding indebtedness or other similar
obligations to a Shareholder or any of their respective
Affiliates. Except as set forth on Schedule 5.19, since the
Balance Sheet Date, neither IDT nor any Subsidiary has made any
payments in cash or otherwise (as a dividend, other distribution
or otherwise), or made any loans to an Affiliate and has not
entered into any agreements with any Affiliate. Except as set
forth on Schedule 5.19, none of IDT or any Subsidiary, or any of
their respective officers, employees or Affiliates (i) owns any
direct or indirect interest of any kind in, or controls or is a
director, officer, employee or partner of, or consultant to, or
lender to or borrower from or has the right to participate in the
profits of, any Person which is (A) a competitor, supplier,
customer, landlord, tenant, creditor or debtor of IDT or any
Subsidiary, (B) engaged in a business related to the business of
either IDT or any Subsidiary or (C) a participant in any
transaction to which either IDT or any Subsidiary is a party or
(ii) is a party to any Contract or transaction with either IDT or
any Subsidiary.
5.20 Year 2000 Warranty. Except as set forth on
Schedule 5.20, IDT and the Subsidiaries' computer programs and
software (collectively called "Software") and all updates thereto
will correctly handle the change of the century in a standard and
compliant manner, including the year 2000 and beyond as well as
the leap year and the absence of leap year, and will operate
accurately in all respects with respect to date related
operations. For purposes of this Agreement, compliance with the
foregoing shall mean that the Software will operate and correctly
process such that (i) calculations using dates execute utilizing
a four digit year, (ii) the Software functionality, including but
not limited to, entry, inquiry, maintenance, update and display
(whether on-line, batch or otherwise) shall support four digit
year processing, (iii) interfaces and reports shall support four
digit year processing, (iv) successful transition to the year
2000 using the correct system date shall occur without human
intervention, (v) after transition to the year 2000, processing
with a four digit year shall occur without human intervention,
(vi) all leap years shall be calculated correctly, (vii) correct
results shall be produced in forward and backward date
calculations spanning century boundaries, including the
conversion of previous years currently stored as two digits, and
(viii) the Software complies with industry standards regarding
the change of the century and year 2000 compliance.
5.21 No Misrepresentation. No representation or
warranty of IDT, any Subsidiary or any Shareholder contained in
this Agreement or in any schedule hereto or in any certificate or
other agreement or instrument furnished by IDT, any Subsidiary or
any Shareholder to Axiom or Acquisition pursuant to the terms
hereof contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements
contained herein or therein not misleading. There are no
material facts relating to IDT or any Subsidiary or the Business
the Assets that have not been disclosed in writing to Axiom.
5.22 Financial Advisors. No Person, other than Roger
Williams, has acted, directly or indirectly, as a broker, finder
or financial advisor for IDT, any Subsidiary or any Shareholder
in connection with the transactions contemplated by this
Agreement and no Person, other than Roger Williams, is entitled
to any fee or commission or like payment in respect thereof.
5.23 Securities Representations.
(a) Each Shareholder is a resident of the
state set forth opposite such Shareholder's name on Schedule
5.23, and Michael L. Moore, Frances Penfold and Dale A. Spencer
are "accredited investors" as that term is in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the
"1933 Act").
(b) Each Shareholder has read the Securities
Reports. Axiom has made available to each Shareholder all
documents that the Shareholders have requested relating to the
Axiom Shares, and has provided answers to all of Shareholders'
questions concerning the Axiom Shares. In addition, Shareholders
have had an opportunity to discuss the Axiom Shares with
representatives of Axiom and to ask questions of them. Without
limiting the foregoing, each Shareholder understands and
acknowledges that neither Axiom, Acquisition nor anyone acting on
the behalf of either has made any representations or warranties
other than those contained herein respecting Axiom or the future
conduct of Axiom's business or of IDT's business, and no
Shareholder has relied upon any representations or warranties
other than those contained herein in the belief that they were
made on behalf of Axiom.
(c) Each Shareholder recognizes that receipt
of Axiom Shares involves certain risks, including without
limitation those set forth in the Registration Statement on Form
S-1 that is one of the Securities Reports, and has sufficient
knowledge to understand all such risks.
(d) Each Shareholder is acquiring the Axiom
Shares to be issued to such Shareholder without a view to any
distribution or resale thereof, other than a distribution or
resale that, in the opinion of counsel, which opinion is
satisfactory to Axiom, may be made without violating the
registration provisions of the 1933 Act or applicable securities
laws of the jurisdiction in which such Shareholder resides. The
Axiom Shares to be acquired by the Shareholders are "restricted
securities" within the meaning of Rule 144 under the 1933 Act and
have not been registered under the 1933 Act and therefore must be
held indefinitely unless they are subsequently registered under
the 1933 Act or an exemption from registration is available.
(e) Each Shareholder understands that there
shall be endorsed on the certificate evidencing the Axiom Shares
delivered contemporaneously herewith a legend substantially
similar to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE 1933 ACT'), OR
THE SECURITIES LAWS OF ANY OTHER JURISDICTION
AND ARE RESTRICTED SECURITIES' AS DEFINED BY
RULE 144 UNDER THE 1933 ACT. THE SHARES MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT REGISTERING THE SHARES
UNDER THE 1933 ACT, OR IN LIEU THEREOF, AN
OPINION OF COUNSEL, WHICH OPINION IS
SATISFACTORY TO THE ISSUER OF THE SHARES, TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACTS."
(f) Each Shareholder acknowledges that (i)
such Shareholder is at least 21 years of age, (ii) such
Shareholder has adequate means of providing for his current needs
and personal contingencies, (iii) such Shareholder has no need
for liquidity in the Axiom Shares acquired in connection
herewith, (iv) such Shareholder maintains his domicile and is not
a transient or temporary resident at the address shown below and
(v) all of such Shareholder's investments in and commitments to
non-liquid assets and similar investments are, and after such
Shareholder's receipt of the Axiom Shares, will be, reasonable in
relation to such Shareholder's net worth and current needs.
(g) Each Shareholder understands that the
Axiom Shares are being issued in reliance on specific exemptions
from the registration requirements of Federal and state
securities laws and that Axiom and the principals and controlling
persons thereof are relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments, and
understandings set forth herein in order to determine the
applicability of such exemptions and the suitability of such
Shareholder to acquire Axiom Shares.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF AXIOM AND ACQUISITION
Axiom and Acquisition hereby jointly and severally
represent and warrant to IDT that:
6.1 Organization and Good Standing. Each of Axiom and
Acquisition is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
6.2 Authorization of Agreement. Each of Axiom and
Acquisition has full corporate power and authority to execute and
deliver this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be
executed by Axiom or Acquisition in connection with the
consummation of the transactions contemplated hereby and thereby
(the "Axiom Documents"), and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and
performance by Axiom and Acquisition of this Agreement and each
Axiom Document have been duly authorized by all necessary
corporate action on behalf of Axiom and Acquisition. This
Agreement and each Axiom Document has been duly executed and
delivered by Axiom and Acquisition and (assuming the due
authorization, execution and delivery by the other parties hereto
and thereto) this Agreement and each Axiom Document when so
executed and delivered constitute the legal, valid and binding
obligations of Axiom and Acquisition, enforceable against Axiom
and Acquisition in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in
equity).
