EXHIBIT 2.1
AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
AMONG
ETINUUM, INC.
(FORMERLY INTEK INFORMATION, INC.),
ACORN INFORMATION SERVICES, INC.,
AND
THE SHAREHOLDERS NAMED HEREIN
DATED AS OF MARCH 20, 2000
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS................................................................ 1
ARTICLE 2 PURCHASE AND SALE OF ACORN STOCK........................................... 5
2.1 Purchase Price............................................................... 5
2.2 Contingent Consideration..................................................... 6
2.3 Etinuum Stock Options........................................................ 7
2.4. Non-Employee Shareholder..................................................... 8
2.5 Closing...................................................................... 8
2.6 Transaction Costs............................................................ 10
2.7 Transaction Advisor Fees..................................................... 10
ARTICLE 3............................................................................ 11
3.1 Authorization Capitalization; Outstanding Shares............................. 11
3.2. Organization; Good Standing; Power; Etc...................................... 11
3.3 Agreements Relating to Stock; Options; Warrants; Restrictions on Shares; Etc. 12
3.4 Charter and Bylaws; Officers and Directors................................... 12
3.5 No Subsidiaries.............................................................. 12
3.6 Authorizations and Enforceability............................................ 12
3.7 Effect of Agreement, Etc..................................................... 12
3.8 Restrictions; Burdensome Agreements.......................................... 13
3.9 Government Consents.......................................................... 13
3.10 Compliance; Licenses and Permits............................................. 13
3.11 Financial Statements; Absence of Undisclosed Liabilities..................... 14
3.12 Tax Matters.................................................................. 15
3.13 Title to Properties; Absence of Liens and Encumbrances; Etc.................. 15
3.14 Facilities; Equipment and Condition.......................................... 16
3.15 Insurance.................................................................... 16
3.16 Contracts.................................................................... 16
3.17 Litigation................................................................... 17
3.18 Intellectual Property and Other Intangible Assets............................ 18
3.19 No Interest in Competitors; Etc.............................................. 18
3.20 Books and Records............................................................ 19
3.21 Insider Transactions......................................................... 19
3.22 Employees.................................................................... 19
3.23 Union Contracts; Labor Relations; Etc........................................ 19
3.24 Employee Benefit Plans....................................................... 20
3.25 Bank Accounts and Safe Deposit Arrangements.................................. 20
3.26 Powers of Attorney........................................................... 20
3.27 No Finder.................................................................... 20
3.28 No Material Adverse Change................................................... 20
3.29 Investment Representations................................................... 21
3.30 Suppliers and Customers...................................................... 23
3.31 Securities Act, Etc.......................................................... 23
3.32 Lawyers and Accountants...................................................... 23
3.33 Accounting Controls.......................................................... 23
3.34 Names........................................................................ 23
3.35 Material Misstatements or Omissions.......................................... 24
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3.36 Not A United States Real Property Interest................................... 24
3.37 Other........................................................................ 24
3.38 Year 2000 Compliance......................................................... 24
3.39 Due Diligence................................................................ 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INTEK.................................... 25
4.1 Organization; Good Standing; Power; Etc...................................... 25
4.2 Restrictions; Burdensome Agreements.......................................... 26
4.3 Subsidiaries................................................................. 26
4.4 Capitalization; Outstanding Shares........................................... 26
4.5 Charter and Bylaws; Officers and Directors................................... 27
4.6 Authorization................................................................ 27
4.7 Financial Statements......................................................... 27
4.8 No Material Adverse Change................................................... 27
4.9 Material Liabilities......................................................... 27
4.10 Material Contracts........................................................... 28
4.11 Compliance with Other Instruments, None Burdensome, Etc...................... 28
4.12 Litigation, Etc.............................................................. 28
4.13 Governmental Consents........................................................ 28
4.14 Intek Tax Matters............................................................ 29
4.15 Offering..................................................................... 29
4.16 Brokers or Finders........................................................... 30
4.17 Compliance; Licenses and Permits............................................. 30
4.18 Material Misstatements or Omissions.......................................... 30
4.19 Lawyers and Accountants...................................................... 31
4.20 Effect of Agreement, Etc..................................................... 31
4.21 Other........................................................................ 31
ARTICLE 5 OTHER COVENANTS AND AGREEMENTS............................................. 31
5.1 Access to Information........................................................ 32
5.2 Business Relationships....................................................... 32
5.3 No Shop...................................................................... 32
5.4 Amendments................................................................... 33
5.5 Resignations and Closing Date Board.......................................... 33
5.6 Signature Cards.............................................................. 33
5.7 Additional Financial Statements.............................................. 33
5.8 Satisfaction of Conditions................................................... 33
5.9 Tax Elections - Post Closing Change.......................................... 33
5.10 This Section intentionally left blank........................................ 33
5.11 Confidentiality.............................................................. 33
5.12 Covenant Not to Compete...................................................... 34
5.13 Governmental Filings......................................................... 36
5.14 Good Faith................................................................... 36
5.15 Existing Acorn Loans; Bridge Loan............................................ 36
5.16 Unwind Provision; Changes in Control; Intek IPO.............................. 36
5.17 Board Observer; Executive Management Committee............................... 36
ARTICLE 6 CONDITIONS OF CLOSING..................................................... 37
6.1 Intek's Conditions of Closing................................................ 37
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6.2 Acorn's Conditions of Closing................................................ 38
ARTICLE 7 AMENDMENT.................................................................. 40
ARTICLE 8 INDEMNIFICATION........................................................... 40
8.1 Shareholders' General Indemnification Covenants.............................. 40
8.2 Procedures for Indemnification Pursuant to Section 8.1....................... 41
8.3 Certain Information.......................................................... 42
8.4 Release by Shareholders...................................................... 42
8.5 Indemnification by Intek..................................................... 43
8.6 Exclusive Remedy............................................................. 43
8.7 No Rights of Shareholders Against Acorn...................................... 43
8.8 Limits on Indemnification; Escrow............................................ 43
ARTICLE 9 MISCELLANEOUS............................................................. 45
9.1 Notice....................................................................... 45
9.2 Execution of Additional Documents............................................ 46
9.3 Binding Effect; Benefits..................................................... 46
9.4 Entire Agreement............................................................. 46
9.5 Governing Law................................................................ 47
9.6 Arbitration; Consent to Jurisdiction......................................... 47
9.7 Attorneys' Fees and Costs.................................................... 47
9.8 Survival..................................................................... 48
9.9 Counterparts................................................................. 48
9.10 Headings..................................................................... 48
9.11 Waivers...................................................................... 48
9.12 Merger of Documents.......................................................... 48
9.13 Incorporation of Exhibits and Schedules...................................... 49
9.14 Severability................................................................. 49
9.15 Assignability................................................................ 49
9.16 No Action for Failure to Deliver Opinions, Etc............................... 49
9.17 Effectiveness of Agreement................................................... 49
9.18 Reference to Shareholders Agreement.......................................... 49
9.19 Action by Shareholders....................................................... 49
9.20 Shareholder Family LLC's..................................................... 49
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SCHEDULES TO
AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
AMONG
ETINUUM, INC., ACORN INFORMATION SERVICES, INC. and
THE SHAREHOLDERS NAMED HEREIN
Acorn; Key Shareholders
Schedule Number & Description
2.2.2 Shareholder Percentage Purchase Price
3.1 Capitalization
3.2 Good Standing States
3.3 Agreements Relating to Stock
3.4.A Articles and Bylaws
3.4.B Officers and Directors
3.5 Subsidiaries
3.7. Effects of Agreement
3.8 Restrictions; Burdensome Agreements
3.10 Permits, Licenses
3.11.1 Financial Statements
3.11.2 Exceptions to Financial Statements
3.12 Estimate of Accrued Taxes
3.13 Title to Properties and Assets; Liens and Encumbrances
3.14 Furniture, Fixtures and Equipment
3.15 Insurance
3.16 Leases and Other Material Contracts
3.17 Litigation
3.18.1 Trademarks, Tradenames, Patents, Copyrights; Exceptions to Right
to Use
3.18.2 Exceptions to Unrestricted Rights to Use Trade Secrets, Know-How,
Inventions, Designs, Etc.
3.18.3 Third Party Infringement of Intellectual Property
3.18.4 Conveyances of Intellectual Property
3.19 Interests in Competitors
3.21 Insider Transactions
3.23 Labor and Employment Disputes
3.24 Employee Benefit Plans
3.25 Banking and Investment Information
3.28 Certain Changes in Business or Operations
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3.29.7 Shareholder Mailing Addresses and States of Residence
3.30 Material Agreements with Customers or Suppliers
5.5 Resignations and Closing Date Board
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Etinuum
Schedule Number & Description
4.1 Good Standing States
4.4 Capitalization
4.5.A Charter and Bylaws
4.5.B Officers and Directors
4.7 Financial Statements
4.9 Material Undisclosed Liabilities
4.10 Material Contracts and Commitments
4.12 Litigation
4.14 Tax Exceptions
4.20 Effect of Agreement
5.5 Resignations and Closing Date Board
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EXHIBITS TO
AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
AMONG
ETINUUM, INC. (FORMERLY INTEK INFORMATION, INC.),
ACORN INFORMATION SERVICES, INC.
and THE SHAREHOLDERS NAMED HEREIN
Exhibit Number & Description
2.2.4 Form of Amended and Restated Registration Rights Agreement
2.2.5 Etinuum Shareholders Agreement
2.7 Transaction Advisor Fee Payment Agreement
3.36 FIRPTA Affidavit
5.3 Standstill Agreement dated June 4, 1999
6.1.1 Form of Acorn Employment Agreements and Amended and Restated
Employee Stock Restriction Agreement
6.1.2 Form of Acorn Officer's Certificate
6.1.6 Form of Acorn Secretary's Certificate
6.1.7 Form of Opinion of Counsel for Acorn and Key Shareholders
6.2.2 Form of Etinuum Officer's Certificate
6.2.5 Form of Etinuum Secretary's Certificate
6.2.6 Form of Opinion of Counsel for Etinuum
8.8.3 Form of Escrow Agreement
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AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
AMONG
ETINUUM, INC.
(FORMERLY INTEK INFORMATION, INC.),
ACORN INFORMATION SERVICES, INC.
AND THE SHAREHOLDERS NAMED HEREIN
This Amended and Restated Share Purchase Agreement is dated as of March 20,
2000, and is entered into by and among Etinuum, Inc., formerly Intek
Information, Inc., a Delaware corporation ("Etinuum"), Acorn Information
Services, Inc., a Delaware corporation ("Acorn"), and Xxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxxx Xxxxxxxxxx and Xxxxx Xxxxx (referred to herein individually by name
and collectively as the "Key Shareholders") and all other former shareholders of
Acorn common stock listed on the signature page hereof (referred to collectively
as the "Non Employee Shareholders" and together with the Key Shareholders as the
"Shareholders").
RECITALS
A. Acorn and Etinuum entered into a Share Purchase Agreement dated as of
October 30, 1999 (the "Agreement"), pursuant to which Etinuum acquired all of
the outstanding shares of capital stock of Acorn from the Shareholders under the
terms and conditions provided therein.
B. Etinuum and the Shareholders and Acorn desire to amend and restate the
Share Purchase Agreement and to replace it in its entirety with this Amended and
Restated Share Purchase Agreement (the "Amended and Restated Agreement").
C. The parties hereto desire the agreements entered into concurrently with
the Closing to remain in full force and effect, including: (i) the employment
agreements (which shall include non-compete covenants), among each of the Key
Shareholders, Etinuum and Acorn; and (ii) the escrow agreement among Etinuum,
the Shareholders and a mutually agreed upon escrow agent for the escrow of the
Escrow Consideration (as hereinafter defined). Each of those documents and the
other operative documents and certificates executed and delivered in connection
with the Agreement is sometimes referred to individually as a "Document" or
collectively as the "Documents." The Registration Rights Agreement and Employee
Stock Restriction Agreement are amended and restated concurrently herewith.
ARTICLE 1
DEFINITIONS
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The following terms have the meanings set forth below:
"Acorn" means Acorn Information Services, Inc., a Delaware corporation.
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"Acorn Shares" means all of the issued and outstanding shares of capital
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stock of Acorn.
"Acorn Officers Loans" means those certain loans from various officers of
--------------------
Acorn to Acorn as described on Schedule 3.21.
"Annual Period" has the definition set forth in Section 2.2.
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"Base Consideration" means the amount payable to the Shareholders by
------------------
Etinuum at Closing in consideration for the Acorn Shares and as provided in
Section 2.1 herein.
"Bridge Loan" means the loan to Acorn by Etinuum in the principal amount of
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$200,000 pursuant to a Promissory Note executed by Acorn on June 4, 1999 for
regular payroll and priority accounts payable disbursements and secured by
certain collateral pursuant to a security agreement and by the personal
guarantees of the Key Shareholders.
"Change in Control" means (i) a sale, transfer or disposition of all or
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substantially all of the assets of Etinuum; (ii) a merger or consolidation in
which Etinuum is not the surviving corporation, other than a reincorporation
merger; or (iii) a transaction in which a person and his or her affiliates, who
prior to the transaction are the beneficial owners of less than fifty percent
(50%) of the outstanding common stock of Etinuum, hold, as a result of the
transaction, two-thirds or more of Etinuum's outstanding common stock on an as-
converted to common basis.
"Closing" means the closing of the transactions contemplated by the
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Agreement held on October 30, 1999.
"Closing Date" means October 30, 1999.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Common Stock" means shares of Etinuum common stock, $0.0001 par value per
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share.
"Confidential Information" has the meaning set forth in Section 5.11
------------------------
herein.
