SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Natural MicroSystems Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation or Organization)
0-23282 04-2814586
(Commission File Number) (I.R.S. Employer Identification No.)
8 Erie Rd., Natick, Massachusetts 01760
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508)650-1300
Item 2. Acquisition or Disposition of Assets.
On June 14, 1996, the Registrant acquired two Illinois
corporations, Tek-Nique, Inc. ("Tek") and PSR Systems, Inc.
("PSR"). Tek was acquired by merger for $3.55 million in
cash plus up to an additional $2.5 million in cash to be
paid at later dates subject to certain performance
conditions. PSR was acquired for 41,479 shares of the
Registrant's common stock plus up to an additional $500,000
in value of such stock at a later date subject to certain
performance conditions. Tek and PSR were under common
ownership, consisting principally of Herbert L. Pavey and
Julius Rothschild, the founders, and also including certain
other employees. Tek and PSR have operated a single
business ("TEKnique") of designing, marketing and
maintaining certain networking software programs, which
business the Registrant intends to continue.
Item 7. Financial Statements and Exhibits.
(a) Financial Statement of Business Acquired.
The combined financial statements of TEKnique for the years
ended January 31, 1996 and 1996 and the three months ended
April 30, 1996 are not available as of the date hereof and
will be filed within 60 days of the date of this Form 8-K.
(b) Pro Forma Financial Information
As the combined financial statements of TEKnique for the
years ended January 31, 1995 and 1996 as of the date hereof
and the three months ended April 30, 1996 are not available,
the pro forma combined financial statements of the
Registrant and TEKnique are not available, but will also be
filed within 60 days of the date of this Form 8-K.
(c) Exhibits
Exhibit No. Title
2.1* Merger Agreement and Plan of Reorganization
dated June 14, 1996 among
Natural MicroSystems Corporation, NMS
Acquisition Corp., Tek-Nique, Inc. and
Certain of the Stockholders of Tek-Nique,
Inc. dated as of June 14, 1996.
2.2* Stock Purchase Agreement among Natural
MicroSystems Corporation and the
Stockholders of PSR Systems, Inc. dated as of
June 14, 1996.
* Certain of the exhibits to such Exhibit have been omitted
pursuant to the Rules of the Securities and Exchange Commission.
The Registrant hereby agrees to furnish a copy of any omitted
exhibit to the Securities and Exchange Commission upon request.
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SIGNATURE
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.
NATURAL MICROSYSTEMS CORPORATION
Date: June 28, 1996 By: John F. Kennedy
Title: Chief Financial Officer
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EXHIBIT 2.1
MERGER AGREEMENT AND PLAN OF REORGANIZATION
AMONG
NATURAL MICROSYSTEMS CORPORATION,
NMS ACQUISITION CORP.,
TEK-NIQUE, INC.
AND CERTAIN OF
THE STOCKHOLDERS OF TEK-NIQUE, INC.
DATED AS OF JUNE 14, 1996
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Actions at the Closing . . . . . . . . . . . . . . . . . . . 1
(c) Effect of Merger . . . . . . . . . . . . . . . . . . . . . . 2
(d) Issuance of Merger Consideration; Contingent Shares . . . . . 3
(e) Escrow Agents . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Closing of Transfer Records . . . . . . . . . . . . . . . . . 3
(g) The Representatives . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties of the Major Stockholders . . . . . 4
(a) Organization; Qualification; Corporate Power; Authorization
of Transaction . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . 5
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Financial Statements . . . . . . . . . . . . . . . . . . . . 5
(h) Events Subsequent to Most Recent Fiscal Year End . . . . . . 6
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 8
(j) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . 8
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 8
(l) Real Property . . . . . . . . . . . . . . . . . . . . . . . . 9
(m) Intellectual Property . . . . . . . . . . . . . . . . . . . . 11
(n) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . 13
(o) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(p) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(q) Notes and Accounts Receivable . . . . . . . . . . . . . . . . 15
(r) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . 15
(s) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(t) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 16
(u) Product Warranty . . . . . . . . . . . . . . . . . . . . . . 16
(v) Product Liability . . . . . . . . . . . . . . . . . . . . . . 17
(w) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(x) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 17
(y) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 20
(z) Environment, Health, and Safety . . . . . . . . . . . . . . . 20
(aa) Certain Business Relationships with TEKnique . . . . . . . . 21
(bb) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 21
4. Representations and Warranties of NMS and the Acquisition Sub . . . 21
(a) Organization . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) NMS Shares . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Authorization of Transaction . . . . . . . . . . . . . . . . 21
(d) Noncontravention . . . . . . . . . . . . . . . . . . . . . . 21
(e) Filings with the SEC . . . . . . . . . . . . . . . . . . . . 22
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(f) Financial Statements . . . . . . . . . . . . . . . . . . . . 22
(g) Events Subsequent to Most Recent Fiscal Quarter End . . . . . 22
(h) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 22
(i) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 22
5. Obligations at the Closing . . . . . . . . . . . . . . . . . . . . 22
(a) Obligations of TEKnique and the Major Stockholders at the
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Obligations of NMS at the Closing . . . . . . . . . . . . . . 23
6. Post-Closing Agreements . . . . . . . . . . . . . . . . . . . . . . 23
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . 24
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 24
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . 24
(a) Survival of Representations and Warranties . . . . . . . . . 25
(b) Indemnification Provisions . . . . . . . . . . . . . . . . . 25
(c) Matters Involving Third Parties . . . . . . . . . . . . . . . 25
(d) Other Indemnification Provisions . . . . . . . . . . . . . . 27
8. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Cooperation on Tax Matters . . . . . . . . . . . . . . . . . 27
(b) Tax Sharing Agreements . . . . . . . . . . . . . . . . . . . 28
(c) Certain Taxes . . . . . . . . . . . . . . . . . . . . . . . . 28
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Press Releases and Public Announcements . . . . . . . . . . . 28
(b) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 28
(c) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 28
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . 28
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Amendments and Waivers . . . . . . . . . . . . . . . . . . . 30
(j) Severability . . . . . . . . . . . . . . . . . . . . . . . . 30
(k) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(l) Construction . . . . . . . . . . . . . . . . . . . . . . . . 30
(m) Incorporation of Exhibits and Schedules . . . . . . . . . . . 30
(n) Specific Performance . . . . . . . . . . . . . . . . . . . . 30
(o) Submission to Jurisdiction . . . . . . . . . . . . . . . . . 31
(p) Nature of Certain Obligations . . . . . . . . . . . . . . . . 31
(q) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 31
Appendix 1--Certain Defined Terms
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Exhibit 2(b)--Form of Articles of Merger
Exhibit 2(d)(ii)--Determination of Contingent Shares
Exhibit 2(e)--Form of Escrow Agreement
Exhibit 5(a)(iv)--Form of Opinion of Counsel to TEKnique and the Major
Stockholders
Exhibit 5(a)(v)--Required Consents
Exhibit 5(a)(vi)--Form of Investment Agreement
Exhibit 5(b)(iii)--Form of Opinion of Counsel to NMS and the Acquisition Sub
Annex I--Disclosure Schedule; Exceptions to Representations and Warranties
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
Agreement entered into as of June 14, 1996, by and among Natural
MicroSystems Corporation, a Delaware corporation ("NMS"), NMS Acquisition
Corp., an Illinois corporation and a wholly-owned Subsidiary of NMS (the
"Acquisition Sub"), Tek-Nique, Inc., an Illinois corporation ("TEKnique"), and
Herbert L. Pavey and Julius M. Rothschild (together, the "Major
Stockholders"). NMS, the Acquisition Sub, TEKnique and the Major Stockholders
are referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger transaction in which NMS
will acquire all of the outstanding capital stock of TEKnique through a
reverse subsidiary merger of the Acquisition Sub with and into TEKnique. The
stockholders of TEKnique will receive capital stock of NMS in exchange for
their capital stock of TEKnique. It is intended that this transaction shall
qualify for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code (as defined below) and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368(a) of
the Code. It is intended that the transaction shall be recorded for
accounting purposes as a purchase.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions. Certain capitalized terms are used in this Agreement
as specifically defined in Appendix 1 hereto.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Acquisition Sub will merge with and into TEKnique (the
"Merger") at the Effective Time in accordance with the provisions of the
Illinois Corporation Law. TEKnique shall be the corporation surviving the
Merger (the "Surviving Corporation").
(b) Actions at the Closing. At the closing of the transactions
contemplated by this Agreement (the "Closing") on the date hereof (the
"Closing Date"), (i) TEKnique will deliver to NMS and the Acquisition Sub the
various certificates, instruments, and documents referred to in Section 5(a)
below, (ii) NMS and the Acquisition Sub will deliver to TEKnique the various
certificates, instruments, and documents referred to in Section 5(b) below,
and (iii) TEKnique and the Acquisition Sub will file with the Secretary of
State of the State of Illinois Articles of Merger in the form attached hereto
as Exhibit 2(b) (the "Articles of Merger").
(c) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") TEKnique and the Acquisition Sub file the Articles of
Merger with the Secretary of State of the State of Illinois. The Merger
shall have the effect set forth in the Illinois Corporation Law. The
Surviving Corporation may, at any time after the Effective Time, take
any action (including executing and delivering any document) in the name
and on behalf of either TEKnique or the Acquisition Sub in order to
carry out and effectuate the transactions contemplated by this
Agreement.
(ii) Articles of Incorporation. The Articles of Incorporation of
the Surviving Corporation shall be amended and restated at and as of the
Effective Time to read as did the Articles of Incorporation of the
Acquisition Sub immediately prior to the Effective Time (except that the
name of the Surviving Corporation will remain unchanged).
(iii) Bylaws. The Bylaws of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read as did the
Bylaws of the Acquisition Sub immediately prior to the Effective Time
(except that the name of the Surviving Corporation will remain
unchanged).
(iv) Directors and Officers. The directors and officers of the
Acquisition Sub shall become the directors and officers of the Surviving
Corporation at and as of the Effective Time (retaining their respective
positions and terms of office).
(v) Conversion of TEKnique Shares. At and as of the Effective
Time, by virtue of the Merger and without any action on the part of any
holder of any capital stock of TEKnique, each outstanding TEKnique Share
issued and outstanding at the Effective Time, subject to the terms and
conditions of this Agreement, shall be converted into the right to
receive and become exchangeable for, 12.45242 NMS Shares (the
"Conversion Ratio"), subject to the provisions of Sections 2(c)(vi) and
(vii) and Section 2(d) below.
(vi) Adjustments to Conversion Ratio. The Conversion Ratio shall
be adjusted to reflect the number of Contingent Shares, if any,
determined to be issuable pursuant to Section 2(d)(ii) below and as
provided in Exhibit Section 2(d)(ii).