6.3 Conflicts; Consents of Third Parties.
(a) Except as set forth on Schedule 6.3
hereto, none of the execution and delivery by Axiom and
Acquisition of this Agreement and of the Axiom Documents, the
consummation by Axiom and Acquisition of the transactions
contemplated hereby and thereby or compliance by Axiom and
Acquisition with any of the provisions hereof or thereof will (i)
conflict with, or result in the breach of, any provision of the
certificate of incorporation or by-laws of Axiom or Acquisition,
(ii) conflict with, violate, result in the breach or termination
of, constitute a default under, or give rise to any right of
acceleration under, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Axiom or
Acquisition is a party or by which Axiom or Acquisition or their
properties or assets is bound or (iii) violate any Law or Order
of any Governmental Body by which Axiom or Acquisition is bound.
(b) Except as set forth on Schedule 6.3, no
waiver, Order or Permit of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on
the part of Axiom or Acquisition in connection with the execution
and delivery of this Agreement or the Axiom Documents or the
compliance by Axiom or Acquisition with any of the provisions
hereof or thereof, or the consummation of the Merger or the other
transactions contemplated hereby or thereby.
6.4 Financial Advisors. No Person has acted, directly
or indirectly, as a broker, finder or financial advisor for Axiom
or Acquisition in connection with the transactions contemplated
by this Agreement and no person is entitled to any fee or
commission or like payment in respect thereof.
6.5 No Misrepresentation. No representation or
warranty of Axiom or Acquisition contained in this Agreement or
in any schedule hereto or in any certificate or other agreement
or instrument furnished by Axiom or Acquisition to any
Shareholder pursuant to the terms hereof (including, without
limitation, the Securities Reports) contains any untrue statement
of a material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading.
6.6 Securities Representations. Axiom shall, for a
period of two (2) years following Closing, file such reports and
other information referenced in Rule 144(c) under the Securities
Act as is necessary to allow Shareholders to sell their Axiom
Shares pursuant to Rule 144 under the Securities Act.
6.7 Financial Statements. The consolidated balance
sheets of Axiom and its Subsidiaries as at September 30, 1997 and
December 31, 1997 (the December 31, 1997 balance sheet is
hereafter referred to as the "Axiom Warranted Balance Sheet") and
the related statements of income (loss) and cash flows for the
fiscal years ended on the date of such balance sheets, and all
related schedules and notes to the foregoing, were prepared in
accordance with GAAP and practices consistently applied
throughout the periods reported upon and with past periods, and
fairly and accurately present in all material respects the
consolidated financial position of Axiom and its Subsidiaries as
at the date of such balance sheets, and the consolidated results
of the operations and cash flows of Axiom and its Subsidiaries
for the periods ended on such dates. The financial statements
for the one year period ended on September 30, 1997 were audited
by Arthur Andersen, independent accountants, whose reports are
included with such financial statements.
6.8 Litigation. Except as set forth in Schedule 6.8,
there is no suit, action, proceeding, investigation, claim or
order pending or, to the knowledge of Axiom, threatened, against
Axiom or any Subsidiary, or to which Axiom or any Subsidiary is
otherwise a party, before any court, or before any Governmental
Body; nor, to the knowledge of Axiom, is there any reasonable
basis for any such action, proceeding, or investigation. Neither
Axiom nor any Subsidiary is subject to any judgment or Order of
any Governmental Body and neither Axiom nor any Subsidiary is
engaged in any legal action to recover monies due it or for
damages sustained by it.
ARTICLE VII
CONTINUATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made in this
Agreement shall survive the consummation of the transactions
provided for in this Agreement for a period of time equal to the
applicable statutes of limitations. Each warranty and
representation contained herein is independent of all other
warranties and representations contained herein (whether or not
covering an identical or a related subject matter) and must be
independently and separately complied with and satisfied.
Exceptions or qualifications to any warranties or representations
contained herein shall not be construed as exceptions or
qualifications to any other warranty or representation. No such
representation or warranty shall be deemed to have been waived,
affected or impaired by any investigation made by any party to
this Agreement.
ARTICLE VIII
COVENANTS
8.1 Subsequent Disclosure; Effect of Investigation.
Axiom on the one hand and IDT and Shareholders on the other shall
be entitled and obligated from the effective date hereof through
Closing to disclose to each other any matters coming to the
attention of either of them that may be inconsistent with such
party's representations and warranties contained in Article V of
this Agreement. At any time subsequent to such disclosure and
prior to Closing, Axiom or IDT and the Shareholders, as
applicable, may, at such party's option upon determining in such
party's reasonable discretion that the information so disclosed
is materially adverse to the interests of such party, elect to
terminate this Agreement because of such subsequent disclosure.
If either party so elects, all further obligations of Axiom, IDT
and Shareholders under this Agreement shall terminate without
further liability of Axiom to IDT or Shareholders on the one
hand, or of IDT or Shareholders to Axiom on the other. Axiom and
the Shareholders agree that no investigation by Axiom,
Acquisition, IDT or any Shareholder prior to or after the date of
this Agreement shall diminish or obviate any of the material
representations, warranties, covenants or agreements of any
Axiom, Acquisition, IDT or any Shareholder contained in this
Agreement or the Seller Documents.
8.2 Preservation of Records. Subject to Section 8.7
hereof (relating to the preservation of Tax records), the
Shareholders and Axiom agree that each of them shall preserve and
keep the records held by them relating to the business of IDT and
the Subsidiaries for a period of three years from the date hereof
and shall make such records and personnel available to the other
as may be reasonably required by such party in connection with,
among other things, any insurance claims by, Legal Proceedings
against or governmental investigations of IDT or Axiom or any of
their respective Affiliates or in order to enable the
Shareholders or Axiom to comply with their respective obligations
under this Agreement and each other agreement, document or
instrument contemplated hereby. In the event either any
Shareholder or Axiom wishes to destroy such records after that
time, such party shall first give ninety (90) days prior written
notice to the other and such other party shall have the right at
its option and expense, upon prior written notice given to such
party within that ninety (90) day period, to take possession of
the records within one hundred and eighty (180) days after the
date of such notice.