"Contingent Consideration" means the amount payable to the Key Shareholders
------------------------
by Etinuum in consideration for the Acorn Shares that is contingent upon the Key
Shareholders satisfying certain conditions as provided in Section 2.2 herein.
"Date of Termination" has the meaning given to it in the Employment
-------------------
Agreement.
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"Employment Agreement" means the employment agreement between Etinuum and
--------------------
each of the Key Shareholders in substantially the form attached hereto as
Exhibit 6.1.1, executed concurrently with the Agreement.
"Escrow Consideration" means the consideration defined in Section 8.8.3
--------------------
herein.
"Escrow Agreement" means the escrow agreement described in Section 8.8.3
----------------
herein and attached as Exhibit 8.8.3 hereto.
"Etinuum" means Etinuum, Inc., a Delaware corporation, formerly Intek
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Information, Inc.
"GAAP" means United States generally accepted accounting principles applied
----
in accordance with Etinuum's then current accounting policies.
"IPO" means an initial public offering of the capital stock of Etinuum
---
under the Securities Act of 1933, as amended.
"Key Shareholders" means Xxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxxxxx and
----------------
Xxxxx Xxxxx.
"Material" means a material effect on (i) the business operations,
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condition (financial or otherwise), prospects, assets, liabilities or results of
operations of either Acorn or Etinuum, taken as a whole, (ii) the value,
condition or marketability of any material assets of either Acorn or Etinuum,
taken as a whole or (iii) the ability of either Acorn or Etinuum to perform on a
timely basis its obligations under any material contract or to exercise or
enforce any of its material rights, powers or remedies under any material
contract; provided, that no prospective change in the business, operations,
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condition (financial or otherwise) or results of operations of Acorn or Etinuum,
on account of general economic conditions or local, regional, national or
international industry conditions shall be deemed to constitute a material
effect.
"Net Operating Income" means revenues from continuing operations less
--------------------
operating expenses reported in accordance with GAAP.
3
"Non-Employee Shareholders" means the holders of Acorn common stock who are
-------------------------
not Key Shareholders.
"Person" is to be broadly construed and includes, without limitation, any
------
entity, body, association, governmental body or agency, natural person or trust.
"Return" means any report, return, statement, estimate, declaration,
------
notice, form or other information required to be supplied to a taxing authority
in connection with Taxes (as hereafter defined).
"Shareholders" means the Non-Employee Shareholders and the Key
------------
Shareholders.
"Spider" means Spider Technologies, Inc., a Delaware corporation and a
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previously wholly owned subsidiary of Etinuum.
"Spider Shares" means the common stock of Spider, par value $0.0001 per
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share.
"Sustained Profitability" means (a) positive Net Operating Income for any
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consecutive 30 day period after June 1, 1999 and (b) bona fide and well founded
projections of positive Net Operating Income for the four (4) months following
such period of positive Net Operating Income.
"Sustained Profitability Consideration" means $650,000 in cash or
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immediately available funds less the outstanding principal amount and accrued
interest on the Bridge Loan as of the date of achievement of Sustained
Profitability (which amount shall be used to pay off the Bridge Loan in full),
and less Acorn's cumulative negative Net Operating Income for the period between
September 1, 1999 and the date Acorn achieves Sustained Profitability.
"Taxes" means, any taxes, assessments, duties, fees, levies, imposts,
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deductions, withholdings, including, without limitation, income, gross receipts,
ad valorem, value added, excise, real or personal property, asset, sales, use,
license, payroll, transaction, capital, net worth and franchise taxes, estimated
taxes, withholding, employment, social security, workers compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, or other governmental charges of any nature
whatsoever imposed by any government or taxing authority of any country or
political subdivision of any country and any liabilities with respect thereto,
including any penalties, additions to tax, fines or interest thereon, and
includes any liability of the company arising under any tax sharing agreement to
which the company is or has been a party.
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ARTICLE 2
PURCHASE AND SALE OF ACORN STOCK
--------------------------------
2.1 Purchase Price.
--------------
Subject to the terms and conditions set forth in this Amended and
Restated Agreement, on the date of the Closing, the Shareholders transferred and
conveyed all of the Acorn Shares free and clear of any liens, claims, security
interests or encumbrances of any kind to Etinuum, and Etinuum acquired the Acorn
Shares from the Shareholders for a purchase price (the "Purchase Price")
comprised of:
2.1.1. a non-contingent cash payment in the aggregate amount of
$100,000 (the "Base Consideration") payable in cash or immediately available
funds to the Shareholders at the Closing;
2.1.2. an obligation to pay certain contingent cash payments (the
"Contingent Consideration"), determined and paid in the amounts and subject to
the terms and conditions as set forth in Section 2.2 below;
2.1.3. options to purchase up to a total of four hundred thousand
(400,000) shares of Common Stock issued to the Key Shareholders as set forth in
Section 2.3 below;
2.1.4. the issuance of ten thousand (10,000) shares of Common Stock
to the Non-Employee Shareholder as set forth in Section 2.4 below;
2.1.5. the issuance of the Spider Shares to the Key Shareholders as
provided in the Employment Agreements and Amended and Restated Stock Restriction
Agreements to which they are a party and to the Non-Employee Shareholder as
provided in Section 2.4 herein; and
2.1.6. If Acorn achieves Sustained Profitability on or before
November 30, 1999, the Sustained Profitability Consideration payable within
thirty (30) days after Etinuum's determination that Acorn has achieved Sustained
Profitability and Etinuum shall make such payment to the Shareholders
Representative (as defined in Section 2.2.2), less any amounts to be paid into
escrow pursuant to Section 8.8 herein. If Acorn does not achieve Sustained
Profitability by November 30, 1999, Etinuum shall have no obligation to pay the
Shareholders the Sustained Profitability Consideration and Acorn's and the Key
Shareholders' obligations under the Bridge Loan will remain in effect and
interest on such loan will continue to accrue in accordance with the terms of
the Bridge Loan and the Letter of Intent. Etinuum has paid the Sustained
Profitability Consideration and the Bridge Loan has been paid in full.
5
The portion of the Purchase Price for the Acorn Shares payable at the
Closing was paid to each Shareholder based upon the percentages listed on
Schedule 2.2.2 hereto. All subsequent payments of the Purchase Price payable
hereunder shall be made based on the percentages listed in Schedule 2.2.2
pursuant to Section 2.2 below.
2.2 Contingent Consideration.
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2.2.1 Etinuum will pay to the Key Shareholders the Contingent
Consideration, if the Key Shareholders meet certain conditions as set forth in
this Section 2.2 as of October 30 of each of the years 2000, 2001 and 2002
("Year 1," "Year 2" and "Year 3," respectively, and each may be referred to as
an "Annual Period"). Etinuum will pay to the Key Shareholders an aggregate
amount of two hundred thousand dollars ($200,000) following Year 1 and two
hundred thousand dollars ($200,000) following Year 2, provided that all Key
Shareholders are employees of Etinuum throughout and as of the last day of Year
1 and of Year 2, respectively; except that, notwithstanding the foregoing, up to
one Key Shareholder may terminate his or her employment with Etinuum in Year 1
and in Year 2 for Hardship, death or Disability, and any Key Shareholders may be
terminated by Etinuum without Cause or upon a material breach of the Employment
Agreement by Etinuum. Following Year 3, Etinuum will pay to the Key
Shareholders an aggregate amount of four hundred thousand dollars ($400,000)
provided that both (i) no fewer than two Key Shareholders are employees of
Etinuum throughout and as of the last day of Year 3, and (ii) the employment of
any Key Shareholder that was terminated in Year 3 was done with the concurrence
of the Etinuum Chief Executive Officer.
Etinuum's obligation to pay the Contingent Consideration in the
amounts and at the times provided herein is expressly conditioned upon the
satisfaction of the conditions in this Section 2.2.1 by the Key Shareholders.
If any Key Shareholder's employment is terminated except as expressly provided
in this Section 2.2.1, no Key Shareholder shall be entitled to receive any
Contingent Consideration payable in that or in any subsequent Annual Period. If
a Key Shareholder's employment is terminated as permitted by this Section 2.2.1,
such Key Shareholder shall be entitled to receive the Contingent Consideration
he or she would have received in the Annual Period in which the Termination Date
occurs. No Key Shareholder shall be entitled to receive any Contingent
Consideration such terminated Key Shareholder would have been entitled to
receive in any subsequent Annual Periods had he or she continued to be employed
by Etinuum.
As used in this Section 2.2, the terms "Hardship", "Disability" and
"Cause" have the same meaning as in the Employment Agreements. Upon the
termination of a Key Shareholder's employment at any time due to Hardship, death
or Disability, such Key Shareholder shall be counted toward the two Key
Shareholders who may leave in Year 3 under this Section 2.2.1. Upon termination
by a Key Shareholder due to a material breach of the Employment Agreement by
Etinuum or termination by Etinuum without Cause, such Key Shareholder shall not
be counted toward the two Key Shareholders who may leave in Year 3.
6
2.2.2. The Contingent Consideration, if any, will be paid within
thirty (30) days after the closing of Etinuum's books of account for each Annual
Period and will be paid to each of the Key Shareholders entitled to receive
payment thereunder based on the percentages designated in Schedule 2.2.2.
2.2.3. Each Shareholder will consult with his or her own tax advisor
to determine the tax effect of each provision of this Amended and Restated
Agreement on the Shareholder, including the possible application of Section 83
of the Code.
2.3 Etinuum Stock Options and Spider Shares .
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2.3.1 On the effective date of this Amended and Restated Agreement,
Etinuum shall issue to the Key Shareholders non-qualified stock options
(the "Options") to purchase a total of four hundred thousand (400,000)
shares of Common Stock (the "Option Shares") pursuant to the provisions of
the Etinuum 1997 or 1998 Stock Option Plan and the Stock Option Agreements
entered into between Etinuum and each of the Key Shareholders. Each Key
Shareholder shall receive options to purchase such number of the Option
Shares based on the percentages designated in Schedule 2.2.2 attached
hereto. One hundred forty-one thousand six hundred sixty seven (141,667)
of the aggregate Option Shares shall vest immediately upon the date of
grant and the remaining Option Shares shall vest in equal monthly amounts
of 8,333 shares beginning on April 1, 2000 and ending on October 1, 2002.
Subject to the provisions of the 1997 or 1998 Stock Option Plan, the
Options shall have a term of ten years from the date of grant and have an
exercise price of $10.00 per share.
2.3.2 Each of the Key Shareholders agree that they will not sell,
transfer, gift, assign, pledge, encumber or otherwise dispose of
("Transfer") any shares of Common Stock acquired upon exercise of the
Option Shares prior to April 30, 2001, except in connection with any
cashless exercise of the Options as permitted by the 1997 or 1998 Stock
Option Plan, or if to another Key Shareholder or to a partnership, trust or
other entity formed for estate planning purposes, or if in connection with
any Change in Control of Etinuum. Any Transfer, whether voluntary or
involuntary or by operation of law, which is made in violation of this
Section 2.3 shall be null and void and have no effect, and Etinuum shall
not recognize any such Transfer or recognize the transferee as the holder
of such Common Stock for any purpose.
2.3.3 In addition to the Options issuable pursuant to this Section
2.3, the Key Shareholders shall receive Spider Shares in the amounts and on
the terms and conditions provided in the Amended and Restated Employee
Stock Restriction Agreement executed concurrently with this Amended and
Restated Agreement.
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2.4. Non-Employee Shareholder.
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On the effective date of this Amended and Restated Agreement, Etinuum
shall issue to the Non-Employee Shareholder 10,000 shares of Common Stock (the
"Non-Employee Shares") and shall release from escrow the Spider Shares issued to
the Non-Employee Shareholder at the Closing (the "Non-Employee Spider Shares").
The Non-Employee Shareholder will not Transfer any Non-Employee Shares prior to
April 30, 2001, except if to another Shareholder or to a partnership, trust or
other entity formed for estate planning purposes, or in connection with any
Change in Control of Etinuum. Any Transfer, whether voluntary or involuntary or
by operation of law, which is made in violation of this Section 2.4 shall be
null and void and have no effect, and Etinuum shall not recognize any such
Transfer or recognize the transferee as the holder of such Non-Employee Shares
for any purpose.
As a condition to the receipt of the Non-Employee Spider Shares
hereunder, the Non-Employee Shareholder agrees to execute and deliver a copy of
the Spider Shareholders Agreement that is executed by the holders of seventy
percent (70%) or more of the outstanding common stock of Spider (the "Spider
Shareholders Agreement").
The Non-Employee Shareholder may not Transfer any of his Non-Employee
Spider Shares except in accordance with the Spider Shareholders Agreement;
provided, however, that any transferee thereof shall execute and deliver a
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counterpart of the Spider Shareholders Agreement and shall agree to be subject
to the restrictions and obligations thereunder. The Non-Employee Shareholder
agrees and acknowledges that any transfer of his Non-Employee Spider Shares
shall be subject to and made in accordance with the terms of the Spider
Shareholders Agreement.
2.5 Closing.
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The Closing of the transactions contemplated in this Agreement was
effective as of October 30, 1999 (the "Closing Date").