(vii) Fractional Shares. No fraction of an NMS Share shall be
issued, but in lieu thereof each holder of TEKnique Shares who would
otherwise be entitled to a fraction of an NMS Share (after aggregating
all fractional NMS Shares to be received by such holder after
adjustment, if any, to the Conversion Ratio as provided for in Section
2(c)(vi)) shall receive one additional NMS Share.
(viii) Conversion of Acquisition Sub Shares. At and as of
the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of the Acquisition Sub, each
issued and outstanding share of Common Stock, no par value, of
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Acquisition Sub shall be converted into one share of Common Stock, no
par value, of the Surviving Corporation.
(d) Issuance of Merger Consideration; Contingent Shares. NMS agrees
to issue (and deliver certificates evidencing) on the dates indicated to or to
the benefit of the stockholders of TEKnique the following number of NMS
Shares, to be allocated among the stockholders of TEKnique in proportion to
their respective holdings of TEKnique Shares as set forth in Section 3(b) of
the Disclosure Schedule (as may be modified from time to time in the manner
set forth therein):
(i) 41,479 NMS Shares, at the Closing; and
(ii) The number of NMS Shares to be determined as set forth and
on the date specified in Exhibit 2(d)(ii) (the "Contingent
Shares"); provided that if NMS shall have made, and there is
outstanding, a claim for indemnification pursuant to Section 7
below, the Contingent Shares allocable to the Major Stockholders,
together with stock powers executed by each in blank, shall be
delivered to the Escrow Agents and held pursuant to the terms of
the Escrow Agreement.
(e) Escrow Agents. The Escrow Agents shall be Levun, Goodman & Cohen
of Northbrook, Illinois, and Choate, Hall & Stewart of Boston, Massachusetts.
In the event Levun, Goodman & Cohen or any successor declines or is unable to
serve, it shall be succeeded by such person or entity, reasonably acceptable
to NMS as may be designated by the Major Stockholders. In the event Choate,
Hall & Stewart or any successor declines or is unable to serve, it shall be
succeeded by such person or entity, reasonably acceptable to the Major
Stockholders, as may be designated by NMS. All NMS Shares delivered to the
Escrow Agents shall be held and distributed in accordance with an agreement
substantially in the form of Exhibit 2(e) hereto (the "Escrow Agreement").
(f) Closing of Transfer Records. After the close of business on the
Closing Date, transfers of TEKnique Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of the Surviving
Corporation.
(g) The Representatives. The Representatives shall be Herbert L.
Pavey and Julius M. Rothschild, who shall represent the interests of the
Stockholders to the extent specified in Section 7(b)(ii) and Exhibit
2(d)(ii)). In the event either of them declines or is unable to serve, the
other shall serve as sole Representative. If both of them, or any successors,
are unable or decline to serve, successors shall be appointed by a majority of
the Stockholders by percentage interest in funds to be distributed as
consideration hereunder.
3. Representations and Warranties of the Major Stockholders. Each of
the Major Stockholders jointly and severally represent and warrant to NMS and
the Acquisition Sub that the statements contained in this Section 3 are
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correct and complete in all material respects as of the execution of this
Agreement on the date hereof, except as set forth in the disclosure schedule
delivered by the Major Stockholders to NMS on the date hereof and attached
hereto as Annex I (the "Disclosure Schedule"). Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts
in reasonable detail. Without limiting the generality of the foregoing, the
mere listing (or inclusion of a copy) of a document or other item shall not be
deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). The Disclosure Schedule is arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3.
(a) Organization; Qualification; Corporate Power; Authorization of
Transaction. TEKnique is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Illinois and is duly qualified
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except where the failure to
so qualify would not have a material adverse effect on the business or
financial condition of TEKnique or PSR Systems, Inc. TEKnique has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the business in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used
by it. Section 3(a) of the Disclosure Schedule lists the directors and
officers of TEKnique. TEKnique has delivered to NMS correct and complete
copies of the charter and bylaws of TEKnique (as amended to date). The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of TEKnique are correct and
complete. TEKnique is not in default under or in violation of any provision
of its charter or bylaws. TEKnique has full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of TEKnique,
enforceable in accordance with its terms and conditions. TEKnique need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any private third party or any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
(b) Capitalization. The entire authorized capital stock of TEKnique
consists of 1,000,000 TEKnique Shares, of which 3,331 TEKnique Shares are
issued and outstanding and no TEKnique Shares are held in treasury. All of
the issued and outstanding TEKnique Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Stockholders as set forth in Section 3(b) of the Disclosure
Schedule. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require TEKnique to issue, sell, or
4
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to TEKnique. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of TEKnique.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which TEKnique is subject or any provision of
the charter or bylaws of TEKnique, or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which TEKnique is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets).
(d) Brokers' Fees. TEKnique does not have any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Assets. TEKnique has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by them, located
on its premises, or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
(f) Subsidiaries. TEKnique has no Subsidiaries and does not control
directly or indirectly or have any direct or indirect equity participation in
any corporation, partnership, trust or other business.
(g) Financial Statements. TEKnique has delivered to NMS the following
financial statements (collectively the "Financial Statements"): (i) balance
sheets and statements of income, changes in stockholders' equity, and cash
flow as of and for the fiscal years ended February 28, 1994, February 28, 1995
and February 29, 1996 (the "Most Recent Fiscal Year End") for TEKnique; and
(ii) balance sheets and statements of income, changes in stockholders' equity,
and cash flow (the "Most Recent Financial Statements") as of and for the two
months ended April 30, 1996 (the "Most Recent Fiscal Month End") for TEKnique.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of TEKnique as of such
dates and the results of operations of TEKnique for such periods, are correct
and complete, and are consistent with the books and records of TEKnique (which
books and records are correct and complete).
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(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of TEKnique. Without limiting the generality of the foregoing,
since that date:
(i) TEKnique has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than in the Ordinary Course
of Business;
(ii) TEKnique has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $25,000 or outside the Ordinary
Course of Business;
(iii) no party (including TEKnique) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving
more than $25,000 to which TEKnique is a party or by which any of them
is bound;
(iv) TEKnique has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) TEKnique has not made any capital expenditure (or series of
related capital expenditures) either involving more than $25,000 or
outside the Ordinary Course of Business;
(vi) TEKnique has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions)
either involving more than $25,000 or outside the Ordinary Course of
Business;
(vii) TEKnique has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving more
than $10,000 singly or $25,000 in the aggregate;
(viii) TEKnique has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) TEKnique has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than $25,000 or outside the Ordinary Course of Business;
(x) TEKnique has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property except for
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standard licenses of its software that are commercially available to the
public in the Ordinary Course of Business;
(xi) there has been no change made or authorized in the charter
or bylaws of TEKnique;
(xii) TEKnique has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(xiii) TEKnique has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv) TEKnique has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) TEKnique has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvi) TEKnique has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xvii) TEKnique has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xviii) TEKnique has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) TEKnique has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) TEKnique has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving TEKnique; and
(xxii) TEKnique has not committed to any of the foregoing.
7
(i) Undisclosed Liabilities. TEKnique does not have any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of
them giving rise to any Liability), except for (i) Liabilities set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) Liabilities which have arisen after the Most Recent Fiscal Month End
in the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
(j) Legal Compliance. TEKnique has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure so
to comply.
(k) Tax Matters.
(i) TEKnique has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by TEKnique (whether or not shown on any Tax Return) have
been paid. TEKnique is not currently the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where TEKnique does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of TEKnique that
arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) TEKnique has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) No Stockholder or director or officer (or employee
responsible for Tax matters) of TEKnique expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
TEKnique either (A) claimed or raised by any authority in writing or (B)
as to which any of the Stockholders and the directors and officers (and
employees responsible for Tax matters) of TEKnique has Knowledge based
upon personal contact with any agent of such authority. Section 3(k) of
the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to TEKnique for taxable periods
ended on or after December 31, 1990, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are
the subject of audit. TEKnique has delivered to NMS correct and
complete copies of all federal income Tax Returns, examination reports,
8
and statements of deficiencies assessed against or agreed to by TEKnique
since December 31, 1990.
(iv) TEKnique has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) TEKnique has not filed a consent under Code Section 341(f)
concerning collapsible corporations. TEKnique has not made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. TEKnique
has not been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). TEKnique has disclosed on
its federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax within
the meaning of Code Section 6662. TEKnique is not a party to any Tax
allocation or sharing agreement. TEKnique (A) has not been a member of
an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was TEKnique) or (B) does
not have any Liability for the Taxes of any Person (other than TEKnique)
under Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) Intentionally Omitted.
(vii) The unpaid Taxes of TEKnique (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of TEKnique
in filing its Tax Returns.
(l) Real Property.
(i) TEKnique owns no real property.
(ii) Section 3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to TEKnique.
TEKnique has delivered to NMS correct and complete copies of the leases
and subleases listed in Section 3(l)(ii) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in
Section 3(l)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
9
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true
and correct with respect to the underlying lease;
(G) TEKnique has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(H) to the Knowledge of the Major Stockholders, all
facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable
laws, rules, and regulations;
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
(J) to the Knowledge of the Major Stockholders, the owner
of the facility leased or subleased has good and marketable title
to the parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
installments of special easements not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
(m) Intellectual Property.
(i) TEKnique owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary
or desirable for the operation of the business of TEKnique as presently
conducted and as presently proposed to be conducted. Each item of
10
Intellectual Property owned or used by TEKnique immediately prior to the
Closing hereunder is owned or available for use by TEKnique on identical
terms and conditions immediately subsequent to the Closing hereunder.
TEKnique has taken all reasonably necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or
uses.
(ii) to the Knowledge of the Major Stockholders, TEKnique has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties and none
of the Stockholders and the directors and officers of TEKnique has ever
received, or has Knowledge of, any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that TEKnique must license or refrain
from using any Intellectual Property rights of any third party). To the
Knowledge of any of the Stockholders and the directors and officers of
TEKnique, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of TEKnique.