8.3 Noncompetition Agreement.
(a) Duration and Extent of Noncompetition
Agreement. For a period of two (2) years from the date hereof,
no Shareholder shall (as principal, partner, director, officer,
agent, employee, consultant or otherwise) directly or indirectly
engage in (except as an employee or consultant of Axiom or an
Affiliate of Axiom), or directly or indirectly be financially
interested in, any business that is engaged in the business of
designing manufacturing or selling of devices that interface with
telecommunications switches or similar devices anywhere in the
world. Nothing in the foregoing sentence shall be deemed,
however, to prevent a Shareholder from owning securities of
Axiom, or of any other publicly-owned corporation engaged in any
such business, provided that the total amount of securities of
each class owned by any Shareholder in any such other
publicly-owned corporation does not exceed five percent (5%) of
the outstanding securities of such class.
(b) Remedies for Breach. The Shareholders
acknowledge that the restrictions contained in Section 8.3(a) are
reasonable and necessary in order to protect Axiom's legitimate
interests and that any violation thereof would result in
irreparable injury to Axiom. The Shareholders therefore
acknowledge and agree that, in the event of any violation
thereof, Axiom shall be authorized and entitled to obtain, from
any court of competent jurisdiction, preliminary and permanent
injunctive relief as well as an equitable accounting of all
profits or benefits arising out of such violation, which rights
and remedies shall be cumulative and in addition to any other
rights or remedies to which Axiom may be entitled. Each
Shareholder shall be liable solely for the breach, if any, by
such Shareholder of the restrictions contained in Section 8.3(a).
In the event that Section 8.3(a) above is held to be in any
respect an unreasonable restriction upon the any Shareholder,
then the court so holding may reduce the territory to which it
pertains and/or the period of time in which it operates, or
effect any other change to the extent necessary to render such
subparagraph enforceable by said court.
(c) Extension of Noncompetition Agreement.
In the event of any breach or violation of the restriction
contained in Section 8.3(a) above, the period therein specified
shall abate during the time of any violation thereof and that
portion remaining at the time of commencement of any violation
shall not begin to run until such violation has been fully and
finally cured.
8.4 Cooperation with Respect to Returns.
(a) Shareholders shall prepare, or cause to
be prepared, and file, or cause to be filed, all Returns for IDT
for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The preparer of the Return shall
permit Axiom to review and comment on any such Returns described
in the preceding sentence prior to filing and shall make such
Returns available to Axiom at least 15 days prior to their
respective due dates. Shareholders shall pay all Taxes due with
respect to the filing of such Returns.
(b) Axiom or Acquisition shall prepare, or
cause to be prepared, and file, or cause to be filed, all Returns
for IDT for all periods beginning prior to the Closing Date and
ending after the Closing Date which are filed after the Closing
Date. The preparer of the Return shall permit the Shareholders
to review and comment on any such Returns described in the
preceding sentence prior to filing and shall make such Returns
available to the Shareholders at least 15 days prior to their
respective due dates. At such time, Axiom or Acquisition shall
also provide to Shareholders an estimate of the amount of the
reimbursement discussed in the following sentence. Shareholders
shall reimburse Axiom or Acquisition for Taxes of IDT with
respect to such periods for which they are liable hereunder,
within 15 days after payment by Axiom or Acquisition of such
Taxes, to the extent such Taxes are not reflected in the reserve
for tax liability shown on the face of the Closing Balance Sheet.
(c) The Shareholders, Axiom and Acquisition
agree to furnish or cause to be furnished to each other, upon
request, and each at their own expense, as promptly as
practicable, such information (including access to books and
records) and assistance as is reasonably necessary for the filing
of any Return, for the preparation for any audit, and for the
prosecution or defense of any claim, suit or proceeding relating
to any adjustment or proposed adjustment with respect to Taxes,
including providing additional information and explanations of
any material provided hereunder. With respect to the books and
records referred to in the preceding sentence, each of the
Shareholders, Axiom and Acquisition agrees to retain any such
books and records within its possession until six (6) months
after the expiration of the applicable statute of limitations.
After such time, the Shareholders, Axiom or Acquisition, as the
case may be, may dispose of such books and records, provided that
prior to such disposition, the Shareholders, Axiom or
Acquisition, as the case may be, shall provide the other with a
reasonable opportunity to take possession of such books and
records, at no cost or expense.
8.5 Agent of IDT and Shareholders. Michael L. Moore
(the "Shareholders' Agent") shall be the agent and attorney-in-fact for IDT and
each of the Shareholders, and any notice
delivered pursuant to this Agreement shall be deemed to be given
to all such parties when such notice is given to the
Shareholders' Agent. The Shareholders' Agent shall be entitled
to act for and bind and receive all payments on behalf of all
such parties for all purposes of this Agreement, and to enter
into amendments and supplements to this Agreement, and to grant
waivers, consents and approvals in connection with this
Agreement, as the Shareholders' Agent shall deem desirable, and
all such parties hereby appoint the Shareholders' Agent as their
agent and attorney-in-fact for all such purposes. All other
parties to this Agreement shall be entitled to rely upon such
appointment for all such purposes. If the Shareholders' Agent
becomes unavailable or refuses to continue to serve in such
capacity, Frances Penfold shall succeed Michael L. Moore upon
written notice thereof to Axiom and Frances Penfold shall
thereafter have the same rights and powers.
8.6 Financial Statements. As soon as available, but
in no case later than forty-five (45) days after the Closing
Date, the Shareholders shall provide to Axiom financial
statements for the periods as to which financial statements are
required pursuant to a Form 8-K to be filed by Axiom with the
Securities and Exchange Commission (the "SEC") describing the
transaction to be consummated pursuant to this Agreement. Such
financial statements shall conform with the applicable
requirements of Regulation S-X under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and shall therefore be
suitable for inclusion in such Form 8-K (and meet all of the
requirements of such form). Such financial statement shall be
provided at the expense of the Shareholders, to the extent such
expense is not accrued as part of the calculation of Closing Date
Book Value; provided, however, that the Shareholders shall not be
obligated to pay, in the aggregate, more than Three Thousand
Dollars ($3,000) to obtain such financial statements.
8.7 Publicity. Upon execution of this Agreement,
Axiom shall prepare a press release regarding the execution of
this Agreement and the transactions contemplated hereby. Prior
to issuing such press release to the public, Axiom shall provide
to IDT the opportunity to review and comment on such press
release.
8.8 Accounts Receivable of IDT. Subsequent to
Closing, Axiom shall use its reasonable best efforts, in the
ordinary course of its business, to collect the accounts
receivable of IDT and the Subsidiaries as of the Closing Date,
and to make reasonable accommodations to the obligors of such
accounts receivable in connection therewith.
8.9 Consents of Third Parties. IDT, the Subsidiaries
and the Shareholders shall use their best efforts to obtain any
consents, approvals or waivers from third parties, if any,
necessary to consummate the transactions contemplated by this
Agreement.