2.5.1. Subject to the terms and conditions set forth in the
Agreement, at the Closing, the Shareholders delivered to Etinuum:
2.5.1.1. the certificates representing the Acorn Shares
held by each Shareholder, duly endorsed, or along with duly executed
stock powers;
2.5.1.2. Employment Agreements, together with all
exhibits thereto, in the form of Exhibit 6.1.1 executed by each of
the Key Shareholders and Acorn;
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2.5.1.3. a certificate in the form attached hereto as
Exhibit 6.1.2 executed by the Shareholders and an officer of Acorn
certifying that each of the representations and warranties made in
ARTICLE 3 is accurate in all Material respects as of the Closing
Date and that each of the covenants, terms and conditions of this
Agreement have been complied with and performed in all Material
respects as of the Closing Date;
2.5.1.4. a certificate executed by the Secretary of Acorn
in the form attached hereto as Exhibit 6.1.6;
2.5.1.5. an Escrow Agreement in the form attached hereto
as Exhibit 8.8.3 executed by each of the Shareholders;
2.5.1.6. an Opinion executed by counsel to Acorn and the
Shareholders in the form attached hereto as Exhibit 6.1.7;
2.5.1.7. resignations of all officers and directors of
Acorn, from such positions (but not as employees) except those
persons continuing as directors or officers under Section 5.5
hereof;
2.5.1.8. a letter from Prospero LLC. ("Prospero") in the
form attached hereto as Exhibit 2.5.1.8 agreed and acknowledged by
Acorn, and the Transaction Advisor Fee Payment Agreement in the form
attached hereto as Exhibit 2.7 executed by Prospero and acknowledged
by Acorn and the Shareholders; and
2.5.1.9. an affidavit in the form attached hereto as
Exhibit 3.36 executed by Acorn and each of the Shareholders.
2.5.2. Subject to the terms and conditions set forth in the
Agreement, at the Closing, Etinuum delivered to the Shareholders:
2.5.2.1. each such Shareholder's portion of that amount
of the Purchase Price which is, as of the date of the Closing,
payable to the Shareholders pursuant to Schedule 2.2.2 herein in
cash or immediately available funds;
2.5.2.2. Employment Agreements, together with all
exhibits thereto, in the form of Exhibit 6.1.1. executed by Etinuum;
2.5.2.3. a certificate in the form attached hereto as
Exhibit 6.2.2. executed by an officer of Etinuum certifying that
each of the representations and warranties made in ARTICLE 3 is
accurate in all Material
9
respects as of the Closing Date and that each of the covenants,
terms and conditions of this Agreement have been complied with and
performed in all Material respects as of the Closing Date;
2.5.2.4. an Escrow Agreement in the form attached hereto
as Exhibit 8.8.3 executed by Etinuum;
2.5.2.5. an Opinion executed by counsel of Etinuum in the
form attached hereto as Exhibit 6.2.6;
2.5.2.6. the Transaction Advisor Fee Payment Agreement in
the form attached hereto as Exhibit 2.7 executed by Etinuum; and
2.5.2.7. a certificate executed by the Secretary of
Etinuum in the form attached hereto as Exhibit 6.2.5.
2.6 Transaction Costs. Except as set forth in Section 2.7 below, the
-----------------
parties will each be solely responsible for and bear all of their respective
expenses in connection with the negotiation, documentation or consummation of
the transactions contemplated in this Amended and Restated Agreement including,
without limitation, expenses of legal counsel, accountants and other advisors,
and any fees of any finder or broker, whether or not such transactions are
consummated. Without limitation, this shall include the obligation of the
parties to pay the legal fees of their respective counsel.
2.7 Transaction Advisor Fees. In consideration for services rendered by
------------------------
Prospero in connection with the transactions contemplated by the Agreement,
Etinuum issued to Prospero on behalf of Acorn the number of shares of Etinuum
common stock ("Transaction Advisor Shares") as set forth in the Transaction
Advisor Fee Payment Agreement attached hereto as Exhibit 2.7 and subject to the
terms and conditions of such Agreement. Except as set forth in this Amended and
Restated Agreement, Etinuum shall assume no liability for any taxes or other
payments of Prospero, Acorn or the Shareholders. Acorn and the Acorn
Shareholders acknowledge the acceptance by Prospero of the Transaction Advisor
Shares in partial consideration for services rendered by Prospero to Acorn. The
Shareholders agree to hold Etinuum harmless and to pay all costs associated with
any Etinuum or Acorn defense that may arise from any claim asserted by Prospero,
or an intermediary on its behalf, in connection with the payments to be made by
the Shareholders under the Engagement Letter with Prospero dated August 3, 1998
(as amended). Etinuum agrees to hold the Shareholders harmless and to pay all
costs associated with any Shareholder defense that may arise from any claim
asserted by Prospero, or an intermediary on its behalf, in connection with the
consideration to be paid by Etinuum under the Transaction Advisor Fee Payment
Agreement.
2.8 Documents. Concurrently with the execution of this Amended and
---------
Restated
10
Agreement, each of the Key Shareholders and Etinuum shall execute and
deliver an Amended and Restated Employee Stock Purchase Agreement, and each of
the Key Shareholders, Etinuum and Prospero shall execute and deliver an Amended
and Restated Registration Rights Agreement. The parties hereto agree and
acknowledge that the Employment Agreements among Etinuum, Acorn and each of the
Key Shareholders, the Escrow Agreement among Etinuum, the Escrow Agent and each
of the Key Shareholders, and the Transaction Fee Payment Agreement between
Prospero and Etinuum, shall each remain in full force and effect and shall not
be amended.
2.9 No Waiver. The entering into of this Amended and Restated
---------
Agreement is not a waiver of any claim by any Person except in respect of the
specific amendments made herein or in other Documents in connection herewith.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACORN
----------------------------------------
AND THE SHAREHOLDERS
--------------------
Acorn and the Shareholders (as limited by ARTICLE 8) represent and
warrant to Etinuum as of the Closing:
3.1 Authorization Capitalization; Outstanding Shares. The authorized
------------------------------------------------
capital stock of Acorn on the Closing Date consists of 5,000 shares of Class A
common stock, with a stated par value of $0.01 per share, of which 1,840 shares
are issued and outstanding and 5,000 shares of Class B (non-voting) common
stock, with a stated par value of $0.01 per share, of which no shares are issued
and outstanding. All of the issued and outstanding Shares of Acorn stock are
duly authorized, fully paid, validly issued and non-assessable, with no personal
liability attaching to the ownership hereof. Each Shareholder is the record and
beneficial owner of, and has marketable, legal and valid title to, the shares of
Acorn common stock as set forth on Schedule 3.1 free and clear of any liens,
charges, claims, security interests or encumbrances of any kind.
3.2. Organization; Good Standing; Power; Etc. Acorn: (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (ii) is authorized or licensed to do business as a
foreign corporation and is in good standing in the jurisdictions listed in
Schedule 3.2; (iii) is not required to be authorized or licensed to do business
as a foreign corporation in any other jurisdiction (within or without the United
States) except jurisdictions in which Acorn's failure to qualify to do business
will have no Material adverse effect on the business, prospects, operations,
properties, assets or condition (financial or otherwise) of Acorn or, if Acorn
is not so qualified in any such jurisdiction, it can become so qualified in such
jurisdiction without any Material adverse effect; and (iv) has the requisite
11
power and authority to own, lease and operate its properties and to carry on its
business as currently conducted.
3.3 Agreements Relating to Stock; Options; Warrants; Restrictions on
----------------------------------------------------------------
Shares; Etc. Except as set forth on Schedule 3.3, neither Acorn nor any
------------
Shareholder, is a party to any written or oral agreement, understanding,
arrangement or commitment or bound by any certificate of incorporation, bylaw or
instrument (including options, warrants or convertible securities) which creates
any rights in any person with respect to shares of the capital stock or any
other securities of Acorn including any which relates to the voting of,
restricts the transfer of, requires Acorn or the Shareholder to issue or sell,
or creates rights in any person with respect to the capital stock or other
securities of Acorn (or warrants or rights with respect thereto). There exist
no options or other rights to purchase, or rights to convert any securities or
obligations into, any shares of the capital stock or other securities of Acorn.
3.4 Charter and Bylaws; Officers and Directors. Complete and correct
------------------------------------------
copies of: (i) Acorn's corporate charter or articles of incorporation, as
amended to date ("Charter"), certified by the appropriate officials of the
jurisdiction of incorporation; and (ii) Acorn's Bylaws, as amended to date
("Bylaws"), are attached as Schedule 3.4.A. Such Charter and Bylaws are fully
in force and effect, and Acorn is not in violation of any of the provisions
thereof. A complete and correct list of all officers and directors of Acorn is
set forth in Schedule 3.4.B.
3.5 No Subsidiaries. Acorn does not own and Acorn has never owned, any
---------------
interest, directly or indirectly, in any other corporation, person, company,
limited liability company, business, trust, partnership, limited partnership,
joint venture, or other entity or association, except as listed on Schedule 3.5.
3.6 Authorizations and Enforceability. Each Shareholder and Acorn has
---------------------------------
all requisite power and authority to execute, deliver and perform this
Agreement, and any ancillary agreements hereto, and to consummate the
transactions contemplated hereby. This Agreement and the Documents have been
duly and validly authorized by Acorn, and have been duly and validly executed
and delivered by each Shareholder and by Acorn and constitute the valid and
binding obligation of each Shareholder and Acorn fully enforceable in accordance
with their respective terms, except as may be limited by principles of public
policy and except as indemnification provisions may be limited by securities
laws, and subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.7 Effect of Agreement, Etc. The execution, delivery and performance of
-------------------------
this Agreement and the Documents by each Shareholder and by Acorn and the
consummation of the transactions contemplated hereby will not, with or without
the giving of notice of the lapse of time, or both: (i) violate any provision of
law, statute, rule or regulation to which Acorn or any Shareholder is subject;
(ii) violate any judgment, order, writ or decree of any court, arbitrator or
governmental agency applicable to Acorn or any Shareholder; (iii) have any
effect on any of
12
Acorn's permits, licenses, tariffs, orders or approvals or the ability of Acorn
to make use of such permits, licenses, tariffs, orders or approvals or (iv)
result in the breach of or conflict with any term, covenant, condition or
provision of, result in the modification or termination of, constitute a default
under, or result in the creation or imposition of, any lien, security interest,
charge or encumbrance upon any of the properties or assets of Acorn or any
Shareholder pursuant to any charter, bylaw, commitment, contract or other
agreement or instrument, including any of the Commitments (as defined in Section
3.16) to which Acorn or any Shareholder is a party or by which any of its assets
or properties are or may be bound or affected or from which Acorn or any
Shareholder derives benefit, except as set forth in Schedule 3.7.
3.8 Restrictions; Burdensome Agreements. Except as set forth in Schedule
-----------------------------------
3.8, neither Acorn nor any Shareholder is a party to any contract, commitment or
agreement, and neither Acorn nor any of the Shareholders or any of their
respective properties and assets are subject to or bound or affected, by any
charter, bylaw or other corporate restriction, or any order, judgment, decree,
law, statute, ordinance, rule, regulation or other restriction of any kind or
character, which would: (i) prevent any Shareholder or Acorn from entering into
this Agreement or the Documents or from consummating the transactions
contemplated hereby; or (ii) have a Material adverse effect on the business,
properties, prospects or the condition, financial or otherwise, of Acorn. None
of Acorn's contracts or agreements are on terms more burdensome to Acorn than
typical contracts and agreements in its industry for companies the size and
scope of Acorn.
3.9 Government Consents. No consent, authorization or approval of, or
-------------------
exemption by, or filing with, any governmental, public or self-regulating body
or authority (including, but not limited to, any licensing authority with
jurisdiction over the services used or provided by Acorn) is required by any
Shareholder or by Acorn for consummation of this Agreement or any of the
instruments or agreements herein referred to, or the taking of any action herein
contemplated.
3.10 Compliance; Licenses and Permits.
--------------------------------
3.10.1. Acorn has all requisite corporate power and authority, and
all permits, licenses, tariffs, orders and approvals of governmental and
administrative authorities which are Material, to own, lease and operate its
properties and to carry on its business as presently or previously conducted;
all such presently existing permits, licenses, tariffs, orders and approvals
Material to the conduct of the business of Acorn are listed in Schedule 3.10,
are in full force and effect, and no suspension or cancellation of any of them
is pending or threatened.
3.10.2. Acorn has complied in all respects with, and is not in
violation in any respect of, all or any Legal Requirements (as defined below)
applicable to the business of Acorn as presently or previously conducted, or as
currently proposed to be conducted, except where such non-compliance or
violation has not had, and could not reasonably be expected to have, a Material
adverse effect upon Acorn. Acorn has all federal, state, local and
13
foreign governmental tariffs, orders, licenses and permits (collectively,
"Permits") which are required for the conduct of its business presently or
previously conducted by Acorn, which Permits are in full force and effect, and
no violations are outstanding or uncured with respect to any such Permits and no
proceeding is pending or, to the best of Acorn's knowledge, threatened to revoke
or limit any thereof. Acorn and the Shareholders have no knowledge or reason to
know of any such Permits with respect to any Acorn employees that are not in
full force and effect, or have violations outstanding or uncured with respect
thereto, or any proceedings pending or threatened to revoke or limit any such
Permits. No condition or event has occurred which, with notice or the passage of
time or both, would constitute a violation of a Legal Requirement or Permit
except where such noncompliance or violation has not had, and could not
reasonably be expected to have, a Material adverse effect upon Acorn. "Legal
Requirement" means any applicable law, rule, regulation, order or ordinance.
Acorn's current and currently contemplated activities and services will not
violate any Legal Requirement in such a fashion as to have a Material adverse
effect on Acorn.