(iii) Section 3(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to TEKnique with respect to
any of its Intellectual Property, identifies each pending patent
application or application for registration which TEKnique has made with
respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which TEKnique has granted to
any third party with respect to any of its Intellectual Property
(together with any exceptions). TEKnique has delivered to NMS correct
and complete copies of all such patents, registrations, applications,
licenses, agreements, and permissions (as amended to date) and have made
available to NMS correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of
each such item. Section 3(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark of TEKnique used by
it in connection with any of its business. With respect to each item of
Intellectual Property required to be identified in Section 3(m)(iii) of
the Disclosure Schedule:
(A) TEKnique possesses all right, title, and interest in
and to the item, free and clear of any Security Interest, license,
or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or
ownership of the item; and
11
(D) TEKnique has not ever agreed to indemnify any Person
for or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(iv) Section 3(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that
TEKnique makes material use of pursuant to license, sublicense,
agreement, or permission other than commercially available software
development, word processing, and spreadsheet software and other similar
office software products. TEKnique has delivered to NMS correct and
complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 3(m)(iv) of
the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in
full force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby;
(C) to the Knowledge of the Major Stockholders, no party
to the license, sublicense, agreement, or permission is in breach
or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) ((C) being
to the Knowledge of the Major Stockholders), above are true and
correct with respect to the underlying license;
(F) to the Knowledge of the Major Stockholders, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending, or to the
Knowledge of the Major Stockholders, is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
12
(H) TEKnique has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(v) To the Knowledge of any of the Stockholders and the
directors and officers of TEKnique, TEKnique will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the
continued operation of its business as presently conducted and as
presently proposed to be conducted.
(vi) None of the Stockholders and the directors and officers of
TEKnique had any Knowledge of any new products, inventions, procedures,
or methods of manufacturing or processing that any competitors or other
third parties have developed which reasonably could be expected to
supersede or make obsolete any product or process of TEKnique.
(n) Tangible Assets. TEKnique owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its business as presently conducted and as presently proposed to be conducted.
Each such tangible asset is free from defects (patent and latent) has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for
the purposes for which it presently is used and presently is proposed to be
used.
(o) Inventory. The inventory of TEKnique consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of TEKnique.
(p) Contracts. Section 3(p) of the Disclosure Schedule lists the
following contracts and other agreements to which TEKnique is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments
in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to TEKnique, or involve consideration in
excess of $25,000 other than computer software and hardware support and
maintenance agreements entered into in the Ordinary Course of Business;
13
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$25,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality (other than those
entered into in the Ordinary Course of Business) or noncompetition;
(vi) any agreement with any of the Stockholders and their
Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement or license relating in whole or in part to the
Intellectual Property of TEKnique (including, without limitation, any
agreement or license under which TEKnique has the right to use any
Intellectual Property owned or held by a third party or by NMS) which is
material to the business, financial condition or results of operations
of TEKnique (other than standard licenses for software that is
commercially available to the public in the Ordinary Course of
Business);
(xii) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of TEKnique;
(xiii) any agreement pursuant to which material benefits
accrue to the other party or parties to such contract as a result of the
transactions contemplated by this Agreement, including, without
limitation, rights of termination or modification of such agreements;
(xiv) any agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000; or
14
(xv) any other agreement not made in the Ordinary Course of
Business.
TEKnique has delivered to NMS a correct and complete copy of each written
agreement listed in Section 3(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 3(p) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of TEKnique are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and
collectible, subject only to the reserve for bad debts set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of TEKnique.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of TEKnique.
(s) Insurance. Section 3(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which TEKnique has been a party,
a named insured, or otherwise the beneficiary of coverage at any time within
the past twelve months:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
15
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither TEKnique nor any other party to the policy is
in breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the
policy has repudiated any provision thereof. To the Knowledge of the Major
Stockholders, TEKnique has been covered during the past 10 years by insurance
in scope and amount customary and reasonable for the businesses in which it
has engaged during the aforementioned period. Section 3(s) of the Disclosure
Schedule describes any self-insurance arrangements affecting TEKnique.
(t) Litigation. Section 3(t) of the Disclosure Schedule sets forth
each instance in which TEKnique (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the Stockholders and the directors and officers (and
employees with responsibility for litigation matters) of TEKnique, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 3(t) of the Disclosure Schedule could
result in any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of TEKnique. None of
the Stockholders and the directors and officers (and employees with
responsibility for litigation matters) of TEKnique has any reason to believe
that any such action, suit, proceeding, hearing, or investigation may be
brought or threatened against TEKnique.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by TEKnique has been in conformity with all applicable contractual
commitments and all express and implied warranties, and TEKnique does not have
any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
TEKnique. No product manufactured, sold, leased, or delivered by TEKnique is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Section 3(u) of the
Disclosure Schedule includes copies of the standard terms and conditions of
sale or lease for TEKnique (containing applicable guaranty, warranty, and
indemnity provisions).
16
(v) Product Liability. TEKnique does not have any Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by TEKnique.
(w) Employees. To the Knowledge of any of the Stockholders and the
directors and officers of TEKnique, no executive, key employee, or group of
employees has any plans to terminate employment with TEKnique. TEKnique a
party to or bound by any collective bargaining agreement, nor has any of them
experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. TEKnique has not committed any unfair
labor practice. None of the Stockholders and the directors and officers of
TEKnique has any Knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
TEKnique.
(x) Employee Benefits.
(i) Section 3(x) of the Disclosure Schedule lists each Employee
Benefit Plan that TEKnique or any member of a Controlled Group of
Corporations of which TEKnique is a member ("TEKnique Controlled Group
Member") maintains or has ever maintained, has an obligation to
contribute to, or has any liability thereunder.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) is administered in compliance
with its terms and complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and
other applicable laws, rulings and other authority issued
thereunder.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary
Plan Descriptions) have been timely filed or distributed
appropriately with respect to each such Employee Benefit Plan as
required by ERISA, the Code and other applicable law. The
requirements of ERISA Sections 601-609 and of Code Section 4980B
have been met with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which
are due have been paid to each fund or trust established pursuant
to the terms of an Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have been paid
to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of TEKnique. All
17
premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and has received, within the last two
years, a favorable unrevoked determination letter from the
Internal Revenue Service which determination letter may still be
relied upon as to such tax qualified status, and no circumstances
have occurred that would adversely affect the tax qualified status
of any such Employee Pension Benefit Plan.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan equals or
exceeds the present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods, factors,
and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination. Neither TEKnique nor a
TEKnique Controlled Group Member has incurred any accumulated
funding deficiency within the meaning of ERISA.
(F) TEKnique has delivered to NMS correct and complete
copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that TEKnique or
a TEKnique Controlled Group Member maintains or ever has maintained or
to which TEKnique or a TEKnique Controlled Group Member contributes,
ever has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan has been completely or partially terminated
or been the subject of a Reportable Event as to which notices
would be required to be filed with the PBGC. No proceeding by the
PBGC to terminate any such Employee Pension Benefit Plan has been
instituted or threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary 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 such Employee Benefit Plan. No action, suit,
proceeding, hearing, arbitration, or investigation with respect to
the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is
pending or threatened alleging any breach of the terms of any such
18
Employee Benefit Plan or of any Fiduciary duties thereunder or
violation of any applicable law with respect to any such Employee
Benefit Plan. None of the Stockholders and the directors and
officers (and employees with responsibility for employee benefits
matters) of TEKnique or of a TEKnique Controlled Group Member has
any Knowledge of any Basis for any such action, suit, proceeding,
hearing, or investigation.
(C) TEKnique or a TEKnique Controlled Group Member has not
incurred, and none of the Stockholders and the directors and
officers (and employees with responsibility for employee benefits
matters) of TEKnique or of a TEKnique Controlled Group Member has
any reason to expect that TEKnique or a TEKnique Controlled Group
Member will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including
any withdrawal liability, as determined under ERISA Sections 4201
et seq.) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
(iii) TEKnique or a TEKnique Controlled Group Member does not
contribute to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan or has any Liability (including
withdrawal liability, as determined under ERISA Sections 4201 et seq.)
under any Multiemployer Plan.
(iv) TEKnique or a TEKnique Controlled Group Member does not
maintain or ever has maintained or contributes, ever has contributed to,
or ever has been required to contribute to any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with ERISA
Sections 601-609 and Code Section 4980B).
(v) Subject to applicable requirements of ERISA, neither any
provision of any Employee Benefit Plan nor any agreement with any
Employee nor any representation or course of conduct by or on behalf of
TEKnique or any TEKnique Controlled Group Member would prevent the
amendment or termination after the Closing Date of any Employee Benefit
Plan without liability to TEKnique or any TEKnique Controlled Group
Member.
(vi) No Employee Benefit Plan is a "multiple employer welfare
arrangement" within the meaning of ERISA Section 3(40).
(vii) With respect to any Employee Benefit Plans that is self-
insured, no claims have been made pursuant to any such plan that have
not yet been paid and no injury, sickness or other medical condition has
been incurred with respect to which claims may be made pursuant to any
such plan.
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(viii) Neither TEKnique nor any TEKnique Controlled Group
Member maintains or has any obligation to contribute to any "voluntary
employees' beneficiary association" within the meaning of Code Section
501(c)(9) or other funding arrangement for the provision of welfare or
fringe benefits.
(y) Guaranties. TEKnique is not a guarantor or otherwise is liable
for any Liability or obligation (including indebtedness) of any other Person.
(z) Environment, Health, and Safety.
(i) TEKnique has complied with all Environmental, Health, and
Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply. Without limiting
the generality of the preceding sentence, TEKnique has obtained and been
in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
(ii) TEKnique does not have any Liability (and has not handled or
disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition,
or owned or operated any property or facility in any manner that could
form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against
TEKnique giving rise to any Liability) for damage to any site, location,
or body of water (surface or subsurface), for any illness of or personal
injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of
TEKnique have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(aa) Certain Business Relationships with TEKnique. Neither of the
Major Stockholders or their Affiliates (other than PSR Systems, Inc.) has been
involved in any business arrangement or relationship with TEKnique within the
past 12 months other than being Stockholders, Investors, Officers, or
employees, and neither of the Stockholders or their Affiliates (other than PSR
Systems, Inc.) owns any asset, tangible or intangible, which is used in the
business of TEKnique.
(bb) Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
20
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Representations and Warranties of NMS and the Acquisition Sub.
Each of NMS and the Acquisition Sub represents and warrants to TEKnique that
the statements contained in this Section 4 are correct and complete in all
material respects as of the date of this Agreement.
(a) Organization. Each of NMS and the Acquisition Sub is a
corporation duly organized, validly existing, and, in the case of NMS, in good
standing, under the laws of the States of Delaware and Illinois, respectively.
(b) NMS Shares. All of NMS Shares to be issued in the Merger have
been duly authorized and, upon consummation of the Merger, will be validly
issued when delivered, fully paid, and nonassessable.
(c) Authorization of Transaction. Each of NMS and the Acquisition Sub
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of each of
NMS and the Acquisition Sub, enforceable in accordance with its terms and
conditions.