8.10 Assumption of Tax Liability; Filing of
Certificate of Merger. No later than the Closing Date, IDT and
Michael L. Moore shall mail to the Secretary of State of
California, Office of Legal Review, an Assumption of Tax
Liability/Request for Tax Clearance Certificate Supplemental
Information Form 3555, duly executed by IDT, along with a related
Individual Assumption of Tax Liability and Financial Statement
for Individual Assumer duly completed and executed by Michael L.
Moore. Each of such documents (collectively, the "Tax Clearance
Documents") shall be in form provided at Closing to Axiom. Upon
receipt of a tax clearance certificate for IDT from the State of
California, the Shareholders, as necessary, will execute, and
Axiom shall cause to be filed, the Certificate of Merger with the
Secretary of State of California.
ARTICLE IX
INDEMNIFICATION
9.1 Statements as Representations. All
representations contained in this Agreement shall be deemed a
representation and warranty as such terms are used in this
Article IX.
9.2 General Indemnity.
(a) Michael Moore, Frances Penfold and Dale
Spencer shall jointly and severally indemnify and hold harmless
Axiom and its Affiliates (the "Buyer Group"), and all other
Shareholders shall indemnify and hold harmless Axiom and its
Affiliates (but only to the extent of each such other
Shareholder's pro rata portion of the Merger Consideration),
from, against and in respect of any and all damages, claims,
liabilities or expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees (collectively,
"Damages"), resulting from, incurred in connection with or
arising out of or otherwise in respect of (i) the breach of any
representation or warranty of IDT or Shareholders for such period
of survival as provided in Article VII; (ii) the nonfulfillment
of any unwaived covenant or agreement on the part of IDT or
Shareholders set forth in this Agreement or in any agreement or
certificate executed and delivered by IDT or Shareholders
pursuant to this Agreement, (iii) all liabilities for Taxes of
IDT, Shareholders or any of their respective Affiliates,
including all taxes related to the transactions contemplated
hereby and payments to Shareholders of the amount of any refund
of Taxes pursuant to Section 4.2, for any period ending on or
prior to the Closing Date, including Bulk Sales Tax, if any, and
all Taxes for periods that include, and end after, the Closing
Date, including Bulk Sales Tax, if any (except to the extent that
any such tax liabilities are accrued on the Closing Balance
Sheet); provided, however, that the foregoing shall be subject to
adjustment in accordance with Schedule 9.2; (iv) any and all
liabilities, obligations, or responsibilities of IDT,
Shareholders or any of their respective Affiliates with respect
to any employee of IDT or a Subsidiary, or any spouse, dependent
or family member of any employee of IDT or a Subsidiary,
resulting from, relating to or arising out of any action or
failure to act which occurred on or prior to the Closing Date,
including, without limitation, obligations, liabilities and
responsibilities with respect to any (1) discrimination or civil
rights claims, wrongful discharge claims, unfair labor practice
charges or other charges, claims, complaints or grievances
relating to labor relations, employment, employment contracts or
contracts for the provision of services, with IDT, any
Shareholder or any Affiliate of IDT; (2) claims or actions under
federal, state or local WARN Acts for improper notification of a
plant closing or mass layoff; (3) accidents, events or other
occurrences compensable under any applicable workers'
compensation or similar state or federal law, except to the
limited extent that such obligations, liabilities or
responsibilities are required by applicable law to be assumed by
Axiom; and (4) pension plan, severance plan or policy,
termination or indemnity payment, salary continuation agreement
or practice, special bonuses or any similar costs or obligations
(except to the extent that any such liabilities are accrued on
the Closing Balance Sheet); (v) all liabilities of IDT (except to
the extent that any such liabilities are accrued on the Closing
Balance Sheet), incurred on or prior to the Closing Date,
including without limitation any liabilities with respect to any
Environmental Claim or Environmental Laws and claims of
infringement of Intellectual Property rights of others with
respect to actions or failures to act prior to the Closing; (vi)
any amount by which the amount of uncollected accounts receivable
of IDT and the Subsidiaries that are on the Closing Balance Sheet
and remain outstanding as of December 31, 1999 exceeds the
allowance for such uncollected accounts receivable reflected on
the Closing Balance Sheet; provided, that to the extent that,
subsequent to payment by the Shareholders to Axiom in respect of
the indemnity set forth in this Section 9.2(a)(vi), Axiom
collects any accounts receivable with respect to which such
payment was made, Axiom shall reimburse the Shareholders for the
amount of any such payment, less any costs or fees, including
attorneys' fees, incurred by Axiom in the collection of such
accounts receivable; (vii) all litigation resulting from,
incurred in connection with or arising out of or otherwise in
respect of the conduct of the Business on or prior to the
Closing; (viii) any and all fees and expenses and other
transaction costs, including, without limitation, attorneys'
fees, financial advisors' fees or accountants' fees incurred by
any Shareholder, IDT or any of their respective Affiliates, in
each case in connection with this Agreement or the transactions
contemplated by this Agreement (except to the extent that any
such tax liabilities are accrued on the Closing Balance Sheet),
and (ix) any and all actions, suits, claims, proceedings,
investigations, audits, examinations, demands, assessments,
fines, judgments, settlements, interest, penalties, costs,
remedial actions and other expenses (collectively, "Actions")
pertaining to or arising out of any of the foregoing in this
Section 9.2(a). The indemnities set forth in clauses (iii)
through (ix) of the preceding sentence shall be referred to as
the "Specific Indemnities." IDT and Shareholders hereby
acknowledge that the Specific Indemnities are in addition to, and
in no way in limitation of, any other obligations of indemnity
set forth herein.
(b) The Buyer Group shall be entitled to
indemnification only if the aggregate of all damages, losses,
obligations, liabilities, claims, actions, or causes of action
arising from or in connection with events specified in Section
9.2(a) of this Agreement exceed Twenty Thousand Dollars ($20,000)
(but if the aggregate amount of such damages, losses,
obligations, liabilities, claims, actions, or causes of action
exceeds Twenty Thousand Dollars ($20,000), the Shareholders shall
be liable for such entire amount); provided, however, that the
aggregate obligation of the Shareholders in respect of the
indemnity agreements contained in Sections 9.2(a)(i), (ii), (iv),
(v), (vi), (vii) and (viii) of this Agreement, shall not exceed
the Consideration Amount, except to the extent that IDT or the
Shareholders have knowledge of any such matter on the Closing
Date, and such matter has not been disclosed in this Agreement or
on any schedule hereto.
(c) Axiom shall indemnify and hold harmless
IDT and Shareholders from, against and in respect of any and all
Damages resulting from, incurred in connection with or arising
out of or otherwise in respect of (i) the breach of any
representation or warranty of Axiom for such period of survival
as provided in Article VII, (ii) the nonfulfillment of any
unwaived covenant or agreement on the part of Axiom set forth in
this Agreement or in any agreement or certificate executed and
delivered by Axiom pursuant to this Agreement, (iii) any and all
fees and expenses, including, without limitation, attorneys'
fees, financial advisors' fees, accountants' fees and brokers' or
finders' fees incurred by Axiom in connection with this Agreement
or the transactions contemplated by this Agreement, (iv) the
conduct of the Business by Axiom subsequent to the Closing Date
and (v) any and all Actions pertaining to or arising out of any
of the foregoing in this Section 9.2(c).