3.11 Financial Statements; Absence of Undisclosed Liabilities.
--------------------------------------------------------
3.11.1. Acorn's most recent audited financial statements as of and
for the period ended December 31, 1998, and Acorn's unaudited balance sheets and
income statements dated as of August 31, 1999 (the "Acorn Financial
Statements"), are attached as Schedule 3.11.1 The Acorn Financial Statements
have been prepared in accordance with GAAP (without reference to Etinuum's
application thereof), and fairly present, in all Material respects, the
financial condition and results of operations of Acorn as of the dates
indicated. Without limitation, any reduction in the net book value of Acorn of
more than $50,000 is "Material" for purposes of this Section. The August 31,
1999 balance sheet is referred to as the "Balance Sheet" and August 31, 1999 is
referred to as the "Balance Sheet Date." The historical books and records of
Acorn for the fiscal year period ended December 31, 1998, have been sufficiently
prepared to permit the preparation of audited financial statements by Etinuum
after the Closing in accordance with the financial accounting rules applicable
in connection with any registered public offering of Etinuum securities under
the Securities Act of 1933, as amended. The books and records of Acorn for the
fiscal years ended December 31, 1997 and 1996 have been prepared in all Material
respects consistently with the financial accounting rules applied to the Acorn
books and records for fiscal year 1998, except that the for the fiscal years
1997 and 1996 the cash basis method of accounting was used.
3.11.2. Except to the extent reflected or reserved against or
otherwise disclosed in the Acorn Financial Statements or in Schedule 3.11.2, as
of the Balance Sheet Date, Acorn had no liabilities, debts or other obligations
of any nature, whether absolute, accrued, contingent or otherwise, or whether
due or to become due, including, without limitation, liabilities for Taxes, in
excess of $50,000 in any one case or which in the aggregate exceed $100,000.
Subsequent to the Balance Sheet Date, Acorn has not incurred any liabilities,
debts or obligations other than in the ordinary course of business (and such
ordinary course items do not in the aggregate exceed $50,000), except as listed
in Schedule 3.11.2, or otherwise disclosed
14
herein including the accounts payable report described below or in the Schedules
hereto, and has endeavored to properly record in its books of account all items
of income and expense and all other proper charges and accruals required to be
made in accordance with GAAP (without reference to Etinuum's application
thereof. Since the Balance Sheet Date, no debts or liabilities of or to Acorn
have been forgiven, settled or compromised, except for full consideration or
except in the ordinary course of business. To assist in disclosing the status of
its debts Acorn has delivered to Etinuum an accounts payable report, as prepared
in the ordinary course of Acorn's business, which report was created not more
than five (5) days before the date of this Agreement. The parties recognize that
in the ordinary course of business invoices arrive at various times.
3.12 Tax Matters.
-----------
3.12.1. Acorn's fiscal year for income tax reporting
purposes ends December 31.
3.12.2. Acorn has timely filed (including extensions) all
Tax Returns that are required to have been filed by it with the appropriate
federal, state, county and local government agencies or instrumentalities, that
would have a Material adverse effect if not filed. Acorn has paid or established
reserves shown on the Balance Sheet (plus not more than $10,000 of additional
reserves subsequent to the Balance Sheet Date) for all income, franchise,
payroll and other Taxes. An estimate of accrued Taxes is set forth in Schedule
3.12. There is no pending dispute with any Taxing authority relating to any of
Acorn's Tax Returns. Acorn is not subject to any proposed Material liability for
any Tax to be imposed upon its properties or assets for which there is not an
adequate reserve reflected in the Acorn Financial Statements or accrued since
the Balance Sheet Date. No federal or state income or sales Tax Returns of Acorn
have been audited. Acorn has not executed or filed with any Taxing authority any
agreement extending the period for assessment or collection of any Taxes.
Complete and correct copies of the income tax returns of Acorn for fiscal years
ending in 1995, 1996, 1997, and 1998 as filed with the Internal Revenue Service
and all state taxing authorities, together with all related correspondence and
notices, have previously been delivered to Etinuum. Acorn has not consented to
having the provisions of Section 341(f) (which relates to collapsible
corporations) of the Code apply to it.
3.12.3. Acorn has never elected to be treated as a
Subchapter S corporation as provided by the Code.
3.13 Title to Properties; Absence of Liens and Encumbrances; Etc. Acorn
-----------------------------------------------------------
does not own any real property. Except as set forth in Schedule 3.13, Acorn
owns good and marketable title to the properties and assets used in its business
(including, without limitation, the assets reflected in the Acorn Financial
Statements, except as since sold or otherwise disposed of in the ordinary course
of business), free and clear of all mortgages, security interests, claims,
liens, charges, encumbrances, restrictions on use or transfer or other defects
in title. The fixed assets of Acorn reflected in the Acorn Financial Statements
are all located on real property owned or
15
leased by Acorn and all personal property located at or on such real property is
owned or leased (as disclosed in the Schedules) by Acorn. Acorn is not a bailee
for any other entity, except as set forth on Schedule 3.13. The leases and other
agreements under which Acorn holds, leases or is entitled to the use of any real
property or personal property involving lease payments of over $18,000 per year
are set forth in Schedule 3.16 (the "Scheduled Leases") and are in full force
and effect, and all rentals, royalties or other payments payable thereunder
prior to the date hereof have been duly paid. All "buy-out" prices under the
Scheduled Leases are shown on Schedule 3.16, regardless as to whether the lessee
has any obligation to purchase such property.
3.14 Facilities; Equipment and Condition. Schedule 3.14 sets forth a
-----------------------------------
correct and complete list of all of the furniture, fixtures or equipment having
a book value, before accumulated depreciation or amortization, of more than
$50,000 (or, in the case of any such equipment which is leased and does not have
a book value for purposes of Acorn's financial statements, in the opinion of
Acorn management has a fair market value in excess of $50,000), buildings,
plants, warehouses and other real estate owned or used by Acorn in the conduct
of its businesses ("Fixed Assets"), indicating whether such property is owned or
leased, and complete legal descriptions of all real property. The Fixed Assets
owned, operated or leased by Acorn are in good condition and repair (ordinary
wear and tear excepted) and suitable for the uses for which intended. All such
Fixed Assets are operated in conformity with all applicable laws, ordinances,
regulations, orders and other requirements relating thereto currently in effect,
scheduled to come into effect, or proposed.
3.15 Insurance. Schedule 3.15 contains a correct and complete description
---------
(including amounts, scope and coverage) of all of the policies of insurance and
fidelity or surety bonds carried by Acorn. All such policies are in full force
and effect. Acorn has not failed to give any notice or present any claim under
any insurance policy, fidelity bond or surety bond in due and timely fashion.
There are no outstanding requirements or recommendations by any insurance
company that issued a policy with respect to any of the properties and assets
owned or leased by Acorn or by any governmental authority requiring or
recommending any repairs or other work to be done on or with respect to any of
the properties and assets owned or leased by Acorn or requiring or recommending
any equipment or facilities to be installed on or in connection with any of the
properties or assets owned or leased by Acorn. The worker's compensation and
unemployment insurance ratings of Acorn have been made available to Etinuum.
There are no Material proposed premium increases on any of Acorn's insurance
policies and no conditions or circumstances applicable to the business of Acorn
which might result in such increase except as shown on Schedule 3.15.
3.16 Contracts. All contracts, agreements and instruments, to which
---------
Acorn is a party are valid, binding and in full force and effect in all Material
respects, and are valid, binding and enforceable by Acorn in accordance with
their respective terms, subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. Acorn has
no knowledge or any reason to know of any default by any other party to such
contracts in any
16
Material respect under such contracts, agreements or instruments. Each of such
Material contracts, agreements and instruments has been listed on Schedule 3.16
attached hereto.
Except as set forth in Schedule 3.16, or another Schedule hereto, Acorn is
not a party to, nor are its properties and assets bound or affected by, any oral
or written:
3.16.1. contracts, agreements, or instruments providing for
payments by or to Acorn of $50,000 or more per year;
3.16.2. employment or consulting agreements which provide for
compensation at the rate of more than $50,000 per year (including all salary,
bonuses and commissions);
3.16.3. employment or consultant policies or agreements, express or
implied, placing any limits (other than a notice period not exceeding 30 days)
on Acorn's right to terminate at will the employment or retention of any
employee or consultant;
3.16.4. agreement involving more than $50,000 guaranteeing,
indemnifying or otherwise becoming liable for the obligations or liabilities of
another, or involving more than $50,000 of compensating balances, or agreeing to
assure another person meets any financial covenant; or
3.16.5. agreement which restricts the conduct of business
anywhere in the world.
Correct and complete copies of all such agreements, plans, policies,
documents and arrangements (or, where they are oral, true and complete written
summaries thereof) (collectively referred to herein as the "Commitments") have
been delivered to Etinuum prior to the date hereof.
3.17 Litigation. Except as set forth in Schedule 3.17, there is no
----------
pending or, to the best of Acorn's knowledge, threatened claim, action, suit,
proceeding, arbitration, investigation or inquiry pending before any federal,
state, municipal, foreign or other court or any governmental, administrative or
self-regulatory body or agency, or any private arbitration tribunal which may
have any Material adverse effect upon the assets, properties or business of
Acorn or the transactions contemplated by this Agreement. Neither Acorn, nor
any officer, director, partner, agent or employee of Acorn has been permanently
or temporarily enjoined or barred by order, judgment or decree of any court or
other tribunal or any agency or self-regulatory body from engaging in or
continuing any conduct or practice in connection with the business engaged in by
Acorn. Except as set forth in Schedule 3.17, there is not in existence at
present any order, judgment or decree of any court or other tribunal or any
agency or self-regulatory body to which Acorn or the business, properties or
assets of Acorn are subject or by which they are bound. Acorn is not in
Material default under any order, license, tariff, regulation or demand of any
00
Xxxxxxx, xxxxx, xxxxxxxxx, foreign or other governmental, administrative or
self-regulatory body or with respect to any order, writ, injunction or decree of
any court or arbitration body.
3.18 Intellectual Property and Other Intangible Assets.
-------------------------------------------------
3.18.1. Except as set forth in Schedule 3.18, Acorn (i) owns or has
the right to use, free and clear of all liens, claims and restrictions, all
patents, trademarks, service marks, trade names, copyrights, licenses and
rights, used in the conduct of its business as now conducted or as proposed to
be conducted without infringing upon the right or claimed right of any person
under or with respect to any of the foregoing, and (ii) is not obligated or
under any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner of, licensor of, or other claimant to, any patent,
trademark, tradename, copyright or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise.
Acorn has not received any written communication alleging that Acorn or any of
its employees has violated or infringed upon, or, by conducting Acorn's business
as proposed, would violate or infringe upon, any patent, trademark, service
xxxx, trade name, copyright, license, or right of any other person or entity.
All patents, trademarks, service marks, tradenames, copyrights and licenses (and
applications therefor) owned or used by Acorn are listed on Schedule 3.18
hereto, and such schedule indicates which such rights are owned.
3.18.2. Except as set forth on Schedule 3.18.2, Acorn owns or has the
unrestricted right to use all trade secrets, including know-how, inventions,
designs, processes, computer programs and technical data required for or
incident to the development, manufacture, operation, sale and licensing of all
products and services sold or licensed or proposed to be sold or licensed by
Acorn (together with the rights listed in Schedule 3.18, such rights will be
hereinafter referred to collectively as the "Intellectual Property"), free and
clear of any rights, liens or claims of others, including without limitation
former employers of all employees of Acorn. All computer software which is in
any way used or to be used in conducting the business (except "off-the-shelf"
software, such as word processing and spreadsheet packages, to which Acorn has
express, written licenses) was created wholly by employees of Acorn, or was
created by independent contractor programmers who expressly, and in writing,
assigned to Acorn all rights, title and interest in such software, including all
copyright(s) and appurtenant rights.
3.18.3. No third party currently infringes, or has threatened
infringement, of any Intellectual Property owned, licensed or used by Acorn as
set forth in Schedule 3.18.
3.18.4. Except as disclosed in Schedule 3.18.4, Acorn has not ever
conveyed, or is currently under an obligation to convey, any right, title or
interest in or to any of the Intellectual Property to any third party other than
in the ordinary course of its business.
3.19 No Interest in Competitors; Etc . Except as set forth in Schedule
-------------------------------
3.19, none of the Key Shareholders, nor any officer or director of Acorn or any
immediate family member or
18
spouse of any such person, or trust for their benefit, directly or indirectly,
owns any interest in (excluding the ownership of securities representing less
than 5% of any class of publicly traded securities) or controls or is an
employee, officer, director or partner of, or participant in or consultant to,
any corporation, partnership, limited liability company, limited partnership,
joint venture, association or other entity which is in the same line of business
as Acorn or Etinuum, or a creditor, debtor, supplier, customer, landlord,
tenant, lessor or lessee, of Acorn, or has any type of business, commercial,
consulting or professional relationship with Acorn.
3.20 Books and Records. The books and records of Acorn are located at 4
-----------------
Corporate Drive, Shelton, Connecticut. The books of account and other financial
and corporate records of Acorn are in all Material respects complete and
correct, and are maintained in accordance with good business practices, as could
reasonably be expected for a company the size and scope of Acorn (provided,
however, that this representation does not diminish the representations in
Section 3.11). The minute books of Acorn, as made available to Etinuum and its
counsel, contain complete and accurate records of all meetings and accurately
reflect all other corporate action of the shareholders and directors (and
committees thereof) of Acorn through the date hereof.
3.21 Insider Transactions . Schedule 3.21 (when read with Schedule 3.19)
--------------------
sets forth: (i) the amounts and other essential terms of indebtedness or other
obligations, liabilities or commitments (contingent or otherwise), whether
written or oral, of Acorn to or from any past or present officer, director, or
shareholder or any person related to, controlling, controlled by or under common
control with any of the foregoing (other than for usual services performed in
connection with such person's employment with Acorn, the payment for which is
not yet due and does not constitute a bonus); and (ii) all proposed transactions
with such persons, together with the essential terms thereof.