(d) Noncontravention. To the Knowledge of any director or officer of
NMS, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency,
or court to which either NMS or the Acquisition Sub is subject or any
provision of the charter or bylaws of either NMS or the Acquisition Sub or
(ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which either NMS
or the Acquisition Sub is a party or by which it is bound or to which any of
its assets is subject, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, or failure to give
notice would not have a material adverse effect on the ability of the Parties
to consummate the transactions contemplated by this Agreement.
(e) Filings with the SEC. NMS has made all filings with the SEC that
it has been required to make under the Securities Exchange Act (collectively
the "Public Reports"). Each of the Public Reports has complied with the
Securities Exchange Act in all material respects. None of the Public Reports,
as of their respective dates, contained any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
21
(f) Financial Statements. NMS has filed a Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1996 (the "Most Recent Fiscal
Quarter End") and an Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. The financial statements included in or incorporated by
reference into these Public Reports (including the related notes and
schedules) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby and present fairly the financial
condition of NMS and its Subsidiaries as of the indicated dates and the
results of operations of NMS and its Subsidiaries for the indicated periods;
provided, however, that the interim statements are subject to normal year-end
adjustments.
(g) Events Subsequent to Most Recent Fiscal Quarter End. Since the
Most Recent Fiscal Quarter End, there has not been any material adverse change
in the financial condition of NMS and its Subsidiaries taken as a whole.
(h) Undisclosed Liabilities. None of NMS and its Subsidiaries has any
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes, except for (i) liabilities set forth on the face of the balance sheet
dated as of the Most Recent Fiscal Quarter End (rather than in any notes
thereto) and (ii) liabilities which have arisen after the Most Recent Fiscal
Quarter End in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
(i) Brokers' Fees. None of NMS and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
5. Obligations at the Closing.
(a) Obligations of TEKnique and the Major Stockholders at the Closing.
At the Closing, TEKnique and the Major Stockholders shall deliver or cause to
be delivered to NMS the following:
(i) severance and noncompetition agreements duly executed by
Herbert L. Pavey and Julius M. Rothschild, satisfactory to NMS;
(ii) Resignations of all of the members of the board of directors
of TEKnique, effective as of the close of business on this date;
(iii) A counterpart of the Escrow Agreement, duly executed by the
Stockholders and Levun, Goodman & Cohen;
(iv) An opinion of Levun, Goodman & Cohen in the form of Exhibit
5(a)(iv) hereto;
22
(v) The third party consents, if any, set forth on Exhibit
5(a)(v) hereto;
(vi) An Investment and Registration Rights Agreement in the form
of Exhibit 5(a)(vi) hereto (the "Investment Agreement"), duly executed
by NMS; and
(vii) Certificates evidencing all of the TEKnique Shares
outstanding prior to the Effective Time.
(b) Obligations of NMS at the Closing. At the Closing, NMS shall
deliver or cause to be delivered to TEKnique and the Major Stockholders or to
the benefit of the stockholders of TEKnique the following:
(i) Certificates evidencing the NMS Shares to be delivered at
the Closing as specified in Section 2;
(ii) A counterpart of the Escrow Agreement, duly executed by NMS
and Choate, Hall & Stewart;
(iii) An opinion of Choate, Hall & Stewart in the form of Exhibit
5(b)(iii) hereto; and
(iv) A counterpart of the Investment Agreement, duly executed by
TEKnique and all of its stockholders.
6. Post-Closing Agreements. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7
below). The Major Stockholders acknowledge and agree that from and after the
Closing NMS will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating
to TEKnique.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving TEKnique, each of the other Parties will
cooperate with him or it and his or her counsel in the contest or defense,
make available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
23
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Transition. Neither of the Major Stockholders has taken any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of TEKnique
from maintaining the same business relationships with TEKnique after the
Closing as it maintained with TEKnique prior to the Closing. Each of the
Major Stockholders will refer all customer inquiries relating to the
businesses of TEKnique to NMS from and after the Closing.
(d) Confidentiality. Each of the Major Stockholders will treat and
hold as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to NMS or destroy, at the request and option of NMS, all
tangible embodiments (and all copies) of the Confidential Information which
are in his or her possession. In the event that either of the Major
Stockholders is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Major Stockholder will notify NMS promptly of the request or
requirement so that NMS may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, either of the Major
Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
that Major Stockholder may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Major Stockholder shall use
his or her reasonable best efforts to obtain, at the reasonable request of
NMS, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as
NMS shall designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
7. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. The representations
and warranties made by each of the Parties in this Agreement shall be deemed
to have been relied upon by the other Parties hereto and shall survive the
Closing, provided that in no event shall any Party be entitled to seek
indemnification in respect of any breach of any representation or warranty
made herein (except any made in Section 3(b) or the last three sentences of
Section 3(a) above, as to which such remedy shall not be so limited) pursuant
to this Section 7 unless the Party seeking indemnification has made a written
claim therefor pursuant to Section 9(h) below prior to January 1, 1998.
24
(b) Indemnification Provisions.
(i) In the event TEKnique or either of the Major Stockholders
breaches (or in the event any third party alleges facts that, if true,
would mean TEKnique or either of the Major Stockholders has breached)
any of its or his representations, warranties, and covenants contained
herein, provided that NMS makes a written claim for indemnification
pursuant to Section 9(h) below prior to January 1, 1998, then each of
the Major Stockholders agrees to indemnify NMS from and against the
entirety of any Adverse Consequences NMS may suffer through and after
the date of the claim for indemnification (including any Adverse
Consequences NMS may suffer after December 31, 1997) resulting from,
arising out of, relating to, in the nature of, or caused by the breach
(or the alleged breach); provided that, in no event shall the Major
Stockholders be liable to an amount which exceeds the aggregate fair
market value (determined on the basis of the closing price of the NMS
Shares on the date of the respective issuances) of the NMS Shares issued
to all of the stockholders of TEKnique in consideration for the exchange
of all of the TEKnique Shares.
(ii) In the event NMS breaches (or in the event any third party
alleges facts that, if true, would mean NMS has breached) any of its
representations, warranties, and covenants contained herein, provided
that the Representatives makes a written claim for indemnification
against NMS pursuant to Section 9(h) below prior to January 1, 1998,
then NMS agrees to indemnify each of the Major Stockholders from and
against the entirety of any Adverse Consequences the Major Stockholders
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Stockholder may suffer after
December 31, 1997) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).
(c) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 7, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
25
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7(c)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim, (B)
the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 7(a)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
(d) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. Each of the Major Stockholders hereby
agrees that he will not make any claim for indemnification against TEKnique by
reason of the fact that he was a director, officer, employee, or agent of any
such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
26
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether such claim is pursuant
to any statute, charter document, bylaw, agreement, or otherwise) with respect
to any action, suit, proceeding, complaint, claim, or demand brought by NMS
against such Major Stockholder (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law, or
otherwise).
8. Tax Matters.
(a) Cooperation on Tax Matters.
(i) NMS and the Major Stockholders shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection
with the filing of Tax Returns for TEKnique for all periods after or
prior to the Closing Date which are filed after the Closing Date and any
audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Major Stockholders agree (A) to retain all books and records with
respect to Tax matters pertinent to TEKnique relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by NMS, any
extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and,
if NMS so requests, the Stockholders shall allow NMS to take possession
of such books and records.
(ii) NMS and the Major Stockholders further agree, upon request,
to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) NMS and the Major Stockholders further agree, upon request,
to provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(b) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving TEKnique shall be terminated as of the
Closing Date and, after the Closing Date, TEKnique shall not be bound thereby
or have any liability thereunder.
27
(c) Certain Taxes. All transfer, documentary, sales, use, stamp and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement, shall be paid by Stockholders when due, and
Stockholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales,
use, stamp, and other Taxes and fees, and, if required by applicable law, NMS
will, and will cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
9. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of NMS.
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other Parties.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of The Commonwealth of Massachusetts
without giving effect to any choice or conflict of law provision or rule
(whether of The Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than The
Commonwealth of Massachusetts.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
28
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Major
Stockholders: At the addresses Copy to: Levun, Goodman & Cohen
set forth below their 500 Skokie Boulevard
respective signatures Suite 650
Northbrook, Illinois
60062
Attn: Michael J. Cohen,
Esq.
If to TEKnique: 911 North Plum Grove Rd. Copy to: Levun, Goodman & Cohen
Schaumberg, Illinois 61073 500 Skokie Boulevard
Attn: President Suite 650
Northbrook, Illinois
60062
Attn: Michael J. Cohen,
Esq.
If to NMS or the
Acquisition Sub: 8 Erie Drive Copy to: Choate, Hall &
Natick, MA 01760-1334 Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attn: Richard N. Hoehn,
Esq.
If to the
Escrow Agents At their respective addresses
set forth above
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided,
however, that any amendment effected subsequent to stockholder approval will
29
be subject to the restrictions contained in the Illinois Corporation Law. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, provided that TEKnique may
bear the costs and expenses of the Major Stockholders.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context otherwise requires.
The word "including" shall mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the provisions
set forth in Section 9(p) below), in addition to any other remedy to which
they may be entitled, at law or in equity.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Boston, Massachusetts,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
30
determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
(p) Nature of Certain Obligations. The representations, warranties,
and covenants in this Agreement are joint and several obligations. Joint and
several means that each of the Major Stockholders will be responsible to the
extent provided in Section 7 above for the entirety of any Adverse
Consequences NMS may suffer as a result of any breach thereof.
(q) Arbitration. Subject to Section 9(n) all controversies or claims
arising among the Parties (or their respective successors or permitted
assigns) hereunder which are not resolved within thirty (30) days after either
party notifies the other in writing of the controversy or claim, shall be
submitted for arbitration on demand of either party. Such arbitration
proceedings will be conducted in Boston, Massachusetts, and except as
otherwise provided in this Agreement, will be conducted in accordance with the
then-current Commercial Arbitration Rules of the American Arbitration
Association. There shall be three arbitrators. Each party hereto shall
appoint one arbitrator and the two so appointed shall appoint a third. If
either party shall refuse to appoint an arbitrator within fourteen (14) days
of demand by the other, the arbitration shall proceed without said arbitrator.
The arbitrators will have the right to award or include in the award any
relief which they deem proper in the circumstances, including, but not limited
to, money damages, interest on unpaid amounts, specific performance and other
injunctive relief, and reimbursement of arbitration costs. The award and
decision of a majority of the arbitrators will be conclusive and binding, and
judgment on the award may be entered in any court of competent jurisdiction.
Each party hereto, for itself and its respective successors and permitted
assigns, acknowledges that any arbitration award may be enforced in a court of
competent jurisdiction and waives any right to contest the validity or
enforceability of such award.