(d) Shareholders shall be entitled to
indemnification only if the aggregate amount of all damages,
losses, obligations, liabilities, claims, actions, or causes of
action arising from or in connection with events specified in
section 9.2(c) of this Agreement exceeds Twenty Thousand Dollars
($20,000) (but if the aggregate amount of such damages, losses,
obligations, liabilities, claims, actions, or causes of action
exceeds Twenty Thousand Dollars ($20,000), Axiom shall be liable
for such entire amount).
9.3 Interest on Indemnification Obligations. In the
case of any payments in respect of the indemnification
obligations set forth in Section 9.2, interest shall accrue on
the amount of such payment from the date payment is made by the
Person seeking indemnification until the same is reimbursed at a
rate per annum equal to the prime rate, as quoted from time to
time in the Wall Street Journal, plus two percent (2%).
9.4 Indemnification Procedure. All claims for
indemnification by a Person entitled to be indemnified hereunder
(an "Indemnitee") by another Person (an "Indemnitor"), shall be
asserted and resolved as follows:
(a) In the event that any claim or demand
for which an Indemnitee may claim indemnity is asserted against
or sought to be collected from an Indemnitee by a third party,
the Indemnitee shall notify the Indemnitor within fifteen (15)
days following the receipt by the Indemnitee of such claim or
demand, specifying the nature of such claim or demand and the
amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final
amount of such claim and demand) (the "Claim Notice"); provided,
however, that the failure so to notify the Indemnitor will not
relieve the Indemnitor from any liability it may have to the
Indemnitee under this Article IX unless, and only to the extent
that, such failure so to notify results in the loss of
substantive rights or defenses.
(b) An Indemnitor shall have thirty (30)
days from the date on which the Claim Notice is duly given (the
"Notice Period") to notify an Indemnitee (i) whether or not it
disputes the liability of the Indemnitor to the Indemnitee
hereunder with respect to such claim or demand and (ii) whether
or not the Indemnitor desires, at its sole cost and expense, to
defend the Indemnitee against such claim or demand; provided,
however, that the Indemnitor shall not be entitled to assume the
defense of any proceeding pursuant to Section 9.4(b)(ii) unless
it has accepted and assumed in writing the obligation to
indemnify the Indemnitee with respect to Damages arising from or
relating to such claim or demand. If an Indemnitor does not
notify an Indemnitee within the Notice Period that it disputes
its liability to the Indemnitee, the Indemnitor shall be liable
for the amount of any Damages related thereto.
(c) In the event an Indemnitor notifies an
Indemnitee within the Notice Period that it desires to defend the
Indemnitee against such claim or demand from the Indemnitee, then
except as hereinafter provided the Indemnitor shall defend, at
its sole cost and expense, the Indemnitee by appropriate
proceedings, shall use its best efforts to settle or prosecute
such proceedings to a final conclusion in such a manner as to
avoid any risk of the Indemnitee becoming subject to any
injunctive or other equitable order for relief or to liability
for any other matter, and shall control the conduct of such
defense; provided, however, that the Indemnitor shall not,
without the prior written consent of the Indemnitee, consent to
the entry of any judgment against the Indemnitee or enter into
any settlement or compromise which does not include, as an
unconditional term thereof, the giving by the claimant or
plaintiff to the Indemnitee of a release, in form and substance
reasonably satisfactory to the Indemnitee, from all liability in
respect of such claim or litigation. If the defendants in any
such claim or demand include both the Indemnitor and the
Indemnitee, and the Indemnitee, following consultation with and
notice to the Indemnitor, shall have received the opinion of
outside counsel, reasonably acceptable to the Indemnitor, stating
that there may be legal defenses or rights available to the
Indemnitee which are different from, in actual or potential
conflict with, or additional to those available to the
Indemnitor, the Indemnitee shall have the right to select one law
firm to act at the Indemnitor's expense as separate counsel, on
behalf of the Indemnitee. In addition, if the Indemnitee desires
to participate in, but not control, any other defense or
settlement, it may do so at its sole cost and expense. So long
as the Indemnitor is defending in good faith any such claim or
demand, the Indemnitee shall not settle such claim or demand
without the consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed.
(d) In the event an Indemnitee should have a
claim against an Indemnitor hereunder which does not involve a
claim or demand being asserted against or sought to be collected
from the Indemnitee by a third party, the Indemnitee shall
promptly send a Claim Notice with respect to such claim to the
Indemnitor; provided, however, that the failure so to notify the
Indemnitor will not relieve the Indemnitor from any liability it
may have to the Indemnitee under this Article IX unless, and only
to the extent that, such failure so to notify results in the loss
of substantive rights or defenses. If the Indemnitor does not
notify the Indemnitee within the Notice Period that it disputes
such claim, the Indemnitor shall be liable for the amount of any
Damages related thereto.
9.5 Remedies Cumulative. The remedies provided in
this Article IX are not exclusive and shall not preclude
assertion by any party hereto of any other rights or the seeking
of any other remedies against any party hereto.
9.6 Reduction of Consideration. Any amount paid to
Buyer Group by Shareholders with respect to the above indemnity
shall be treated as a reduction of the consideration paid by
Axiom and Acquisition hereunder.
ARTICLE X
DELIVERIES AT CLOSING
10.1 Deliveries by IDT and Shareholders at Closing.
At Closing, IDT or Shareholders will deliver or cause to be
delivered to Axiom the following: (i) all agreements,
understandings, assignments, contracts, items and documents
referred to in section 12.2(g); (ii) copies of the minutes of the
Board of Directors and shareholders of IDT authorizing the
execution and performance of this Agreement and all ancillary
agreements, certified by IDT's President and Secretary; (iii)
executed copies of the Certificate of Merger; (iv) a certificate,
dated the Closing Date, executed by Michael L. Moore, Frances
Penfold, Dale A. Spencer and an authorized officer of IDT, to the
effect that the conditions set forth in Sections 12.2(a) and
12.2(b) hereof have been satisfied; (v) the Employment Contracts,
executed by each of the persons listed on Schedule 12.2(k)(1);
(vi) the Escrow Agreement; (vii) the financial statements
required by Section 5.7 hereof; (viii) the Tax Clearance
Documents and (ix) all such further documents, instruments and
agreements which may be reasonably requested by Axiom or its
counsel in order to more effectively transfer title to the Assets
to Axiom, or to effectuate and carry out any provision of this
Agreement.