3.22 Employees . Since August 1, 1999, there has been no resignation or
---------
termination of any officer or key employee of Acorn that has had or is expected
to have a Material adverse effect on Acorn. Acorn has received no
communication that any key employee or key consultant of Acorn is considering:
(i) terminating his or her employment or consultant status; or (ii) seeking a
substantial increase in compensation or benefit.
3.23 Union Contracts; Labor Relations; Etc. Acorn is not presently, and
-------------------------------------
has not been, party to any union or collective bargaining agreement. Acorn is
in compliance in all Material respects with all applicable laws, rules and
regulations respecting employment conditions and practices, has withheld all
amounts required by law or agreement to be withheld from the wages or salaries
of its employees and Acorn is not liable for arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing. Acorn has not
engaged in any unfair labor practice, nor has Acorn discriminated on the basis
of race, religion, age or sex, or other protected category in its employment
conditions or practices, nor has Acorn taken any Material adverse action against
any employee or
19
consultant in breach of any agreement or policy, express or implied, oral or
written, nor taken any Material adverse action against any employee or
consultant in violation of public policy. Except as set forth in Schedule 3.23
or in another Schedule to this Agreement, there are no: (i) charges or
complaints of unfair labor practices, race, religion, age, sex or other
discrimination, breach of employment or consultant agreement or policy, or
breach of public policy pending or threatened against Acorn before any board,
department, commission, agency or court, nor does any basis therefor exist; (ii)
existing or threatened labor strikes, disputes, grievances, controversies or
other labor troubles affecting Acorn; or (iii) pending or threatened union
representation questions respecting the employees of Acorn.
3.24 Employee Benefit Plans. Except as listed on Schedule 3.24, Acorn
----------------------
does not have any employee benefit plan, stock option plan, stock appreciation
plan, stock purchase plan, profit sharing plan, or retirement or deferred
compensation plan (collectively "Plans"). Acorn has no liability (contingent or
otherwise) to any other person (including a Plan trust or Plan) in respect of
any profit sharing, retirement, deferred compensation or other employee benefit
plan that is maintained, sponsored or contributed to by another person.
3.25 Bank Accounts and Safe Deposit Arrangements. Schedule 3.25 sets
-------------------------------------------
forth a correct and complete list of each bank account, brokerage account,
similar account and safe deposit box maintained by Acorn, and the names of all
authorized signatories on such accounts.
3.26 Powers of Attorney. No person has any power of attorney to act on
------------------
behalf of Acorn in connection with any of the properties or business affairs of
Acorn.
3.27 No Finder. Except as provided for in Section 2.7, neither Acorn nor
---------
the Key Shareholders has taken any action which would give to any person a right
to a consultant's or finder's fee or any type of brokerage commission in
relation to or in connection with the transactions contemplated by this
Agreement.
3.28 No Material Adverse Change. Except as set forth in Schedule 3.28,
--------------------------
since the Acorn Balance Sheet Date:
3.28.1. Acorn has not entered into any Material transaction which was
not in the ordinary course of its business except as contemplated or disclosed
by this Agreement;
3.28.2. There has been no Material adverse change to the business
operations or financial condition of Acorn other than changes in the ordinary
course of its business, none of which, individually or in the aggregate, has a
Material adverse effect;
3.28.3. There has been no damage to, destruction of or loss of
physical property (whether or not covered by insurance) that has had a Material
adverse effect on the business or operations of Acorn;
20
3.28.4. There has been no resignation or termination of employment
of any officer or key employee of Acorn, and Acorn does not have any actual
knowledge or reason to know of the impending resignation or termination of
employment of any officer or key employee of Acorn that would have a Material
adverse effect on the business of Acorn;
3.28.5. All loans or advances made by Acorn to any of its employees,
officers or directors are disclosed on Schedule 3.21, which Schedule sets forth
the name of such employee, officer or director, the loan amount, the date of the
loan, the maturity date and the other terms of each such loan.
3.28.6. Acorn has not made or granted any employee a bonus, or any
general or specific wage or salary increase, outside the ordinary course of
business (and in any event less than 10%), engaged any new officer, or engaged
any new employee outside the ordinary course of business;
3.28.7. Acorn has not made any increase in or commitment to increase
any employee benefits or adopted or made any commitments to adopt any additional
employee benefit plan;
3.28.8. Acorn has not declared or paid any distribution to its Key
Shareholders, whether in the nature of dividends or otherwise, or purchased or
redeemed any of its outstanding shares of capital stock or other securities, or
paid any debt for borrowed money to any Shareholder or any affiliate of a
Shareholder; and
3.28.9. Acorn has not issued or sold any shares of its capital
stock or any other securities, or granted any options or other rights for the
purchase of any shares of its capital stock or other securities.
3.29 Investment Representations .
--------------------------
3.29.1. The Non-Employee Shareholder represents and warrants to
Etinuum that:
3.29.1.1. he is acquiring the Non-Employee Shares for his own account
for investment, not for the interest of any other person, not for resale to any
other person and not with a view to or in connection with a sale or
distribution;
3.29.1.2. he has provided the information requested in written due
diligence requests of Etinuum to the Non-Employee Shareholder related to the
Non-Employee Shareholder, and that such information provided by him is true and
correct in all respects;
3.29.1.3. he has had an opportunity to ask questions of and receive
answers from representatives of Etinuum with respect to the acquisition of the
Non-Employee
21
Shares. Etinuum has made available to him all documents requested and has
provided answers to all such persons' questions relating to receipt of the Non-
Employee Shares, including the Etinuum Financial Statements (as defined in
Section 4.7);
3.29.1.4. he acknowledges that, because the Non-Employee Shares will
not have been registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities laws, any resale inconsistent with the
Act may create liability on his part and/or the part of Etinuum, and agrees not
to assign, sell, pledge, transfer or otherwise dispose of or transfer any of the
Non-Employee Shares unless registered under the Securities Act and applicable
state securities laws or he has delivered an opinion of counsel satisfactory to
Etinuum that such registration is not required;
3.29.1.5. he is able to bear the economic risk of an investment in
the Non-Employee Shares and, by reason of his business or financial experience
or the business or financial experience of his professional advisors who are
unaffiliated with and who are not compensated by Etinuum, directly or
indirectly, has the capacity to protect his own interests in connection with the
transactions contemplated hereby; and
3.29.1.6. he acknowledges that all certificates of the Non-Employee
Shares and the Spider Shares issued pursuant hereto, shall contain substantially
the following legend, and any such additional restrictive legends as Etinuum
deems appropriate or necessary:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THEY
MAY NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE
UNLESS (I) A REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT IS IN EFFECT OR (II) THE CORPORATION HAS RECEIVED AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY TO THE CORPORATION, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT."
3.29.1.7. his state of residence and mailing address is as
shown on Schedule 3.29.7.
3.29.2. Each Key Shareholder hereby agrees that, to the extent such
Key Shareholder receives Common Stock which becomes issuable pursuant to the
terms and conditions of this Amended and Restated Agreement at any time
subsequent to the date of the Closing, such Key Shareholder will make such
investment representations, in writing for the benefit of Etinuum, as of the
date of the issuance of the Common Stock as required by Etinuum and as provided
in the 1997 or 1998 Stock Option Plan and Stock Option Agreements to which such
Key Shareholder is a party.
22
3.29.3. Neither Acorn nor any Shareholder, nor any "associate" of
Acorn or any Shareholder as such term is defined in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, is, or has a relationship with, a member of
the National Association of Securities Dealers, Inc. ("NASD"), or is an officer,
director, registered representative, lender, employee or beneficial owner of 10%
or more of a NASD member or any corporation or entity which owns a 10% or
greater ownership interest in an NASD member.
3.30 Suppliers and Customers. Except as set forth in Schedule 3.30, there
-----------------------
are no Material agreements of over twelve (12) months in duration which commit
Acorn to carry on business at fixed prices or prices determined by an
established formula. No supplier or customer accounted for more than five
percent (5%) of Acorn's consolidated sales or purchases in either the past
fiscal year or in the interim period ended as of the Balance Sheet Date, and no
supplier or customer Material to Acorn's business has terminated its
relationship with Acorn, or has since the Balance Sheet Date decreased or
delayed Materially, or threatened to decrease or delay Materially, its services
or supplies to Acorn.
3.31 Securities Act, Etc. Neither Acorn, nor its respective officers,
-------------------
directors, or controlling persons (a) have been convicted within the ten years
preceding the date of this Agreement of any felony or misdemeanor of the types
described in Rule 262 (b)(1) under the Securities Act, (b) are subject to an
order, judgment or decree of the types described in Rule 262(b)(2) under the
Securities Act, (c) are subject to an order of the SEC of the types described in
Rule 262(b)(3) under the Securities Act, (d) have been suspended or expelled
from, or suspended or barred from association with a member of, a national
securities exchange or as described in Rule 262(b)(4) under the Securities Act
or (e) are subject to an order or injunction as described in Rule 262(b)(5)
under the Securities Act.
3.32 Lawyers and Accountants. Acorn and the Key Shareholders are not
-----------------------
relying upon any investigation made by Etinuum's counsel or accountants or the
presence of such counsel or accountants as an indication that counsel or the
accountants has reviewed or passed upon the representations, warranties,
projections or business plan of Etinuum or the wisdom of an investment in
Etinuum.
3.33 Accounting Controls. Neither Acorn, nor any director, officer,
-------------------
agent, employee, consultant or other person associated with or acting on behalf
of any Acorn, has (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity
or (b) made any direct or indirect unlawful payments to government officials or
others from corporate funds or established or maintained any unlawful or
unrecorded funds.
3.34 Names. Since the date of its inception, Acorn has not used any trade
-----
name, d/b/a, or other name to identify itself, except Acorn Information
Services, Inc.
23
3.35 Material Misstatements or Omissions. No representations or
-----------------------------------
warranties by Acorn or any Key Shareholder in this Agreement, or any document,
exhibit, statement, certificate or schedule furnished to Etinuum by a
representing party pursuant hereto, or in connection with the transactions
contemplated hereby, intentionally contains any untrue statement of a Material
fact, or intentionally omits to state any Material fact necessary to make the
statements or facts contained herein or therein in the context in which they
were made not misleading. Any forecasts or projections, including in the
Business Plan, delivered by or on behalf of Acorn are not guarantees or
representations as to performance and Acorn and the Key Shareholders expressly
disclaim any warranty as to the profitability or future prospects of Acorn.
3.36 Not A United States Real Property Interest. Acorn has delivered to
------------------------------------------
Etinuum an affidavit in the form attached as Exhibit 3.36 hereto certifying that
Acorn is not and has never been a United States Real Property Holding Company as
defined in the Code.
3.37 Other. Acorn has delivered to Etinuum Certificates of the Secretary
-----
of State (or other authorized officer) of the State of Delaware certifying as of
a date within thirty (30) days before the Closing Date that Acorn is, as of such
date, in good standing and authorized to transact business as a domestic
corporation. Acorn has delivered to Etinuum Certificates of the Secretary of
State (or other authorized officer) of each jurisdiction in which Acorn is
qualified to do business as a foreign corporation, certifying as of a date
within thirty (30) days before the Closing Date that Acorn is, as of such date,
in good standing and authorized to transact business as a foreign corporation in
such jurisdiction. Acorn has delivered the written resignations, effective as
of the Closing, of all officers and members of the Board of Directors of Acorn
except those persons to remain as directors or officers, as applicable,
hereunder. The approvals and all consents from third parties and governmental
agencies (including under Blue Sky laws) required by Acorn, or a Shareholder
(other than approvals or consents required by Acorn the absence of which would
not have a Material adverse effect on the ability of Etinuum or Acorn to operate
their respective business after the Closing) required to consummate the
transactions contemplated hereby and any additional regulatory consents have
been obtained.
3.38 Year 2000 Compliance. In all Material respects, products used by
--------------------
Acorn, and products sold and/or licensed by Acorn in the conduct of its business
and all other products used in combination with products sold and/or licensed by
Acorn, are designed to be used prior to, during and after the calendar year
2000 A.D. and will be capable of accurately processing date data, without error,
delay or the need for manual input with respect to date data, specifically
including without limitation date data which represents or references the 20th
and 21st centuries, including the years 1999 and 2000 and February 29, 2000.
Without limiting the generality of the foregoing:
(i) The equipment, hardware, software and intellectual properties included
in the Acorn assets will not abnormally end or provide invalid or incorrect
results as a results of date data, specifically including date data which
represents or references different centuries or more
24
than one century.
(ii) The equipment, hardware, software and Intellectual Property owned,
licensed, leased or used by Acorn have been designed to ensure year 2000
compatibility, including, but not limited to, date data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, and date data interface values that reflect the century.
(iii) The equipment, hardware, software and Intellectual Property owned,
licensed, leased or used include "Year 2000 capabilities". "Year 2000
capabilities" means the equipment, hardware, software and Intellectual Property:
(a) will manage and manipulate data involving dates, including
single century formulas and multi-century formulas, and will not cause an
abnormally ending scenario within the application or generate incorrect values
or invalid results involving such dates; and
(b) provides that all date-related user interface functionalities
and data fields include the indication of century; and
(c) provides that all date-related data interface functionalities
include the indication of century.
Etinuum expressly acknowledges that Acorn has relied on the representations
and warranties of third party vendors with respect to such vendors' products
used, sold or licensed by Acorn.