* * * * *
31
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
under seal as of the date first above written.
NATURAL MICROSYSTEMS CORPORATION
By: John F. Kennedy
Title: Chief Financial Officer
TEK-NIQUE, INC.
By: Herbert L. Pavey
Title: President
NMS ACQUISITION CORP.
By: John F. Kennedy
Title: Vice President & Treasurer
MAJOR STOCKHOLDERS:
Herbert L. Pavey
Address: 911 N. Plum Grove Road
Schaumburg, IL 60173
Julius M. Rothschild
Address: 1053 Apple Creek
Des Plaines, IL 60016
Appendix 1
Certain Defined Terms
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a).
"Acquisition Sub" has the meaning set forth in the preface.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Certificate of Merger" has the meaning set forth in Section 2(b).
"Closing" has the meaning set forth in Section 2(b).
"Closing Date" has the meaning set forth in Section 2(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Confidential Information" means any information concerning the business
and affairs of TEKnique that is not generally available to the public.
"Contingent Shares" has the meaning set forth in Section 2(d)(ii).
"Controlled Group of Corporations" means members of a controlled group
of corporations, trades or businesses which are under common control, or
affiliated service groups, within the meaning set forth in Code Sections
414(b), (c), and (m), respectively, and as further provided in Code Section
414(o).
"Conversion Ratio" has the meaning set forth in Section 2(c)(v).
"Disclosure Schedule" has the meaning set forth in Section 3.
"Effective Time" has the meaning set forth in Section 2(c)(i).
1
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2) and the regulations promulgated thereunder.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1) and the regulations promulgated thereunder.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"Escrow Agents" has the meaning set forth in Section 2(e).
"Escrow Agreement" has the meaning set forth in Section 2(e).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Excess Loss Account" has the meaning set forth in IRS Reg. Section
1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 3(g).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
2
"Illinois Corporation Law" means the Business Corporation Act of the
State of Illinois, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d).
"Indemnifying Party" has the meaning set forth in Section 7(d).
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"IRS" means the Internal Revenue Service.
"Investment Agreement" has the meaning set forth in Section 5(a)(vi).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Major Stockholders" has the meaning set forth in the preface.
"Merger" has the meaning set forth in Section 2(a).
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(f).
"Most Recent Fiscal Quarter End" has the meaning set forth in Section
4(f).
3
"Most Recent Financial Statements" has the meaning set forth in Section
3(g).
"Most Recent Fiscal Year End" has the meaning set forth in Section 3(g).
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"NMS" has the meaning set forth in the preface.
"NMS Share" means any share of the Common Stock, $.01 par value per
share, of NMS.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Public Reports" has the meaning set forth in Section 4(e).
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Representatives" has the meaning set forth in Section 2(g).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialman's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital
lease arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
4
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Surviving Corporation" has the meaning set forth in Section 2(a).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TEKnique" has the meaning set forth in the preface.
"TEKnique Share" means any share of the Common Stock, no par value per
share, of TEKnique.
"Third Party Claim" has the meaning set forth in Section 7(d).
5
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
AMONG
NATURAL MICROSYSTEMS CORPORATION
AND
THE STOCKHOLDERS OF PSR SYSTEMS, INC.
DATED AS OF JUNE 14, 1996
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of PSR Shares . . . . . . . . . . . . . . . . . . 1
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . 1
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 1
(c) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Escrow Agents . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) The Representatives . . . . . . . . . . . . . . . . . . . . . 2
(f) Termination of Cross Purchase Agreement . . . . . . . . . . . 2
3. Representations and Warranties Concerning the Stockholders . . . . 2
(a) Authorization of Transaction . . . . . . . . . . . . . . . . 2
(b) Noncontravention . . . . . . . . . . . . . . . . . . . . . . 3
(c) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) PSR Shares . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Representations and Warranties Concerning PSR . . . . . . . . . . . 3
(a) Organization, Qualification, and Corporate Power . . . . . . 4
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . 4
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) Financial Statements . . . . . . . . . . . . . . . . . . . . 5
(h) Events Subsequent to Most Recent Fiscal Year End . . . . . . 5
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 7
(j) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . 7
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 7
(l) Real Property . . . . . . . . . . . . . . . . . . . . . . . . 9
(m) Intellectual Property . . . . . . . . . . . . . . . . . . . . 10
(n) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . 12
(o) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(p) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(q) Notes and Accounts Receivable . . . . . . . . . . . . . . . . 14
(r) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . 15
(s) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(t) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 15
(u) Product Warranty . . . . . . . . . . . . . . . . . . . . . . 16
(v) Product Liability . . . . . . . . . . . . . . . . . . . . . . 16
(w) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(x) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 16
(y) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 19
(z) Environment, Health, and Safety . . . . . . . . . . . . . . . 19
(aa) Certain Business Relationships with PSR . . . . . . . . . . . 20
(bb) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 20
i
4A. Representations and Warranties Concerning NMS . . . . . . . . . . . 20
(a) Organization of NMS . . . . . . . . . . . . . . . . . . . . . 20
(b) Authorization of Transaction . . . . . . . . . . . . . . . . 20
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . 20
(d) Filings with the SEC . . . . . . . . . . . . . . . . . . . . 21
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . 21
(f) Events Subsequent to Most Recent Fiscal Quarter End . . . . . 21
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 21
(h) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 21
(i) Investment . . . . . . . . . . . . . . . . . . . . . . . . . 22
5. Obligations at the Closing . . . . . . . . . . . . . . . . . . . . 22
(a) Obligations of the Stockholders at the Closing . . . . . . . 22
(b) Obligations of NMS at the Closing . . . . . . . . . . . . . . 22
6. Post-Closing Agreements . . . . . . . . . . . . . . . . . . . . . . 22
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . 23
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 23
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . 23
(a) Survival of Representations and Warranties . . . . . . . . . 23
(b) Indemnification Provisions for Benefit of NMS . . . . . . . . 24
(c) Matters Involving Third Parties . . . . . . . . . . . . . . . 24
(d) Other Indemnification Provisions . . . . . . . . . . . . . . 25
8. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Cooperation on Tax Matters . . . . . . . . . . . . . . . . . 26
(b) Tax Sharing Agreements . . . . . . . . . . . . . . . . . . . 27
(c) Certain Taxes . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Nature of Certain Obligations . . . . . . . . . . . . . . . . 27
(b) Press Releases and Public Announcements . . . . . . . . . . . 27
(c) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 27
(d) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 27
(e) Succession and Assignment . . . . . . . . . . . . . . . . . . 27
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 28
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . . . 29
(k) Severability . . . . . . . . . . . . . . . . . . . . . . . . 29
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(m) Construction . . . . . . . . . . . . . . . . . . . . . . . . 29
(n) Incorporation of Exhibits, Annexes, and Schedules . . . . . . 29
(o) Specific Performance . . . . . . . . . . . . . . . . . . . . 29
(p) Submission to Jurisdiction . . . . . . . . . . . . . . . . . 30
(q) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 30
ii
Appendix 1--Certain Definitions
Exhibit 2(b)(ii)--Determination of Contingent Amounts
Exhibit 2(d)--Form of Escrow Agreement
Exhibit 5(a)(iv)--Form of Opinion of Counsel to the Stockholders
Exhibit 5(a)(v)--Required Consents
Exhibit 5(b)(iii)--Form of Opinion of Counsel to NMS
Annex I--Exceptions to the Stockholders' Representations and Warranties
Concerning the Transaction
Annex II--Disclosure Schedule; Exceptions to Representations and Warranties
Concerning PSR
iii
STOCK PURCHASE AGREEMENT
Agreement entered into as of June 14, 1996, by and among Natural
MicroSystems Corporation, a Delaware corporation ("NMS"), PSR Systems, Inc.,
an Illinois corporation ("PSR"), and the Stockholders of PSR signatory hereto
(collectively, the "Stockholders") who in the aggregate own all of the
outstanding capital stock of PSR. NMS and the Stockholders are referred to
collectively herein as the "Parties." PSR joins in this Agreement solely for
the purpose of its agreement set forth in Section 2(f).
This Agreement contemplates a transaction in which NMS will purchase
from the Stockholders, and the Stockholders will sell to NMS, all of the
outstanding capital stock of PSR in return for cash. It is intended that the
transaction shall be recorded for accounting purposes as a purchase.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions. Certain capitalized terms are used in this Agreement
as specifically defined in Appendix 1 hereto.
2. Purchase and Sale of PSR Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, NMS agrees to purchase from each of the Stockholders, and each
of the Stockholders agrees to sell to NMS, all of his or her PSR Shares for
the consideration specified below in this Section 2.
(b) Purchase Price. NMS agrees to pay to the Stockholders, allocated
among the Stockholders in proportion to their respective holdings of PSR
Shares as set forth in Section 4(b) of the Disclosure Schedule (as may be
modified from time to time in the manner set forth therein), the following
amounts:
(i) $3,550,000, which shall be paid by certified check at the
Closing; and
(ii) Such amounts (to be paid by certified check) to be
determined and by such dates as provided in Exhibit 2(b)(ii) (the
"Contingent Amounts") provided that the Contingent Amounts, if any,
allocable to the Major Stockholders shall be paid to the Escrow Agents
to be held pursuant to the terms of the Escrow Agreement if NMS shall
have made, and there is outstanding, a written claim for indemnification
pursuant to Section 7 below.
(c) The Closing. Simultaneously with the delivery of this Agreement
on the date hereof (the "Closing Date"), (i) the Stockholders will deliver to
NMS the various certificates, instruments and documents referred to in Section
1
5(a) below, and (ii) NMS will deliver to the Stockholders the consideration
specified in Section 2(b)(i) above and the various instruments and documents
referred to in Section 5(b) below. The Closing shall take place at the
offices of Choate, Hall & Stewart, 53 State Street, Exchange Place, Boston,
Massachusetts.
(d) Escrow Agents. The Escrow Agents shall be Levun, Goodman & Cohen
and Choate, Hall & Stewart of Boston, Massachusetts. In the event Levun,
Goodman & Cohen or any successor declines or is unable to serve, it shall be
succeeded by such person or entity, reasonably acceptable to NMS, as may be
designated by the Major Stockholders. In the event Choate, Hall & Stewart or
any successor declines or is unable to serve, it shall be succeeded by such
person or entity, reasonably acceptable to the Major Stockholders, as may be
designated by NMS. All payments made to the Escrow Agents shall be held and
distributed in accordance with an agreement substantially in the form of
Exhibit 2(d) hereto (the "Escrow Agreement").
(e) The Representatives. The Representatives shall be Herbert L.