10.2 Deliveries by Axiom at Closing. At the Closing,
Axiom will deliver or cause to be delivered to IDT and
Shareholders the following: (i) the Consideration, minus the
Escrow Amount; (ii) a certificate evidencing the Merger Shares;
(iii) executed copies of the Certificate of Merger; (iv) a
certificate of the Secretary or Assistant Secretary of Axiom,
dated the Closing Date, certifying that all necessary action has
been taken to authorize the consummation by Axiom of the
transactions contemplated by this Agreement; (v) a certificate,
dated the Closing Date, executed by an authorized officer of
Axiom, to the effect that the conditions set forth in Sections
12.3(a) and 12.3(b) hereof have been satisfied; (vi) the
Employment Contracts, for each of the persons listed on Schedule
12.2(j)(1), executed by an authorized officer of Axiom; and (vii)
all such further documents, instruments and agreements which may
be reasonably requested by IDT, Shareholders or their counsel in
order to effectuate and carry out the provisions of this
Agreement.
10.3 "Nonforeign Certifications". IDT and
Shareholders (the "Affiants") shall execute and deliver to Axiom
and Acquisition, on or prior to the Closing Date, "Nonforeign
Certifications" meeting the requirements of Section 1445(b) (2)
of the Code and Treasury Regulation $1.1445-2(b) (2) and deliver
said Nonforeign Certifications to Axiom and Acquisition at
Closing. In the event Affiants do not execute and deliver such
"Nonforeign Certifications" or in the event Axiom nor
Acquisition is permitted to rely on any such "Nonforeign
Certification" and either is required to withhold a portion of
the purchase price under Section 1445(a) of the Code, then
notwithstanding any other provision hereof, Acquisition Axiom, as
appropriate shall deduct and withhold any amounts required to be
withheld by such Section or such lesser amount as may be agreed
to by the Internal Revenue Service.
10.4 Liquidation of FISC. IDT's subsidiary,
Innovative Data Technology International, qualifies as a "FISC"
as defined in Section 922 of the Code. Prior to Closing, IDT
will cause Innovative Data Technology International to be
liquidated into IDT.
ARTICLE XI
CONDUCT OF THE BUSINESS PENDING CLOSING
Between the date hereof and the Closing hereunder IDT
will, and Shareholders will cause IDT to:
(a) Not take or suffer or permit any action
which would render untrue any of the representations or
warranties of Shareholders and IDT herein contained, and not omit
to take any action, the omission of which would render untrue any
such representation or warranty;
(b) Conduct the Business in a good and
diligent manner in the ordinary and usual course;
(c) Not enter into any contract, agreement,
commitment or arrangement relating to the Business with any party
that would obligate IDT in an amount greater than, in the
aggregate, Fifty Thousand Dollars ($50,000), other than contracts
for the sale of merchandise and contracts for the purchase of
materials and supplies in the ordinary and usual course of
business, and not amend, modify or terminate any Contracts
without the prior written consent of Axiom;
(d) Use its best efforts to preserve IDT's
organization intact as it relates to the Business, except as may
be required to comply with the terms hereof, to keep available
the services of its employees and sales representatives, and to
preserve its relationships with customers, suppliers and others
with whom it deals;
(e) Not reveal, orally or in writing, to any
party, other than Axiom and Axiom's authorized agents, any of the
business procedures and practices followed by IDT in the conduct
of the Business, or any technology used in the processing,
evaluation or manufacture of any of the products of the Business;
(f) Maintain in full force and effect all of
the insurance policies listed on Schedule 5.8 and make no change
in any insurance coverage without the prior written consent of
Axiom;
(g) Keep the premises occupied by IDT and
all of IDT's equipment and other tangible personal property in
good order and repair and perform all necessary repairs and
maintenance in accordance with past practices, normal wear and
tear excepted;
(h) Continue to maintain all of IDT's usual
business books and records in accordance with its past practices
and not change its method of accounting;
(i) Not issue any capital stock or any
option, warrant or right relating thereto (except for the options
to purchase shares of the IDT Common Stock, as referenced in
Section 3.1);
(j) Not waive any right or cancel any claim
relating to the Business other than in the ordinary course of
business;
(k) Maintain IDT's corporate existence and
not merge or consolidate with any other entity; and
(l) Except as may be required to comply with
the terms hereof, comply with all provisions of all Contracts and
all applicable laws, rules and regulations.
ARTICLE XII
CONDITIONS TO CLOSING
12.1 Conditions to Each Party's Obligations. The
respective obligations of each party to consummate the
transactions contemplated hereby shall be subject to the
fulfillment, at or prior to the Closing Date, of the condition
that no preliminary or permanent injunction or other order,
decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated
or enacted by any Governmental Entity shall be in effect which
would prevent the consummation of the transactions contemplated
hereby, and no action, suit, claim or proceeding brought by a
governmental authority before any domestic court, governmental
agency, commission or administrative or regulatory authority
shall have been commenced and be pending which seeks to restrain,
prevent or materially delay or restructure the transactions
contemplated hereby or which otherwise questions the validity or
legality of any such transactions;
12.2 Conditions to Obligations of Axiom. The
obligations of Axiom to consummate the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions, the fulfillment of any
of which may be waived by Axiom in its sole discretion:
(a) each of Shareholders and IDT has
performed or complied in all material respects with all
obligations and agreements required to be performed or complied
with by them hereunder at or prior to the Closing Date;
(b) each of the representations and
warranties of Shareholders and of IDT contained in this Agreement
is true and correct in all material respects;
(c) no litigation, governmental action or
other proceedings involving or potentially involving a liability,
obligation or loss on the part of IDT aggregating Twenty Thousand
Dollars ($20,000) or more, or which by reason of the nature of
the relief sought might have a Material Adverse Effect, are
threatened in good faith or commenced against either IDT or any
Subsidiary with respect to any matter, or against any Person with
respect to the consummation of the transactions provided for
herein;
(d) no damage in excess of Twenty Thousand
Dollars ($20,000) in the aggregate shall have occurred to the
Assets and no Material Adverse Effect shall have occurred with
respect to the Business or the Assets;
(e) all documents required to be delivered
by IDT and Shareholders at or prior to Closing have been
delivered or tendered;
(f) all agreements, arrangements,
understandings and contracts identified on Schedule 5.13; items
of Intellectual Property that require assignment to pass title or
license agreements identified on Schedule 5.12(b); and all other
agreements, contracts, documents or other instruments that must
be assigned to Axiom in order to consummate the transactions
contemplated by this Agreement have been assigned to Axiom and
are, with respect to Axiom, be legal, valid, binding, enforceable
and in full force and effect on identical terms;
(g) the Shareholders and IDT have executed
the Escrow Agreement;
(h) the security interest of Dale A.