3.39 Due Diligence. Acorn has provided to Etinuum the information
-------------
requested in the due diligence request dated August 27, 1999, and the
information so provided was true and correct in all Material respects.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ETINUUM
-----------------------------------------
Etinuum represents and warrants (as limited by ARTICLE 8) to Acorn and the
Shareholders as follows as of the Closing:
4.1 Organization; Good Standing; Power; Etc. Etinuum (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (ii) is authorized or licensed to do business as a
foreign corporation and is in good standing in the jurisdictions listed in
Schedule 4.1; (iii) is not required to be authorized or licensed to do business
as a foreign corporation in any other jurisdiction (within or without the United
States) except jurisdictions in which Etinuum's failure to qualify to do
business will have no Material adverse effect on the business, prospects,
operations, properties, assets or condition (financial or
25
otherwise) of Etinuum or, if Etinuum is not so qualified in any such
jurisdiction, it can become so qualified in such jurisdiction without any
Material adverse effect; and (iv) has the requisite power and authority to own,
lease and operate its properties and to carry on its business as currently
conducted.
4.2 Restrictions; Burdensome Agreements. Etinuum is not a party to any
-----------------------------------
contract, commitment or agreement, and its properties and assets are not subject
to or bound or affected, by any charter, bylaw or other corporate restriction,
or any order, judgment, decree, law, statute, ordinance, rule, regulation or
other restriction of any kind or character, which would: (i) prevent Etinuum
from entering into this Agreement or the Documents or from consummating the
transactions contemplated hereby; or (ii) have a Material adverse effect on the
business, properties, prospects or the condition, financial or otherwise, of
Etinuum. To the best of Etinuum's knowledge, none of Etinuum's contracts or
agreements are on terms more burdensome to Etinuum than typical contracts and
agreements in its industry for companies the size and scope of Etinuum.
4.3 Subsidiaries. Etinuum does not own and Etinuum has never owned, any
------------
interest, directly or indirectly, in any other corporation, person, company,
limited liability company, business, trust, partnership, limited partnership,
joint venture, or other entity or association, except Brokerage Administrators
Corporation, Etinuum Insurance, Inc., Etinuum Teleservices, Inc., and Spider.
4.4 Capitalization; Outstanding Shares. As of the Closing, the
----------------------------------
authorized capital stock of Etinuum consists solely of 105,805,860 shares of
Common Stock, with a stated par value of $0.0001 per share, of which 40,506,547
shares are or will be issued and outstanding (on an as converted to common stock
basis) immediately prior to the Closing and 63,321,322 shares of outstanding
Preferred Stock, which have been designated as Series A, Series B, Series C,
Series D and Series E Preferred Stock as set forth in the Capitalization Table
attached hereto as in Schedule 4.4. The outstanding shares of capital stock of
Etinuum have been duly authorized and validly issued, and are fully paid and
non-assessable. A complete and accurate schedule listing all shareholders of
Etinuum and the number of shares held by each such shareholder on an as
converted to common stock basis is set forth in Schedule 4.4 and such Schedule
will be updated as of the Closing by an officer's certificate of Etinuum. Except
as set forth in (i) Schedule 4.4; (ii) the Etinuum Amended and Restated
Certificate of Incorporation, as amended; and (iii) the Amended and Restated
Shareholders Agreement, dated as of October 1, 1999, there are no preemptive
rights or rights of first refusal with respect to Etinuum's capital stock, and
there are no written or oral agreements, understandings, arrangements or
commitments, certificate of incorporation, bylaw or instrument (including
options, warrants or convertible securities) which creates any rights in any
person with respect to shares of the capital stock or any other securities of
Etinuum including any which relates to the voting of, restricts the transfer of,
requires Etinuum to issue or sell, or creates rights in any person with respect
to the capital stock or other securities of Etinuum (or warrants or rights with
respect thereto).
26
4.5 Charter and Bylaws; Officers and Directors. Complete and correct
------------------------------------------
copies of: (i) Etinuum's corporate charter or articles of incorporation, as
amended to date ("Etinuum Charter"), certified by the Secretary of State of
Delaware; and (ii) Etinuum's Bylaws, as amended to date ("Etinuum Bylaws"), are
attached as Schedule 4.5.A. Such Charter and Bylaws are fully in force and
effect, and Etinuum is not in violation of any of the provisions thereof. A
complete and correct list of all officers and directors of Etinuum is set forth
in Schedule 4.5.B.
4.6 Authorization. Etinuum has all requisite power and authority to
-------------
execute, deliver and perform this Agreement, and any ancillary agreements
hereto, and to consummate the transactions contemplated hereby. All corporate
action on the part of Etinuum, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Documents by Etinuum has been taken. This Agreement constitutes, and the
Documents constitute, valid and binding obligations of Etinuum, enforceable in
accordance with their respective terms, except as may be limited by principles
of public policy and except as indemnification provisions may be limited by
securities laws, and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. The Non-
Employee Shares, when issued in compliance with the provisions of this Agreement
at their respective times of issuance, (i) will be validly issued, fully paid
and non assessable, will be free of any liens or encumbrances, and will not be
subject to any restrictions on transfer (except for those set forth in the
Shareholders Agreement or herein), provided, however, that such shares may be
--------
subject to restrictions on transfer under the state and/or federal securities
laws as set forth herein, and (ii) are not and will not be subject to any
preemptive rights or rights of first refusal except for those in the
Shareholders Agreement, the Etinuum Charter, as may be amended from time to
time, and herein.
4.7 Financial Statements. Etinuum's audited balance sheets dated as of
--------------------
the fiscal years ended 1997 and 1998 and Etinuum's audited statements of
operations for the fiscal years ended 1997 and 1998, and Etinuum's unaudited
balance sheet and statement of operations for the interim period ended June 30,
1999 (the "Etinuum Financial Statements") are attached as Schedule 4.7. The
Etinuum Financial Statements have been prepared in accordance with GAAP, and
fairly present, in all Material respects, the financial condition and results of
operations of Etinuum as of the dates indicated.
4.8 No Material Adverse Change. Since August 1, 1999 (the "Etinuum
--------------------------
Reference Date"), there has not been any Material adverse change in the
business, financial position or results of operation or prospects of Etinuum.
4.9 Material Liabilities. Except as described in the Etinuum Financial
--------------------
Statements, herein, or Schedule 4.9, Etinuum does not have any obligations or
liabilities (whether accrued, absolute or contingent) other than obligations or
liabilities incurred in the ordinary course of
27
business since the Etinuum Reference Date, in excess of $500,000 in any one case
or which is Material to Etinuum.
4.10 Material Contracts. All contracts, agreements and instruments to
------------------
which Etinuum is a party are valid, binding and in full force and effect in all
Material respects, and are valid, binding and enforceable by Etinuum in
accordance with their respective terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. Neither Etinuum nor, to the best of Etinuum's knowledge,
any other party to such contracts, agreements or instruments is in default in
any Material respect under such contracts, agreements or instruments, except as
listed on Schedule 4.10.
4.11 Compliance with Other Instruments, None Burdensome, Etc. Etinuum is
-------------------------------------------------------
not in violation of any Material term or provision of the Etinuum Charter or
Etinuum Bylaws, or any Material mortgage, indebtedness, indenture, contract,
agreement, instrument, judgment or decree, and to its knowledge is not in
violation of any order, statute, rule or regulation applicable to Etinuum. The
execution, delivery and performance of and compliance with this Agreement, and
the issuance of the Non-Employee Shares, have not resulted and will not result
in any violation of, or conflict with, or constitute a default under, any of the
terms of the Etinuum Charter or Etinuum Bylaws or any corporate restriction or
of any indenture, mortgage, deed of trust, pledge, bank loan or credit
agreement, or any instrument, document or agreement by which Etinuum or its
properties may be bound or affected, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
Etinuum.
4.12 Litigation, Etc. Except as set forth in Schedule 4.12, there is no
---------------
claim, action, suit, proceeding, arbitration, investigation or inquiry pending
before any federal, state, municipal, foreign or other court or any
governmental, administrative or self-regulatory body or agency, or any private
arbitration tribunal, (or to the best of Etinuum's knowledge is there any
threat, or basis for, any such claim, action, suit, proceeding arbitration,
investigation or inquiry), which may have any Material adverse effect upon the
assets, properties or business of Etinuum or the transactions contemplated by
this Agreement. Neither Etinuum nor any officer, director, partner, agent or
employee of Etinuum has been permanently or temporarily enjoined or barred by
order, judgment or decree of any court or other tribunal or any agency or self-
regulatory body from engaging in or continuing any conduct or practice in
connection with the business engaged in by Etinuum. There is not in existence
at present any order, judgment or decree of any court or other tribunal or any
agency or self-regulatory body to which Etinuum or the business, properties or
assets, of Etinuum are subject or by which they are bound. Etinuum is not in
Material default under any order, license, tariff, regulation or demand of any
federal, state, municipal, foreign or other governmental, administrative or
self-regulatory body or with respect to any order, writ, injunction or decree of
any court or arbitration body.
4.13 Governmental Consents. No consent, approval or authorization of, or
---------------------
exemption by, or filing with any governmental, public or self regulatory body or
authority is required by
28
Etinuum for the consummation of this Agreement or any of the instruments or
agreements referred to, or the taking of any action, herein contemplated, except
for the qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the issuance of the Non-Employee
Shares under applicable Blue Sky laws or SEC rules and regulations, which
filings and qualifications, if required, will be accomplished by Etinuum in a
timely manner prior to or within ten (10) days after the date of issuance of the
Non-Employee Shares).
4.14 Etinuum Tax Matters.
-------------------
4.14.1. Etinuum's fiscal year for income tax reporting
purposes ends December 31.
4.14.2. Etinuum has timely filed (including extensions)
all Tax Returns that are required to have been filed by it with appropriate
federal, state, county and local government agencies or instrumentalities, that
would have a Material adverse effect if not filed, except as provided in
Schedule 4.14. Etinuum has paid or established reserves for all income,
franchise, payroll and other Taxes except as set forth in Schedule 4.14. There
is no pending dispute with any taxing authority relating to any of Etinuum's
Returns. To the best of Etinuum's knowledge, Etinuum is not subject to any
proposed Material liability for any Tax to be imposed upon its properties or
assets for which there is not an adequate reserve reflected in the Etinuum
Financial Statements or accrued since the date of the Etinuum Financial
Statements. No federal or state income or sales Tax Returns of Etinuum have been
audited. An estimate of accrued Taxes is set forth in Schedule 4.14. Etinuum has
not executed or filed with any Taxing authority any agreement extending the
period for assessment or collection of any Taxes. Etinuum has not consented to
having the provisions of Section 341(f) (which relates to collapsible
corporations) of the Code apply to it.
4.14.3. Etinuum has never been taxed pursuant to
Subchapter S of the Code.
4.15 Offering. Subject to the accuracy of Acorn's and the Shareholders'
--------
representations in ARTICLE 3 hereof, which representations shall be reaffirmed
as of the date of any issuances of Non-Employee Shares pursuant hereto or Common
Stock upon exercise of the Options, the offer, sale and issuance of the Non-
Employee Shares and the Options constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act and applicable Blue
Sky laws. Neither Etinuum nor any authorized agent acting on its behalf will
take any action hereafter that would cause the loss of such exemption.
29
4.16 Brokers or Finders. Except as set forth in Section 2.7 hereof,
------------------
Etinuum has not incurred, and will not incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement. Etinuum will indemnify and hold
Acorn and the Shareholders harmless for any breach of this Section 4.16.
4.17 Compliance; Licenses and Permits.
--------------------------------
4.17.1. Etinuum has all requisite corporate power and
authority, and all permits, licenses, tariffs, orders and approvals of
governmental and administrative authorities which are Material, to own, lease
and operate its properties and to carry on its business as presently or
previously conducted. All such presently existing permits, licenses, tariffs,
orders and approvals Material to the conduct of the business of Etinuum are in
full force and effect, and no suspension or cancellation of any of them is
pending or, to the best of Etinuum's knowledge, threatened.
4.17.2. Etinuum has complied in all respects with, and is
not in violation in any respect of, all or any Legal Requirements applicable to
the business of Etinuum as presently or previously conducted, or as currently
proposed to be conducted except where such non-compliance or violation has not
had, and could not reasonably be expected to have, a Material adverse effect
upon Etinuum. Etinuum (including to the best of Etinuum's knowledge all
applicable employees) has all Permits which are required for the conduct of its
business presently or previously conducted by Etinuum, which Permits are in full
force and effect, and no violations are outstanding or uncured with respect to
any such Permits and no proceeding is pending or, to the best of Etinuum's
knowledge, threatened to revoke or limit any thereof. No condition or event has
occurred which, with notice or the passage of time or both, would constitute a
violation of a Legal Requirement or Permit except where such noncompliance or
violation has not had, and could not reasonably be expected to have, a Material
adverse effect upon Etinuum. To the best of Etinuum's knowledge, its current and
currently contemplated activities will not violate any Legal Requirement in such
a fashion as to have a Material adverse effect on Etinuum.
4.18 Material Misstatements or Omissions. No representations or
-----------------------------------
warranties by Etinuum in this Agreement, or any Document, exhibit, statement,
certificate or schedule furnished by Etinuum to a Key Shareholder or Acorn
pursuant hereto, or in connection with the transactions contemplated hereby, to
the best of Etinuum's knowledge intentionally contain any untrue statement of a
Material fact, or intentionally omit to state any Material fact necessary to
make the statements or facts contained herein or therein in the context in which
they were made not misleading.
30
4.19 Lawyers and Accountants. Etinuum is not relying upon any
-----------------------
investigation made by Acorn's counsel or accountants or the presence of such
counsel or accountants as an indication counsel or the accountants has reviewed
or passed upon the representations, warranties, projections or business plan of
Acorn or the wisdom of an investment in Acorn.