Pavey and Julius M. Rothschild, who shall represent the interests of the
Stockholders to the extent specified in Section 7(b) below and in Exhibit
2(b)(ii). In the event either of them declines or is unable to serve, the
other shall serve as sole Representative. If both of them, or any successors,
are unable or decline to serve, successors shall be appointed by a majority of
the Stockholders by percentage interest in funds to be distributed as
consideration hereunder.
(f) Termination of Cross Purchase Agreements. Each of the Major
Stockholders and PSR hereby agree that the Cross Purchase Agreement (and any
and all successor or other agreements relating thereto) by and among them (and
previously by John Schoeph) dated as of July 31, 1980 shall be, without any
further action on the part of any of them, terminated upon the occurrence of
the Closing of the transactions contemplated herein whereupon all such
agreements shall be of no further force and effect.
3. Representations and Warranties Concerning the Stockholders.
Herbert L. Pavey and Julius M. Rothschild (the "Major Stockholders") jointly
and severally represent and warrant to NMS that the statements concerning the
Stockholders contained in this Section 3 are correct and complete in all
material respects as of the execution of this Agreement on the date hereof
with respect to each of the Stockholders, except as set forth in Annex I
attached hereto.
(a) Authorization of Transaction. The Stockholder has full
power and authority to execute and deliver this Agreement and to perform
his or her obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Stockholder, enforceable in
accordance with its terms and conditions. The Stockholder need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
2
(b) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Stockholder is subject or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Stockholder is a party or by which he or
it is bound or to which any of his or her assets is subject.
(c) Brokers' Fees. The Stockholder has no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which PSR or NMS could become liable or obligated.
(d) PSR Shares. The Stockholder holds of record and owns
beneficially the number of PSR Shares set forth next to his or her name
in Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. The Stockholder is not a party to any option,
warrant, purchase right, or other contract or commitment that could
require the Stockholder to sell, transfer, or otherwise dispose of any
capital stock of PSR (other than this Agreement). The Stockholder is
not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of PSR.
4. Representations and Warranties Concerning PSR. The Major
Stockholders jointly and severally represent and warrant to NMS that the
statements concerning PSR contained in this Section 4 are correct and complete
in all material respects as of the execution of this Agreement on the date
hereof, except as set forth in the disclosure schedule delivered by the Major
Stockholders to NMS on the date hereof and attached hereto as Annex II (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing
(or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule is arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization, Qualification, and Corporate Power. PSR is a
corporation duly organized, validly existing, and in good standing under the
3
laws of Illinois and is duly qualified to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the failure to so qualify would not have a material
adverse effect on the business or financial condition of PSR or Tek-Nique,
Inc. PSR has full corporate power and authority and all licenses, permits,
and authorizations necessary to carry on the businesses in which it is engaged
and in which it presently proposes to engage and to own and use the properties
owned and used by it. Section 4(a) of the Disclosure Schedule lists the
directors and officers of PSR. The Stockholders have delivered to NMS correct
and complete copies of the charter and bylaws of PSR (as amended to date).
The minute books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of PSR are correct and complete.
PSR is not in default under or in violation of any provision of its charter or
bylaws.
(b) Capitalization. The entire authorized capital stock of PSR
consists of 1,000,000 PSR Shares, of which 185,062 PSR Shares are issued and
outstanding and no PSR Shares are held in treasury. All of the issued and
outstanding PSR Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the respective Stockholders
as set forth in Section 4(b) of the Disclosure Schedule. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require PSR to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with respect to PSR. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of PSR.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which PSR is subject or any provision of the
charter or bylaws of PSR, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which PSR is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). PSR does not needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any private
third party, or any government or governmental agency in order for the Parties
to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. PSR does not have any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
4
(e) Title to Assets. PSR has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on
their premises, or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
(f) Subsidiaries. PSR has no Subsidiaries and does not control
directly or indirectly or have any direct or indirect equity participation in
any corporation, partnership, trust or other business.
(g) Financial Statements. The Major Stockholders have delivered to
NMS the following financial statements (collectively the "Financial
Statements"): (i) balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
January 31, 1994, January 31, 1995, and January 31, 1996 (the "Most Recent
Fiscal Year End") for PSR; and (ii) balance sheets and statements of income,
changes in stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the three months ended April 30, 1996 (the "Most
Recent Fiscal Month End") for PSR. The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of PSR as of such dates and the results of operations of
PSR for such periods, are correct and complete, and are consistent with the
books and records of PSR (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of PSR. Without limiting the generality of the foregoing, since
that date:
(i) PSR has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than in the Ordinary Course
of Business;
(ii) PSR has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) either involving more than $25,000 or outside the Ordinary
Course of Business;
(iii) no party (including PSR) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving
more than $25,000 to which PSR is a party or by which any of them is
bound;
(iv) PSR has not imposed any Security Interest upon any of its
assets, tangible or intangible;
5
(v) PSR has not made any capital expenditure (or series of
related capital expenditures) either involving more than $25,000 or
outside the Ordinary Course of Business;
(vi) PSR has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $25,000 or outside the Ordinary Course of Business;
(vii) PSR has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $10,000
singly or $25,000 in the aggregate;
(viii) PSR has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) PSR has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than $25,000 or outside the Ordinary Course of Business;
(x) PSR has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property except for standard
licenses of its software that are commercially available to the public
in the Ordinary Course of Business;
(xi) there has been no change made or authorized in the charter
or bylaws of PSR;
(xii) PSR has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(xiii) PSR has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of
its capital stock;
(xiv) PSR has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(xv) PSR has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvi) PSR has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
6
(xvii) PSR has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xviii) PSR has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) PSR has not made any other change in employment terms for
any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) PSR has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving PSR; and
(xxii) PSR has not committed to any of the foregoing.
(i) Undisclosed Liabilities. PSR does not have any Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
(j) Legal Compliance. PSR has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure so
to comply.
(k) Tax Matters.
(i) PSR has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all respects. All
Taxes owed by PSR (whether or not shown on any Tax Return) have been
paid. PSR is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where PSR does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no
7
Security Interests on any of the assets of PSR that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) PSR has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) No Stockholder or director or officer (or employee
responsible for Tax matters) of PSR expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of PSR either
(A) claimed or raised by any authority in writing or (B) as to which any
of the Stockholders and the directors and officers (and employees
responsible for Tax matters) of PSR has Knowledge based upon personal
contact with any agent of such authority. Section 4(k) of the
Disclosure Schedule lists all federal, state, local, and foreign income
Tax Returns filed with respect to PSR for taxable periods ended on or
after December 31, 1990, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject
of audit. The Stockholders have delivered to NMS correct and complete
copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by PSR since
December 31, 1990.
(iv) PSR has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) PSR has not filed a consent under Code Section 341(f)
concerning collapsible corporations. PSR has not made any payments, is
obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible under Code Section 280G. PSR has not been a
United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). PSR has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Code Section 6662. PSR is not a party to any Tax allocation or sharing
agreement. PSR (A) has not been a member of an Affiliated Group filing
a consolidated federal income Tax Return or (B) does not have any
Liability for the Taxes of any other Person under Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(vi) Intentionally Omitted.
(vii) The unpaid Taxes of PSR (A) did not, as of the Most Recent
Fiscal Month End, exceed the reserve for Tax Liability (rather than any
8
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (B) do not exceed
that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of PSR in filing
its Tax Returns.
(l) Real Property.
(i) PSR owns no real property.
(ii) Section 4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to PSR. The
Stockholders have delivered to NMS correct and complete copies of the
leases and subleases listed in Section 4(l)(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in Section 4(l)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true
and correct with respect to the underlying lease;
(G) PSR has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(H) to the Knowledge of the Major Stockholders, all
facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and
9
have been operated and maintained in accordance with applicable
laws, rules, and regulations;
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
(J) to the Knowledge of the Major Stockholders, the owner
of the facility leased or subleased has good and marketable title
to the parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
installments of special easements not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
(m) Intellectual Property.
(i) PSR owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary
or desirable for the operation of the business of PSR as presently
conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by PSR immediately prior to the
Closing hereunder is owned or available for use by PSR on identical
terms and conditions immediately subsequent to the Closing hereunder.
PSR has taken all reasonably necessary and desirable action to maintain
and protect each item of Intellectual Property that it owns or uses.
(ii) to the Knowledge of the Major Stockholders, PSR has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and
none of the Stockholders and the directors and officers of PSR has ever
received, or has Knowledge of, any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that PSR must license or refrain from
using any Intellectual Property rights of any third party). To the
Knowledge of any of the Stockholders and the directors and officers of
PSR, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of PSR.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to PSR with respect to any
of its Intellectual Property, identifies each pending patent application
or application for registration which PSR has made with respect to any
of its Intellectual Property, and identifies each license, agreement, or
other permission which PSR has granted to any third party with respect
to any of its Intellectual Property (together with any exceptions). The
Stockholders have delivered to NMS correct and complete copies of all
such patents, registrations, applications, licenses, agreements, and
10
permissions (as amended to date) and have made available to NMS correct
and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Section
4(m)(iii) of the Disclosure Schedule also identifies each trade name or
unregistered trademark of PSR used by it in connection with any of its
businesses. With respect to each item of Intellectual Property required
to be identified in Section 4(m)(iii) of the Disclosure Schedule:
(A) PSR possesses all right, title, and interest in and to
the item, free and clear of any Security Interest, license, or
other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) PSR has not ever agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) Section 4(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that PSR
makes material use of pursuant to license, sublicense, agreement, or
permission other than commercially available software development, word
processing, and spreadsheet software and other similar office software
products. The Stockholders have delivered to NMS correct and complete
copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of Intellectual
Property required to be identified in Section 4(m)(iv) of the Disclosure
Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in
full force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby;
(C) to the Knowledge of the Major Stockholders, no party
to the license, sublicense, agreement, or permission is in breach
or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
11
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) ((C) being
to the Knowledge of the Major Stockholders) above are true and
correct with respect to the underlying license;
(F) to the Knowledge of the Major Stockholders, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of the Major Stockholders, is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(H) PSR has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(v) To the Knowledge of any of the Stockholders and the
directors and officers of PSR, PSR will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the
continued operation of its business as presently conducted and as
presently proposed to be conducted.
(vi) None of the Stockholders and the directors and officers of
PSR had any Knowledge of any new products, inventions, procedures, or
methods of manufacturing or processing that any competitors or other
third parties have developed which reasonably could be expected to
supersede or make obsolete any product or process of PSR.
(n) Tangible Assets. PSR owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted and as presently proposed to be conducted. Each such
tangible asset is free from defects (patent and latent) has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used and presently is proposed to be used.