Spencer, referenced in Section 5.12(a), will be released at or
prior to Closing;
(i) the Options referenced in Section 3.1
have been exercised by the holders thereof in accordance with
their terms;
(j) the persons listed on Schedule
12.2(j)(1) have executed employment contracts (collectively, the
"Employment Contracts"), in the forms attached as annexes to
Schedule 12.2(j)(1), which forms provide for the grant of options
to the person listed on Schedule 12.2(j)(1) in the amounts set
forth on Schedule 12.2(j)(2); and
(k) the Tax Clearance Documents shall have been
filed with the California Secretary of State.
12.3 Conditions to Obligations of Shareholders and
IDT. The obligations of Shareholders and IDT to consummate the
transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Closing Date of the following
conditions:
(a) Axiom has performed or complied in all
material respects with all obligations and agreements required to
be performed or complied with by it hereunder at or prior to the
Closing Date;
(b) each of the representations and
warranties of Axiom contained in this Agreement is true and
correct in all material respects;
(c) Axiom has executed each of the
Employment Contracts;
(d) Axiom has executed the Escrow Agreement;
and
(e) all Consideration and documents required
to be delivered to Shareholders by Axiom have been delivered or
shall be tendered at the time and place of Closing.
ARTICLE XIII
MISCELLANEOUS
13.1 Certain Definitions.
For purposes of this Agreement, the following terms
shall have the meanings specified in this Section 10.1:
"Affiliate" means, with respect to any Person, any
other Person controlling, controlled by or under common control
with such Person.
"Business Day" means any day of the year on which
banking institutions in Trenton, New Jersey, are open to the
public for conducting business and are not required or authorized
to close.
"Closing Date" means May 15, 1998 or such other date
as may be mutually agreed to in writing by the parties; provided,
however, that in no event shall the Closing Date be later than
June 1, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Contract" means any oral or written contract,
agreement, indenture, note, bond, loan, instrument, lease,
commitment or other arrangement or agreement.
"Escrow Account" means an account established pursuant
to and governed by the Escrow Agreement into which Axiom shall
deposit the Escrow Amount.
"Escrow Agreement" means an Escrow Agreement, in the
form attached hereto as Exhibit B, among Axiom, IDT, the
Shareholders and an escrow agent reasonably satisfactory to
Axiom, IDT and the Shareholders (the "Escrow Agent"). The Escrow
Agreement shall be for a term concluding on December 31, 1999
(plus any additional period required to resolve Claims made prior
to the end of such period) and shall provide that: (a) the
Romania Escrow Shares shall be released in accordance with
Section 4.5 hereof; (b) on the first anniversary of the Closing
Date, Escrow Agent shall deliver to the Shareholders fifty
percent (50%) of the amount of the then-existing balance of the
Escrow Account, if any, for which no Claim is then pending; and
(c) on December 31, 1999, Escrow Agent shall deliver to the
Shareholders any remaining balance of the Escrow Account for
which a Claim is not then pending.
"Escrow Amount" means Three Hundred Twenty Thousand
Dollars ($320,000), of which One Hundred Twenty Thousand Dollars
($120,000) shall be designated the "Adjustment Escrow Amount."
"Escrow Shares" means Three Hundred Seven Thousand Five
Hundred (307,500) Axiom Shares, of which One Hundred Eighty-Seven
Thousand Five Hundred (187,500) shall be designated the "Romania
Escrow Shares."
"GAAP" means United States generally accepted
accounting principles as of the date hereof.
"Governmental Body" means any government or
governmental or regulatory body thereof, or political subdivision
thereof, whether federal, state, local or foreign, or any agency,
instrumentality or authority thereof, or any court or arbitrator
(public or private).
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule,
regulation or other requirement, including, without limitation,
any Environmental Law and the Foreign Corrupt Practices Act.
"Legal Proceeding" means any judicial, administrative
or arbitral actions, suits, proceedings (public or private),
claims or governmental proceedings.
"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first
refusal, easement, servitude, transfer restriction under any
shareholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.
"Material Adverse Change" means any material adverse
change in the Business, results of operations, prospects or
condition (financial or otherwise) of IDT or a Subsidiary.
"Order" means any order, injunction, judgment, decree,
ruling, writ, assessment or arbitration award.
"OSHA" means the Occupational Safety and Health Act of
1970, as amended, and any other Federal, state or local statute,
law, ordinance, code, rule or regulation or judicial or
administrative order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee
safety and/or health, as now or at any time hereafter in effect.
"Patents" means any and all United States or foreign
patents owned by IDT, a Subsidiary or any Shareholder.
"Permits" means any approvals, authorizations,
consents, licenses, permits or certificates, including without
limitation any Permits required to handle Hazardous Material or
otherwise required under any Environmental Law.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, Governmental Body or
other entity.
"Securities Reports" means, collectively, the Annual
Report on Form 10-K of Axiom for the fiscal year ended September
30, 1997, as amended, the Quarterly Reports on Form 10-Q of Axiom
for the periods ending December 31, 1997 and March 31, 1998, the
Proxy Statement of Axiom filed with the SEC on January 27, 1998
and the Registration Statement of Axiom on Form S-1, as amended.
"Subsidiary" of a Person means any other Person of
which a majority of the outstanding voting securities or other
voting equity interests are owned, directly or indirectly, by
such Person.
13.2 Confidentiality. Each Shareholder agrees to
maintain as confidential all non-public information received from
Axiom and further agrees not to trade in Axiom's securities on
the basis of any such information.
13.3 Expenses. Except as otherwise provided in this
Agreement, the parties shall each bear their own expenses
incurred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument
contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.
13.4 Termination. This Agreement may be terminated by
written agreement of the parties hereto and in such event this
Agreement shall have no further force or effect and there shall
be no liability to the parties hereto. Any party shall have the
right to terminate this Agreement if Closing does not occur
before June 1, 1998.
13.5 Further Assurances. Each of the Shareholders,
Axiom and Acquisition agrees to execute and deliver such other
documents or agreements and to take such other action as may be
reasonably necessary or desirable, without payment of further
consideration, for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
13.6 Arbitration. Any controversy or claim arising out
of or relating to this Agreement or the breach of any
representation, warranty, covenant or agreement contained herein,
shall be decided by arbitration in Philadelphia, Pennsylvania, in
accordance with the Commercial Arbitration Rules ("C.A.R.") of
the American Arbitration Association ("A.A.A.") then obtaining,
unless the parties otherwise mutually agree in writing. The
dispute shall be decided by a panel of three (3) arbitrators
(each an "Arbitrator" and, collectively, the "Arbitrators")
chosen by Axiom and the Shareholders in accordance with the
C.A.R. of the A.A.A. The decision and the award of damages
rendered by a majority of the Arbitrators shall be final and
binding and judgment may be entered upon it in any court having
jurisdiction thereof.