4.20 Effect of Agreement, Etc. The execution, delivery and performance
-------------------------
of this Agreement by Etinuum and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice of the lapse
of time, or both: (i) violate any provision of law, statute, rule or regulation
to which Etinuum is subject; (ii) violate any judgment, order, writ or decree of
any court, arbitrator or governmental agency applicable to Etinuum; (iii) have
any effect on any of Etinuum's permits, licenses, tariffs, orders or approvals
or the ability of Etinuum to make use of such permits, licenses, tariffs, orders
or approvals, except as set forth in Schedule 4.20; or (iv) result in the breach
of or conflict with any term, covenant, condition or provision of, result in the
modification or termination of, constitute a default under, or result in the
creation or imposition of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Etinuum pursuant to any charter, bylaw,
commitment, contract or other agreement or instrument to which Etinuum is a
party or by which any of its assets or properties are or may be bound or
affected or from which Etinuum derives benefit.
4.21 Other. Etinuum has delivered to Acorn Certificates of the Secretary
-----
of State (or other authorized officer) of the State of Delaware certifying as of
a date within thirty (30) days before the Closing Date that Etinuum is, as of
such date, in good standing and authorized to transact business as a domestic
corporation. Etinuum has delivered to Acorn Certificates of the Secretary of
State (or other authorized officer) of Delaware, Colorado, California and Kansas
certifying as of a date within thirty (30) days before the Closing that Etinuum
is, as of such date, in good standing and authorized to transact business as a
foreign corporation in such jurisdiction. Etinuum has obtained the approvals
and all consents from third parties and governmental agencies (including under
Blue Sky laws, except to the extent obligations to obtain such approvals and
consents are not yet required) required to consummate the transactions
contemplated hereby and any additional regulatory consents have been obtained
(other than approvals or consents required by Etinuum the absence of which would
not have a Material adverse effect on the ability of Etinuum or Acorn to operate
their respective business after the Closing).
ARTICLE 5
OTHER COVENANTS AND AGREEMENTS
------------------------------
Acorn, the Shareholders and Etinuum covenant that as of the Closing (and
continuing after the Closing as to the parties named in and covenants contained
in Sections 5.1, 5.9, 5.11, 5.12, 5.13, 5.14, 5.15, 5.16 and 5.17):
31
5.1 Access to Information.
---------------------
5.1.1. Financial Information. Etinuum shall:
---------------------
5.1.1.1. deliver to each of the Shareholders as soon as
practicable, but in any event within forty-five (45) days after available to
Etinuum, an income statement, balance sheet and statement of shareholder's
equity as of the end of such fiscal year, prepared in accordance with GAAP
and audited and certified by independent public accountants of nationally
recognized standing selected by Etinuum.
5.1.1.2. upon request, deliver to each Shareholder such
financial and other business information relating to Etinuum as Etinuum
routinely provides to Etinuum executives of similar responsibility and
compensation levels as the Key Shareholders who are not also members of the
Etinuum Executive Management Committee (as provided in Section 5.17 below);
and
5.1.1.3. make available for inspection at Etinuum's offices
all financial statements and other written materials relating to Etinuum's
financial condition that is distributed to the Etinuum Executive Management
Committee.
5.1.2. Inspection. Etinuum shall permit each Shareholder at such
----------
Shareholder's expense, to visit and inspect Etinuum's properties, to examine its
books of account and records and to discuss Etinuum's finances and accounts with
its officers, all at such reasonable times as may be requested by the
Shareholder and in accordance with applicable law.
5.1.3. Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Section 5.1.1 and 5.1.2 herein shall terminate as to each
Shareholder and be of no further effect upon the effective date of an IPO or
when Etinuum first becomes subject to the periodic reporting requirements of the
Exchange Act (or similar provisions then in effect), or if such Shareholder is
no longer a holder of Common Stock, whichever event shall first occur.
Notwithstanding the foregoing, Etinuum shall not be required to comply with the
requirements in Section 5.1.1.3 upon the termination of employment of any Key
Shareholder with Acorn for any reason.
5.2 Business Relationships. Acorn shall use all reasonable efforts to
----------------------
preserve present relationships with suppliers, customers, employees, vendors,
and others having relationships with the businesses of Acorn. Acorn will
conduct its operations and business only in the normal course of business
consistent with past practices and in compliance with all applicable laws,
statutes, rules, regulations, ordinances and orders.
5.3 No Shop. As an inducement to Etinuum to provide the Bridge Loan,
-------
Acorn executed and delivered to Etinuum a Standstill Agreement, dated June 4,
1999, incorporated herein by reference and attached hereto as Exhibit 5.3, which
governs the rights and obligations
32
of Acorn and Etinuum with respect to discussions or agreements with other
parties concerning the transactions contemplated by this Agreement. Such
Standstill Agreement remains in effect.
5.4 Amendments. Acorn agrees not to amend, revoke or suspend any
----------
provision in the Acorn Charter or Bylaws except as requested by Etinuum in
connection herewith.
5.5 Resignations and Closing Date Board. The Key Shareholders and Acorn
-----------------------------------
as of the Closing will have caused the resignation of all necessary officers and
directors, and the election of officers and directors, so that immediately after
the Closing the Board of Directors and officers of Acorn may be as contemplated
in Schedule 5.5.
5.6 Signature Cards. Acorn shall prepare new signature cards for each
---------------
bank, depository, savings, brokerage or similar account, of Acorn, effective as
of the Closing.
5.7 Additional Financial Statements. Acorn shall, on a monthly basis,
-------------------------------
deliver to Etinuum the reconciled bank statements, check registers, accounts
receivable aging reports and accounts payable aging reports of Acorn, prepared
in the ordinary course of business, but in no event shall any such monthly
statements be delivered later than thirty (30) days after the end of the
applicable period.
5.8 Satisfaction of Conditions. The parties hereto each shall use their
--------------------------
best efforts to satisfy any Conditions of Closing set forth in ARTICLE 6 herein
or in any other document executed in connection with the Agreement or the
transactions contemplated herein.
5.9 Tax Elections - Post Closing Change. No new elections with respect
-----------------------------------
to taxes or any changes in current elections with respect to taxes affecting
Acorn shall be made after the date of this Agreement without the prior written
consent of Etinuum.
5.10 This Section intentionally left blank.
-------------------------------------
5.11 Confidentiality. Etinuum, Acorn and each Shareholder acknowledge
---------------
and agree that each party will have access to certain "Confidential Information"
(as defined below) of the other parties, and in the future may gain additional
Confidential Information. For the purpose of this Amended and Restated
Agreement, "Confidential Information" shall mean (x) information regarding the
business of Etinuum or of Acorn which is not generally known and which gives
such entity an advantage over competitors who do not know or use it, including
but not limited to Etinuum's or Acorn's plans for future products or
developments and (y) confidential information concerning third persons
(including employees) which is not generally known. Notwithstanding the
foregoing, Confidential Information shall not include: (i) information which is,
or was at the time it was disclosed, generally or readily obtainable by the
public or the trade, (ii) information which is publicly known or becomes known,
through no fault or activity of the party to whom the Confidential Information
was disclosed, (iii) information disclosed pursuant to the requirement of a
court, administrative agency, or other governmental body, or (iv) information
33
which is disclosed pursuant to applicable law, rule or regulation. Etinuum and
Acorn (on a post-Closing basis as to Confidential Information of the
Shareholders), and each of the Shareholders (as to Confidential Information of
Etinuum and Acorn) agree at all times to regard and preserve as confidential
such Confidential Information, and to refrain from publishing or disclosing any
part of it and from using, copying or duplicating it in any way or by any means
whatsoever. Each of the Shareholders agrees to certify the destruction of or to
return any Confidential Information to the owner of such Confidential
Information upon request.
5.12 Covenant Not to Compete.
-----------------------
5.12.1. Covenant. In exchange for the consideration
--------
provided by Etinuum and the entering into of this Amended and Restated
Agreement, and in order to protect the trade secrets of the Subject Company (as
defined below), each Key Shareholder severally, not jointly, hereby agrees with
Etinuum that such Key Shareholder shall not compete directly or materially with
a Subject Company in the business of (i) inbound or outbound telemarketing or
teleservicing; (ii) outsourced teleservicing; (iii) customer direct e-servicing
business, which includes, without limitation, the design, development, marketing
and sale of business tools (including business rules and processes) and computer
software that assist businesses and other organizations in selling products
directly to consumers on the Internet, or (iv) "data mining" by which
demographic data is either gathered or analyzed in order to direct or improve
marketing or customer service activities (collectively the "Business"), during
the Non-Compete Period (as defined below). The parties agree that they shall not
during such period make public statements in derogation of each other, except as
may be required by law. For the purposes of this Section, the term "Subject
Company" shall mean Etinuum and any direct or indirect subsidiaries, parents and
affiliates of Etinuum including Acorn. Competing directly or materially with the
Subject Company shall mean (a) either (i) engaging or (ii) having a material
interest (any ownership or profit interest over 5% always being material),
directly or indirectly, as owner, employee, officer, director, partner,
venturer, shareholder, capital investor, consultant, agent, principal, advisor
or otherwise, either alone or in association with others, in the operation of
any individual or entity engaged in (b) the Business within Canada or the
continental United States, including the California counties which would appear
here if each county in California was listed here. Competing directly or
materially with the Subject Company, as used in this Amended and Restated
Agreement, shall be deemed not to include an ownership interest as an inactive
investor, which for purposes of this Section shall mean the beneficial ownership
of less than five percent (5%) of the outstanding shares of any series or class
of securities of any competitor of the Subject Company, which shares are
publicly traded in the securities markets. The Key Shareholders agree that the
Business is inherently nationwide in scope.
5.12.2. The Key Shareholders each acknowledge that he or she
has had or will have contacts with employees and/or customers of the Subject
Company. Accordingly, the Key Shareholders each covenant and agree that during
the term of the Non-Compete Period, he or she will not (i) solicit or hire any
of the employees of a Subject Company who were employed by a Subject Company at
or within one month before the Closing or during
34
the Key Employee's employment by a Subject Company, (ii) interfere with the
relationship of the Subject Company with any such employees, or (iii) personally
target or solicit, or assist another to target or solicit, customers of Acorn
for activities related to the Business, or attempt to influence any of the
customers of the Subject Company not to do business with the Company.
5.12.3. Remedies. Each of the Key Shareholders acknowledges and
--------
agrees that his or her obligations provided herein are necessary and reasonable
in order to protect the Subject Company and its business, and each Key
Shareholder expressly agrees that monetary damages may be inadequate to
compensate the Subject Company for any breach by any Key Shareholder of his or
her covenants and agreements set forth herein. Accordingly, each Key
Shareholder agrees and acknowledges that, in addition to any other remedies that
may be available, in law, in equity or otherwise, the Subject Company, and any
successor or assign thereof, shall be entitled to obtain specific performance of
this Section.
5.12.4. Term. The term of the Covenant Not to Compete set forth
----
herein (the "Non-Compete Period") shall begin on the Closing Date and end the
longer of one (1) year after the Date of Termination or three (3) years after
the Closing Date. Notwithstanding the foregoing provisions of this Section 5.12,
the Covenant Not to Compete may be reduced in scope, geographic area or time as
to a particular Key Shareholder pursuant to the written employment agreements
that have been attached as Exhibit 6.1.1. A Key Shareholder shall have no
obligation under this Section 5.12 if the Etinuum Chief Executive Officer
consents, which consent shall not be unreasonably withheld, to a Key
Shareholder's employment or performance of services for a business that does not
directly compete with the Business. This provision does not prohibit the Subject
Company and any other person from entering into any other covenant not to
compete or other agreement, including the Employment Agreements, with different
provisions and the obligations of the Key Shareholders under this Section 5.12
are independent from any such other covenant not to compete or other agreements.
5.12.5. Severability. Should any one or more of the provisions of
------------
this Section 5.12 be determined to be illegal or unenforceable, then such
illegal or unenforceable provision shall be modified by the proper court or
arbitrator to the extent necessary and possible to make such provision
enforceable, and such modified provision and all other provisions of this
Section and of each other agreement entered into pursuant to this Section shall
be given effect separately from the provision or portion thereof determined to
be illegal or unenforceable and shall not be affected thereby. If any of the
provisions of Section 5.12 relating to the scope, periods or geographic area of
restriction shall be deemed to exceed the maximum scope, periods of time or
geographic area which a court of competent jurisdiction would deem enforceable,
the scope, times and geographic area shall, for the purposes of Section 5.12, be
deemed to be the maximum scope, time periods and geographic area which a court
of competent jurisdiction would deem valid and enforceable in any state in which
such court of competent jurisdiction
35
shall be convened. The invalidity or unenforceability of any such provision in
one jurisdiction shall not affect its validity or enforceability in another
jurisdiction.
5.13 Governmental Filings. If any filings are required under federal,
--------------------
state or other securities laws for the delivery of the Non-Employee Shares or
for the delivery of the Options or Spider Shares, the parties will cooperate in
such filings.
5.14 Good Faith. The parties will act in good faith in connection with
----------
the matters described herein.
5.15 Existing Acorn Loans; Bridge Loan.
---------------------------------
5.15.1. Chase and Fleet Loans. Upon the earlier of
---------------------
Acorn's achievement of Sustained Profitability or November 30, 1999, Etinuum
will obtain a release of the Key Shareholders from their obligations under their
personal guaranties on loans provided to Acorn by The Chase Manhattan Bank
("Chase") and Fleet Bank ("Fleet"). Acorn will not make any prepayments on the
Chase and Fleet loans without Etinuum's prior written consent; provided,
--------
however, that Etinuum's consent will not be required to make interest payments
on the Chase and Fleet loans and principal payments necessary to maintain the
minimum draw under such loans.