(o) Inventory. The inventory of PSR consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto)
12
as adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of PSR.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which PSR is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments
in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to PSR, or involve consideration in
excess of $25,000 other than computer software and hardware support and
maintenance agreements entered into in the Ordinary Course of Business;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$25,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality (other than those
entered into in the Ordinary Course of Business) or noncompetition;
(vi) any agreement with any of the Stockholders and their
Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement or license relating in whole or in part to the
Intellectual Property of PSR (including, without limitation, any
agreement or license under which PSR has the right to use any
13
Intellectual Property owned or held by a third party or by NMS) which is
material to the business, financial condition or results of operations
of PSR (other than standard licenses for software that is commercially
available to the public in the Ordinary Course of Business);
(xii) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of PSR; or
(xiii) any agreement pursuant to which material benefits
accrue to the other party or parties to such contract as a result of the
purchase and sale transactions contemplated by this Agreement,
including, without limitation, rights of termination or modification of
such agreements;
(xiv) any agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000; or
(xv) any other agreement not made in the Ordinary Course of
Business.
The Stockholders have delivered to NMS a correct and complete copy of each
written agreement listed in Section 4(p) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 4(p) of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of PSR are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, subject
only to the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of PSR.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of PSR.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which PSR has been a party, a
14
named insured, or otherwise the beneficiary of coverage at any time within the
past twelve months:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither PSR nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the
policy has repudiated any provision thereof. To the Knowledge of the Major
Stockholders, PSR has been covered during the past 10 years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. Section 4(s) of the Disclosure
Schedule describes any self-insurance arrangements affecting PSR.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth
each instance in which PSR (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the Stockholders and the directors and officers (and
employees with responsibility for litigation matters) of PSR, is threatened to
be made a party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None
of the actions, suits, proceedings, hearings, and investigations set forth in
Section 4(t) of the Disclosure Schedule could result in any material adverse
change in the business, financial condition, operations, results of
operations, or future prospects of PSR. None of the Stockholders and the
directors and officers (and employees with responsibility for litigation
matters) of PSR has any reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against
PSR.
15
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by PSR has been in conformity with all applicable contractual
commitments and all express and implied warranties, and PSR does not have any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
PSR. No product manufactured, sold, leased, or delivered by PSR is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Section 4(u) of the Disclosure
Schedule includes copies of the standard terms and conditions of sale or lease
for PSR (containing applicable guaranty, warranty, and indemnity provisions).
(v) Product Liability. PSR does not have any Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by PSR.
(w) Employees. To the Knowledge of any of the Stockholders and the
directors and officers of PSR, no executive, key employee, or group of
employees has any plans to terminate employment with PSR. PSR is not a party
to or bound by any collective bargaining agreement, nor has any of them
experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. PSR has not committed any unfair labor
practice. None of the Stockholders and the directors and officers of PSR has
any Knowledge of any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of PSR.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule lists each Employee
Benefit Plan that PSR or any member of a Controlled Group of
Corporations of which PSR is a member ("PSR Controlled Group Member")
maintains or has ever maintained, has an obligation to contribute to, or
has any liability thereunder.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) is administered in compliance
with its terms and complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and
other applicable laws, rulings and other authority issued
thereunder.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary
16
Plan Descriptions) have been timely filed or distributed
appropriately with respect to each such Employee Benefit Plan as
required by ERISA, the Code and other applicable law. The
requirements of ERISA Sections 601-609 and of Code Section 4980B
have been met with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which
are due have been paid to each fund or trust established pursuant
to the terms of an Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have been paid
to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of PSR. All premiums
or other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and has received, within the last two
years, a favorable unrevoked determination letter from the
Internal Revenue Service which determination letter may still be
relied upon as to such tax qualified status, and no circumstances
have occurred that would adversely affect the tax qualified status
of any such Employee Pension Benefit Plan.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan equals or
exceeds the present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods, factors,
and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination. Neither PSR nor a PSR
Controlled Group Member has incurred any accumulated funding
deficiency within the meaning of ERISA.
(F) PSR has delivered to NMS correct and complete copies
of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that PSR or a PSR
Controlled Group Member maintains or ever has maintained or to which PSR
or a PSR Controlled Group Member contributes, ever has contributed, or
ever has been required to contribute:
17
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan has been completely or partially terminated
or been the subject of a Reportable Event as to which notices
would be required to be filed with the PBGC. No proceeding by the
PBGC to terminate any such Employee Pension Benefit Plan has been
instituted or threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary 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 such Employee Benefit Plan. No action, suit,
proceeding, hearing, arbitration, or investigation with respect to
the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is
pending or threatened alleging any breach of the terms of any such
Employee Benefit Plan or of any Fiduciary duties thereunder or
violation of any applicable law with respect to any such Employee
Benefit Plan. None of the Stockholders and the directors and
officers (and employees with responsibility for employee benefits
matters) of PSR or of a PSR Controlled Group Member has any
Knowledge of any Basis for any such action, suit, proceeding,
hearing, or investigation.
(C) PSR or a PSR Controlled Group Member has not incurred,
and none of the Stockholders and the directors and officers (and
employees with responsibility for employee benefits matters) of
PSR or of a PSR Controlled Group Member has any reason to expect
that PSR or a PSR Controlled Group Member will incur any Liability
to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal liability, as
determined under ERISA Sections 4201 et seq.) or under the Code
with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) PSR or a PSR Controlled Group Member does not contribute to,
ever has contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal liability,
as determined under ERISA Sections 4201 et seq.) under any Multiemployer
Plan.
(iv) PSR or a PSR Controlled Group Member does not maintain or
ever has maintained or contributes, ever has contributed to, or ever has
been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with ERISA
Sections 601-609 and Code Section 4980B).
18
(v) Subject to applicable requirements of ERISA, neither any
provision of any Employee Benefit Plan nor any agreement with any
Employee nor any representation or course of conduct by or on behalf of
PSR or any PSR Controlled Group Member would prevent the amendment or
termination after the Closing Date of any Employee Benefit Plan without
liability to PSR or any PSR Controlled Group Member.
(vi) No Employee Benefit Plan is a "multiple employer welfare
arrangement" within the meaning of ERISA Section 3(40).
(vii) With respect to any Employee Benefit Plans that is self-
insured, no claims have been made pursuant to any such plan that have
not yet been paid and no injury, sickness or other medical condition has
been incurred with respect to which claims may be made pursuant to any
such plan.
(viii) Neither PSR nor any PSR Controlled Group Member
maintains or has any obligation to contribute to any "voluntary
employees' beneficiary association" within the meaning of Code Section
501(c)(9) or other funding arrangement for the provision of welfare or
fringe benefits.
(y) Guaranties. PSR is not a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person.
(z) Environment, Health, and Safety.
(i) PSR has complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, PSR has obtained and been in
compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
(ii) PSR does not have any Liability and has not handled or
disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition,
or owned or operated any property or facility in any manner that could
form the Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against PSR
giving rise to any Liability) for damage to any site, location, or body
of water (surface or subsurface), for any illness of or personal injury
to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
19
(iii) All properties and equipment used in the business of PSR
have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(aa) Certain Business Relationships with PSR. None of the Stockholders
and their Affiliates (other than Tek-Nique, Inc.) has been involved in any
business arrangement or relationship with PSR within the past 12 months other
than being Stockholders, officers, directors or employees, and none of the
Stockholders and their Affiliates (other than Tek-Nique, Inc.) owns any asset,
tangible or intangible, which is used in the business of PSR.
(bb) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
4A. Representations and Warranties Concerning NMS. NMS represents and
warrants to the Stockholders that the statements contained in this Section 4A
are correct and complete in all material respects as of the date of this
Agreement, except as set forth in Annex III attached hereto.
(a) Organization of NMS. NMS is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware.
(b) Authorization of Transaction. NMS has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of NMS,
enforceable in accordance with its terms and conditions. NMS need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
NMS is subject or any provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which NMS is a party
or by which it is bound or to which any of its assets is subject.
(d) Filings with the SEC. NMS has made all filings with the SEC
that it has been required to make under the Securities Exchange Act
(collectively the "Public Reports"). Each of the Public Reports has
20
complied with the Securities Exchange Act in all material respects. None
of the Public Reports, as of their respective dates, contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(e) Financial Statements. NMS has filed a Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996 (the "Most Recent
Fiscal Quarter End") and an Annual Report on Form 10-K for the fiscal
year ended December 31, 1995. The financial statements included in or
incorporated by reference into these Public Reports (including the
related notes and schedules) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and
present fairly the financial condition of NMS and its Subsidiaries as of
the indicated dates and the results of operations of NMS and its
Subsidiaries for the indicated periods; provided, however, that the
interim statements are subject to normal year-end adjustments.
(f) Events Subsequent to Most Recent Fiscal Quarter End. Since
the Most Recent Fiscal Quarter End, there has not been any material
adverse change in the financial condition of NMS and its Subsidiaries
taken as a whole.
(g) Undisclosed Liabilities. None of NMS and its Subsidiaries
has any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for taxes, except for (i)
liabilities set forth on the face of the balance sheet dated as of the
Most Recent Fiscal Quarter End (rather than in any notes thereto) and
(ii) liabilities which have arisen after the Most Recent Fiscal Quarter
End in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation
of law).
(h) Brokers' Fees. NMS has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any
Stockholder could become liable or obligated.
(i) Investment. NMS is not acquiring PSR Shares with a view to
or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
5. Obligations at the Closing.
(a) Obligations of the Stockholders at the Closing. At the Closing,
the Stockholders shall deliver or cause to be delivered to NMS the following:
21
(i) Certificates representing all of the shares of capital stock
to be sold by the Stockholders pursuant hereto, duly endorsed for
transfer to NMS;
(ii) Resignations of all of the members of the board of directors
of PSR, effective as of the close of business on the Closing Date;
(iii) A counterpart of the Escrow Agreement, duly executed by the
Stockholders and Levun, Goodman & Cohen;
(iv) An opinion of Levun, Goodman & Cohen in the form of Exhibit
5(a)(iv) hereto; and
(v) The third party consents, if any, set forth on Exhibit
5(a)(v) hereto.
(b) Obligations of NMS at the Closing. At the Closing, NMS shall
deliver to or to the benefit of the Selling Stockholders the following:
(i) The consideration specified in Section 2(b)(i);
(ii) A counterpart of the Escrow Agreement, duly executed by NMS
and Choate, Hall & Stewart; and
(iii) An opinion of Choate, Hall & Stewart in the form of Exhibit
5(b)(iii) hereto.