(a) Timing of Arbitration and Decision. The
arbitration shall be held as promptly as practicable after actual
receipt of notice that the other party has filed a notice for
arbitration with the A.A.A. (the "Arbitration Notice") on such a
date, and at such a place and time in Philadelphia, Pennsylvania,
convenient to the parties and to the Arbitrators, except that if
the parties cannot agree, the Arbitrators shall decide such date
promptly and any award of damages shall be made, unless otherwise
mutually agreed by the parties in writing, no later than fifteen
(15) days from the date of Closing of the hearings or if oral
hearing shave been waived, from the date of transmitting the
final statements and proofs to the Arbitrators.
(b) Out-of-Pocket Expenses. After the
Arbitrators have rendered their decision and made their award,
either party may, within seven (7) business days from the date of
the Arbitrators' decision, request the same Arbitrators to assess
against the other party any or all of the out-of-pocket expenses
(including reasonable attorneys', accountants', and other
professionals' fees) incurred by it in connection with proving or
disproving, as the case may be, the validity of the controversy
or claim. All claims for out-of-pocket expenses shall be decided
in accordance with the Expedited Procedures of the C.A.R. as then
in effect.
(c) Pre-Hearing Discovery. Axiom and the
Shareholders agree to permit pre-hearing discovery as follows:
(i) Discovery, in the form of document
production, oral deposition and interrogatory concerning the
amount and method of calculation of Claims, pursuant to the
Federal Rules of Civil Procedure, subject to such limitations and
modifications as may be imposed by the Arbitrators in their sole
discretion, should commence promptly upon receipt of Arbitration
Notice. The parties shall exchange written requests for
production of documents within fifteen (15) days after the
arbitration Notice and requested documents shall be produced for
inspection within fifteen (15) days thereafter. All written
documents exchanged in response to written requests for
production of documents shall be exchanged as close to
simultaneously as is possible and if a document is not being
produced, such document shall be listed on a non-produced
document list provided to the other party at the time of document
production. Each Party shall have the right to object to
document requests in accordance with the Federal Rules of Civil
Procedure;
(ii) The parties shall exchange lists
of proposed oral deposition witnesses on or before forty-five
(45) days after receipt of the Arbitration Notice. Counsel for
the parties will meed promptly thereafter to agree on a schedule
of oral depositions to be taken as promptly as practicable. All
oral depositions shall be conducted in accordance with the
Federal Rules of Civil Procedure. The testimony of oral
deposition witnesses shall be given under oath;
(iii) The parties will exchange copies
of all exhibits that the Parties propose to use at the
arbitration and the curriculum vitae of any expert to testify at
the arbitration hearing on or before fifteen (15) days prior to
the date scheduled for the arbitration hearing; and
(iv) Each party shall have the right to
petition the Arbitrators for modification of the procedures set
forth herein and, in such event, the procedure shall be tolled
pending the decision of the Arbitrators.
13.7 Entire Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits hereto), the
Seller Documents and the Axiom Documents represent the entire
understanding and agreement between the parties hereto with
respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof or thereof can
be waived, only by written instrument making specific reference
to this Agreement or specific Seller Document or Axiom Document
signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought. No
action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action
of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any Party hereto of a
breach of any provision of this Agreement or specific Seller
Document or Axiom Document shall not operate or be construed as a
further or continuing waiver of such breach or as a waiver of any
other or subsequent breach. No failure on the part of any party
to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of such right, power or remedy by such
party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other
remedies provided by law.
13.8 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth
of Pennsylvania without giving effect to principles of conflicts
of law.
13.9 Table of Contents and Headings. The table of
contents and section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction
or interpretation of this Agreement.
13.10 Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed
given when delivered personally, sent by nationally recognized
overnight courier or mailed by certified mail, return receipt
requested, to the parties (and shall also be transmitted by
facsimile to the Persons receiving copies thereof) at the
following addresses (or to such other address as a party may have
specified by notice given to the other party pursuant to this
provision):
If to Axiom or Acquisition:
Axiom Inc.
4000 Midlantic Drive
Mt. Laurel, NJ 08054
Attention: Andrew P. Maunder
Telephone No: (609) 866-1000
Telecopy No: (609) 866-2439
with a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor, Packard Building
111 South Fifteenth Street
Philadelphia, Pennsylvania 19102
Attention: Jason M. Shargel, Esquire
Telephone No: (215) 977-2216
Telecopy No: (215) 977-2334
If to IDT or a Shareholder:
Innovative Data Technology
15092 Avenue of Science
San Diego, California 92128
Attention: Michael L. Moore, President
Telephone No: (619) 676-1777
Telecopy No: (619) 676-0575
with copies to:
Lautanen & Stanley
4225 Executive Square
Suite 525
La Jolla, California 92037
Attention: W. Alan Lautanen, Esquire
Telephone No: (619) 554-1092
Telecopy No: (619) 554-1093
and
Luce, Forward, Hamilton & Scripps
600 W. Broadway, Ste. 2600
San Diego, California 92101
Attention: Robert G. Copeland
Telephone No: (619) 699-2597
Telecopy No: (619) 236-8311
13.11 Severability. If any provision of this
Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
13.12 Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all
of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
AXIOM INC.
By:/s/ Andrew P. Maunder
---------------------
Andrew P. Maunder
President
AV TECHNOLOGY, INC.
By:/s/ Andrew P. Maunder
---------------------
Andrew P. Maunder
President
INNOVATIVE DATA TECHNOLOGY
By:/s/ Michael L. Moore
---------------------
Michael L. Moore
President
/s/ Michael L. Moore
---------------------------
MICHAEL L. MOORE
/s/ Frances Penfold
---------------------------
FRANCES PENFOLD
/s/ Dale A. Spencer
---------------------------
DALE A. SPENCER
/s/ John H. Hood, Trustee
of Roy W. Hood Trust
---------------------------
THE ESTATE OF ROY W. HOOD,
by John H. Hood, Executor
/s/ Dave V. Hardman
---------------------------
DAVE V. HARDMAN
/s/ John Lesinski
---------------------------
JOHN LESINSKI<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits
A Certificate of Merger
B Escrow Agreement
C Unanimous Written Consent of the Shareholders
Schedules
3.1 Allocation of Consideration Among Shareholders
5.1 Foreign Qualifications
5.3 Subsidiaries and Joint Ventures
5.4 Conflicts; Consents (IDT)
5.5 Directors; Officers; Bank Accounts
5.6 Stock Ownership; Options
5.7 Financial Statements
5.8 Liabilities
5.9 Actions Since Balance Sheet Date
5.10(d) Taxable Income or Gain
5.10(f) Returns
5.11 Leases
5.12(a) Personal Property
5.12(b) Intellectual Property
5.13 Material Contracts
5.14 Labor and Employment Matters
5.15 Environmental Matters
5.16 Litigation (IDT)
5.17 Compliance with Laws
5.18 Insurance
5.19 Related Party Transactions
5.20 Year 2000
5.23 Shareholders Representations
6.3 Conflicts; Consents (Axiom)
6.8 Litigation (Axiom)
12.2 Employment of Certain Shareholders by Axiom