6. Post-Closing Agreements. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7
below). The Stockholders acknowledge and agree that from and after the
Closing NMS will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating
to PSR.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving PSR, each of the other Parties will
cooperate with him or it and his or her counsel in the contest or defense,
make available their personnel, and provide such testimony and access to their
22
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Transition. None of the Stockholders will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of PSR from maintaining the
same business relationships with PSR after the Closing as it maintained with
PSR prior to the Closing. Each of the Stockholders will refer all customer
inquiries relating to the businesses of PSR to NMS from and after the Closing.
(d) Confidentiality. Each of the Stockholders will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to NMS or destroy, at the request and option of NMS, all tangible
embodiments (and all copies) of the Confidential Information which are in his
or her possession. In the event that any of the Stockholders is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that Stockholder
will notify NMS promptly of the request or requirement so that NMS may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Stockholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, that Stockholder may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing
Stockholder shall use his or her reasonable best efforts to obtain, at the
reasonable request of NMS, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as NMS shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available
to the public immediately prior to the time of disclosure.
7. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. The representations
and warranties made by each of the Parties in this Agreement shall be deemed
to have been relied upon by the other Parties hereto and shall survive the
Closing, provided that in no event shall any Party be entitled to seek
indemnification in respect of any breach of a representation or warranty made
herein (except any made in Section 3(a) or Section 4(b) above, as to which
such remedy shall not be so limited) pursuant to this Section 7 unless the
Party seeking indemnification has made a written claim therefor pursuant to
Section 9(h) below prior to January 1, 1998.
(b) Indemnification Provisions for Benefit of NMS.
23
(i) In the event any of the Stockholders breaches (or in the
event any third party alleges facts that, if true, would mean any of the
Stockholders has breached) any of their representations, warranties, and
covenants contained herein, provided that NMS makes a written claim for
indemnification against any of the Stockholders by notice to the
Representatives pursuant to Section 9(h) below prior to January 1, 1998,
then each of the Major Stockholders agrees to indemnify NMS from and
against the entirety of any Adverse Consequences NMS may suffer through
and after the date of the claim for indemnification (including any
Adverse Consequences NMS may suffer after December 31, 1997) resulting
from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach); provided that, in no event shall either
of the Major Stockholders be liable hereunder for an amount which
exceeds the total aggregate consideration paid to all of the
Stockholders hereunder for the sale of all of the PSR Shares to NMS.
(ii) In the event NMS breaches (or in the event any third party
alleges facts that, if true, would mean NMS has breached) any of its
representations, warranties, and covenants contained herein, provided
that Representatives makes a written claim for indemnification against
NMS pursuant to Section 9(h) below prior to January 1, 1998, then NMS
agrees to indemnify each of the Stockholders from and against the
entirety of any Adverse Consequences the Stockholders may suffer through
and after the date of the claim for indemnification (including any
Adverse Consequences the Stockholders may suffer after December 31,
1997) resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(c) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 7, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
24
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7(c)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim, (B)
the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 7(c)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 7.
(d) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. Each of the Stockholders hereby agrees
that he will not make any claim for indemnification against PSR by reason of
the fact that he was a director, officer, employee, or agent of any such
entity or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by NMS against
25
such Stockholder (whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable law, or otherwise).
8. Tax Matters.
(a) Cooperation on Tax Matters.
(i) NMS and the Stockholders shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with
the filing of Tax Returns for PSR for all periods after or prior to the
Closing Date which are filed after the Closing Date and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Stockholders agree (A) to retain all books and records with respect to
Tax matters pertinent to PSR relating to any taxable period beginning
before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by NMS, any extensions thereof)
of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if NMS so requests, the
Stockholders shall allow NMS to take possession of such books and
records.
(ii) NMS and Stockholders further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(iii) NMS and Stockholders further agree, upon request, to provide
the other party with all information that either party may be required
to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(b) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving PSR shall be terminated as of the
Closing Date and, after the Closing Date, PSR shall not be bound thereby or
have any liability thereunder.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be paid by Stockholders when due, and
Stockholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales,
26
use, stamp, and other Taxes and fees, and, if required by applicable law, NMS
will, and will cause its affiliates to, join in the execution of any such Tax
Returns and other documentation.
9. Miscellaneous.
(a) Nature of Certain Obligations. The representations, warranties,
and covenants in this Agreement are joint and several obligations. Joint and
several means that each of the Major Stockholders will be responsible to the
extent provided in Section 7 above for the entirety of any Adverse
Consequences NMS may suffer as a result of any breach thereof.
(b) Press Releases and Public Announcements. The Stockholders shall
not issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of NMS.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of his or her rights, interests, or obligations hereunder without the
prior written approval of NMS and the Stockholders; provided, however, that
(i) NMS may (A) assign any or all of its rights and interests hereunder to one
or more of its Affiliates and (B) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases NMS
nonetheless shall remain responsible for the performance of all of its
obligations hereunder) and (ii) each of the Stockholders may assign, after
written notice to NMS, the related portion of his or her rights to
consideration hereunder so long as such Stockholder remains liable for the
full performance of all of his or her obligations hereunder.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
27
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the
Stockholders or to
the Representatives: At the addresses Copy to: Levun, Goodman & Cohen
set forth below 500 Skokie Boulevard
their respective Suite 650
signatures Northbrook, Illinois 60062
Attn:Michael J. Cohen, Esq.
If to NMS: 8 Erie Drive Copy to: Choate, Hall &
Natick, MA 0l760-1334 Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attn: Richard N. Hoehn,
Esq.
If to the Escrow Agents: At their respective addresses set forth above
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of The Commonwealth of Massachusetts
without giving effect to any choice or conflict of law provision or rule
(whether of The Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than The
Commonwealth of Massachusetts.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by NMS
and the Stockholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
28
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his, her or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Stockholders
agree that, other than the expense of financial audits of the books and
records of PSR, PSR has not borne or will bear any of the Stockholders' costs
and expenses (including any of their legal fees and expenses) in connection
with this Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the provisions
set forth in Section 9(p) below), in addition to any other remedy to which
they may be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Boston, Massachusetts,
in any action or proceeding arising out of or relating to this Agreement and
29
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
(q) Arbitration. Subject to Section 9(o), all controversies or claims
arising among the Parties (or their respective successors or permitted
assigns) hereunder which are not resolved within thirty (30) days after either
party notifies the other in writing of the controversy or claim, shall be
submitted for arbitration on demand of either party. Such arbitration
proceedings will be conducted in Boston, Massachusetts, and except as
otherwise provided in this Agreement, will be conducted in accordance with the
then-current Commercial Arbitration Rules of the American Arbitration
Association. There shall be three arbitrators. Each party hereto shall
appoint one arbitrator and the two so appointed shall appoint a third. If
either party shall refuse to appoint an arbitrator within fourteen (14) days
of demand by the other, the arbitration shall proceed without said arbitrator.
The arbitrators will have the right to award or include in the award any
relief which they deem proper in the circumstances, including, but not limited
to, money damages, interest on unpaid amounts, specific performance and other
injunctive relief, and reimbursement of arbitration costs. The award and
decision of a majority of the arbitrators will be conclusive and binding, and
judgment on the award may be entered in any court of competent jurisdiction.
Each party hereto, for itself and its respective successors and permitted
assigns, acknowledges that any arbitration award may be enforced in a court of
competent jurisdiction and waives any right to contest the validity or
enforceability of such award.
* * * * *
30
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
under seal as of the date first above written.
NATURAL MICROSYSTEMS CORPORATION
By:
Title:
STOCKHOLDERS:
*By: PSR Systems, Inc.
Attorney-in-Fact Under Herbert L. Pavey
Power of Attorney Granted Address: 911 N. Plum Grove Road
June 14, 1996 Schaumburg, IL 60173
By: Herbert L. Pavey
Title: Vice President
Julius M. Rothschild
Address: 1053 Apple Creek
Des Plaines, IL 60016
*
John Alexander
Address: 2118 Neff Court
Lisle, IL 60532
*
Celeste Baril
Address: 380 Shenandoah Court
Deerfield, IL 60015
*
Mark Davis
Address: 1510 Valley Lake Drive
Apt. 545
Schaumburg, IL 60195
31
*
Jeff Dement
Address: 1005 W. Firestone Drive
Hoffman Estates, IL 60195
*
Michael Firman
Address: 710 S. Charles St.
Naperville, IL 60540
*
Mary Hubner
Address: 5180 N. Tamarack Drive
Barrington, IL 60010
*
Joe Lee
Address: 79 E. Garfield
Palatine, IL 60067
*
Adam Machalek
Address: 3 Sweetwater Court
Lake in the Hills, IL 60102
*
Tedd Pierce
Address: 267 S. Bennett Lane
Des Plaines, IL 60016
32
*
Jeff Putnam
Address: 991 Creekview Lane
Lake in the Hills, IL 60102
*
Jeff Rego
Address: 6N970 Sauber Road
Maple Park, IL 60151
*
Steve Witt
Address: 8650 Long Avenue
Skokie, IL 60077
PSR Systems, Inc.
By: Herbert L. Pavey
Title: Vice President
33
Appendix 1
Certain Definitions
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a).
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Closing" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(c).
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"Confidential Information" means any information concerning the business
and affairs of PSR that it not already generally available to the public.
"Contingent Amount" has the meaning set forth in Section 2(b)(iii).
"Controlled Group of Corporations" means members of a controlled group
of corporations, trades or businesses which are under common control, or
affiliated service groups, within the meaning set forth in Code Sections
414(b), (c), and (m), respectively, and as further provided in Code Section
414(o).
"Disclosure Schedule" has the meaning set forth in Section 4.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2), and the regulations promulgated thereunder.
1
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1), and the regulations promulgated thereunder.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Escrow Agents" has the meaning set forth in Section 2(e).
"Escrow Agreement" has the meaning set forth in Section 2(e).
"Excess Loss Account" has the meaning set forth in IRS Reg. Section
1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 4(g).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d).
"Indemnifying Party" has the meaning set forth in Section 7(d).
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
2
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Major Stockholders" has the meaning set forth in Section 3.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g).
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g).
"Most Recent Fiscal Quarter End" has the meaning set forth in Section
4A(e).
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g).
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"NMS" has the meaning set forth in the preface.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface.
"PBGC" means the Pension Benefit Guaranty Corporation.
3
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Public Reports" has the meaning set forth in Section 4A(d).
"PSR" has the meaning set forth in the preface.
"PSR Share" means any share of the Common Stock, no par value, of PSR.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Representatives" has the meaning set forth in Section 2(e).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Stockholder" has the meaning set forth in the preface.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 7(d).
4