5.15.2. Bridge Loan. Upon the earlier of Acorn's
-----------
achievement of Sustained Profitability or November 30, 1999, Etinuum will (a)
release the Key Shareholders from their obligations under their personal
guaranties of the Bridge Loan and (b) reduce the interest rate on the Bridge
Loan to six percent (6%) per annum effective as of the month following
achievement of Sustained Profitability or November 30, 1999 (whichever is
earlier) and until the Bridge Loan is paid in full.
5.15.3. Acorn Officers Loans. The Acorn Officers Loans
--------------------
will be paid in full by Etinuum or Acorn on January 1, 2001.
5.16 Changes in Control. If, within three (3) years from the Closing,
------------------
Etinuum becomes insolvent or sells all or substantially all of the stock or
assets of Acorn to a third party, the Key Shareholders will have a right of
first refusal to purchase the stock or assets of Acorn as the case may be on the
same price and terms as the proposed sale, or Acorn's appraised value if Etinuum
is insolvent and Acorn is not being sold.
5.17 Board Observer; Executive Management Committee.
----------------------------------------------
5.17.1. Xxxxxx Xxxxxx, as of the Closing, shall be
designated as a nonvoting observer on the Etinuum Board of Directors and will be
entitled to attend Board meetings. Observer status on the Etinuum Board of
Directors will terminate if the Acorn Key Shareholders sell more than fifty
percent (50%) of their Common Stock after exercise of their
36
Options or upon an IPO of Etinuum's securities, or upon an Etinuum Change in
Control.
5.17.2. Xxxxxx Xxxxxx and Xxxxx Xxxxxx, as of the
closing, shall be designated members of the Etinuum Executive Management
Committee ("EMC") and will be entitled to participate in EMC meetings. Solely at
the discretion of Etinuum's Chief Executive Officer, EMC participation may
terminate if the Acorn Key Shareholders sell more than fifty percent (50%) of
their Common Stock after exercise of their Options, upon Etinuum Change in
Control or if the individual ceases being an Acorn employee.
5.17.3. The above rights shall terminate as to any person
who has been terminated as an Acorn employee for Cause (as defined in the
Employment Agreement), or who has violated the confidentiality, non-compete or
another material term of this Amended and Restated Agreement.
ARTICLE 6
CONDITIONS OF CLOSING
---------------------
6.1 Etinuum's Conditions of Closing. The obligation of Etinuum to
-------------------------------
consummate the Closing was subject to and conditioned upon the satisfaction at
the Closing of each of the following conditions and no other conditions (any of
which maybe waived in writing by Etinuum, in whole or in part):
6.1.1. Employment Agreements. Etinuum shall have
---------------------
received executed Employment Agreements, in substantially the form attached
hereto as Exhibit 6.1.1, signed by Etinuum and each of the Key Shareholders.
6.1.2. Representations and Warranties. All
------------------------------
representations and warranties of Acorn and the Shareholders shall be true and
correct in all Material respects as of the Closing as though such
representations and warranties had been made on and as of that date, and
certificates to the foregoing effect, in substantially the form attached hereto
as Exhibit 6.1.2, dated as of the date of the Closing and signed by the
President or any Vice President of Acorn, on behalf of Acorn, and by each of the
Shareholders, individually, shall have been delivered to Etinuum.
6.1.3. Performance of Obligations. All of the terms,
--------------------------
covenants and conditions of this Agreement to be complied with and performed by
Acorn and the Shareholders on or before the Closing shall have been duly
complied with and performed in all Material respects on or before the date of
the Closing, and certificates to the foregoing effect, substantially in the form
attached hereto as Exhibit 6.1.2, dated as of the date of the Closing and signed
by the President or any Vice President of Acorn, on behalf of Acorn, and by each
of the Shareholders, individually, shall have been delivered to Etinuum.
37
6.1.4. Consents and Approvals. All necessary consents of and filings
----------------------
required to be obtained or made by Acorn relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
6.1.5. Certified Certificate of Incorporation and Certificate of Good
--------------------------------------------------------------
Standing. Acorn shall have delivered to Etinuum (i) Acorn's Certificate of
--------
Incorporation, duly certified by the Secretary of State of Delaware no less than
thirty (30) days prior to the date of Closing and (ii) a certificate, dated as
of a date no earlier than thirty (30) days prior to the date of Closing, duly
issued by the Secretary of State of Delaware, certifying that Acorn is in good
standing and authorized to do business.
6.1.6. Secretary's Certificate. Etinuum shall have received a
-----------------------
certificate, substantially in the form attached hereto as Exhibit 6.1.6, dated
as of the Closing Date and signed by the Secretary of Acorn, certifying as to
(i) the authenticity of the signatures of the President or any Vice President of
Acorn who is authorized to act on behalf of Acorn with respect to the
transactions contemplated by this Agreement, and (ii) the truth and correctness
of attached copies of Acorn's Certificate of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the board of
directors and shareholders of Acorn approving Acorn's execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
6.1.7. Opinion of Counsel. Etinuum shall have received an opinion
------------------
from counsel for Acorn and the Shareholders, dated as of the date of Closing, in
substantially the form attached hereto as Exhibit 6.1.7.
6.1.8. Additional Documents. Etinuum shall have received such other
--------------------
documents as Etinuum may reasonably request to evidence the accuracy of any
representation or warranty made by Acorn or the Shareholders, or the performance
of or compliance with any covenants or obligations required by Acorn or the
Shareholders, or to otherwise facilitate the consummation of any of the
transactions contemplated by this Agreement.
6.1.9. Termination of Agreements Pertaining to Acorn Stock. Etinuum
---------------------------------------------------
shall have received evidence of the expiration or termination of any and all
agreements (other than with Etinuum) relating in any way to the Acorn Shares or
ownership thereof.
6.2 Acorn's Conditions of Closing The obligation of Acorn and the
-----------------------------
Shareholders to consummate the Closing was subject to and conditioned upon the
satisfaction at the Closing of each of the following conditions and no other
conditions (any of which may be waived in writing by Acorn and the Shareholders,
in whole or in part):
6.2.1. Employment Agreements. The Key Shareholders shall have
---------------------
received Acorn Employment Agreements, in substantially the form attached hereto
as
38
Exhibit 6.1.1, signed by Etinuum.
6.2.2. Representations and Warranties. All
------------------------------
representations and warranties of Etinuum shall be true and correct in all
Material respects as of the Closing as though such representations and
warranties had been made on and as of that date, and certificates to the
foregoing effect, substantially in the form attached hereto as Exhibit 6.2.2,
dated as of the date of the Closing and signed by the President or any Vice
President of Etinuum, shall have been delivered to Acorn and the Shareholders.
6.2.3. Performance of Obligations. All of the terms,
--------------------------
covenants and conditions of this Agreement to be complied with and performed by
Etinuum on or before the Closing shall have been duly complied with and
performed in all Material respects on or before the date of the Closing, and
certificates to the foregoing effect, substantially in the form attached hereto
as Exhibit 6.2.2, dated as of the date of the Closing and signed by the
President or any Vice President of Etinuum, shall have been delivered to Acorn
the Shareholders.
6.2.4. Certified Articles of Incorporation and Good
--------------------------------------------
Standing Certificate. Etinuum shall have delivered to Acorn and the Shareholders
--------------------
(i) Etinuum's Certificate of Incorporation, duly certified by the Secretary of
State of Delaware no less than thirty (30) days prior to the Closing Date and
(ii) a certificate, dated as of a date no earlier than thirty (30) days prior to
the Closing Date, duly issued by the Secretary of State of Delaware, certifying
that Etinuum is in good standing and authorized to do business.
6.2.5. Secretary's Certificate Acorn and the
-----------------------
Shareholders shall have received a certificate, substantially in the form
attached hereto as Exhibit 6.2.5, dated as of the Closing Date and signed by the
Secretary of Etinuum, certifying as to (i) the authenticity of the signatures of
the President or any Vice President of Etinuum who is authorized to act on
behalf of Etinuum with respect to the transactions contemplated by this
Agreement, and (ii) the truth and correctness of attached copies of Etinuum's
Certificate of Incorporation (including amendments thereto), Bylaws (including
amendments thereto), and resolutions of the board of directors of Etinuum
approving Etinuum entering into this Agreement and the consummation of the
transactions contemplated hereby.
6.2.6. Opinion of Counsel. Acorn and the Shareholders
------------------
shall have received an opinion from counsel for Etinuum, dated as of the date of
Closing, in substantially the form attached hereto as Exhibit 6.2.6.
6.2.7. Transaction Fee. Etinuum shall have paid a
---------------
Transaction Fee in accordance with Section 2.7 above.
6.2.8. Additional Documents. Acorn and the
--------------------
Shareholders shall have received such other documents as Acorn and the
Shareholders may reasonably request to evidence the accuracy of any
representation or warranty made by Etinuum, or the performance of
39
or compliance with any covenants or obligations required by Etinuum, or to
otherwise facilitate the consummation of any of the transactions contemplated by
this Agreement.
6.2.9. Consent to Registration Right. Etinuum shall
-----------------------------
have received the consent of holders of registration rights with respect to the
Transaction Advisor Shares, as required prior to a grant of registration rights,
if any, to Prospero pursuant to Section 2.7 above.
ARTICLE 7
AMENDMENT
---------
This Amended and Restated Agreement may be amended by Etinuum, Acorn and the
Shareholders by action taken by the respective Boards of Directors of Etinuum
and Acorn and by the Shareholders individually at any time before or after
approval hereof by the Shareholders, but no amendment after approval by the
Shareholders of Acorn shall be made which changes any of the principal terms of
this Amended and Restated Agreement. This Amended and Restated Agreement may
not be amended except by an instrument in writing signed on behalf of Etinuum,
Acorn and the Shareholders.
ARTICLE 8
INDEMNIFICATION
---------------
8.1 Shareholders' General Indemnification Covenants'. Subject to the
------------------------------------------------
provisions of this ARTICLE 8, the Shareholders, jointly and severally in
proportion to their respective ownership of the Acorn Shares as of the Closing
Date, shall indemnify, defend, save and keep Etinuum and its affiliates
(including Acorn), and their respective officers, directors, successors and
assigns (collectively, the "Etinuum Indemnitees"), harmless against and from all
liability, demands, claims, actions or causes of action, assessments, losses,
fines, penalties, costs, damages and expenses, including without limitation,
reasonable attorneys' fees, court costs and other fees, disbursements and
expenses, including any diminution in the value of Acorn or the Acorn Shares
held by Etinuum, (collectively "Damages"), sustained or incurred by any of the
Etinuum Indemnitees as a result of, arising out or by virtue of any
misrepresentations, breach of any warranty or representation, or non-fulfillment
of any agreement or covenant on the part of Acorn or the Shareholders, whether
contained in this Amended and Restated Agreement, any Document or any exhibit or
schedule hereto or thereto, or any written statement or certificate furnished or
to be furnished to Etinuum pursuant hereto or in any closing document delivered
by Acorn or the Shareholders to Etinuum in connection herewith. Such
obligations apply regardless of the presence of a Third Party Claim (as defined
below). For purposes of determining the amount of Damages for which
indemnification is provided hereunder (but not for the purpose whether a breach
of a representation, warranty or covenant has occurred), each of the
representations, warranties and covenants made by any party in this Amended and
Restated Agreement or in any
40
certificate or other instrument delivered pursuant hereto, including, without
limitation, the Documents, shall be deemed to have been made without the
inclusion of limitations or qualifications as to materiality such as the word
"Material," if with the inclusion of such limitation or qualification the
representation, warranty or covenant was breached.
8.2 Procedures for Indemnification Pursuant to Section 8.1.
------------------------------------------------------
8.2.1. Promptly following the receipt by a Etinuum Indemnitee of
notice of a demand, claim, action, assessment or proceeding made or brought by a
third party, including a governmental agency (a "Third Party Claim") or Etinuum
receiving notice of the basis of a claim for Damages, the Etinuum Indemnitee
receiving the notice of the Third Party Claim or knowledge of the basis for a
claim: (i) shall notify the Shareholders of its existence, setting forth the
facts and circumstances of which such Etinuum Indemnitee has received notice or
knowledge; and (ii) if the Etinuum Indemnitee giving such notice is a person
entitled to indemnification under this ARTICLE 8 (an "Indemnified Party"),
specifying the basis hereunder upon which the Indemnified Party's claim for
indemnification is asserted; provided, however, that a failure to provide prompt
-------- -------
notification shall not prevent or prejudice a claim under this ARTICLE 8 except
to the extent such failure has prejudiced the rights or defenses of the
Shareholders.
8.2.2. The Indemnified Party shall, upon reasonable notice by the
Shareholders, tender the defense of a Third Party Claim to the Shareholders. If
the Shareholders accept responsibility for the defense of a Third Party Claim,
then the Shareholders shall have the right to contest, defend and litigate the
Third Party Claim and shall have the exclusive right, in their discretion
exercised in good faith and upon the advice of counsel, and subject to the
consent of the Indemnified Party (which shall not be unreasonably withheld) to
settle any such matter, either before or after the initiation of litigation,
provided that at least ten (10) days prior to any such settlement, they shall
--------
give written notice of their intention to settle to the Indemnified Party. The
Indemnified Party shall have the right to be represented by counsel at its own
expense in any defense conducted by the Shareholders.
8.2.3. Notwithstanding the foregoing, in connection with any
settlement negotiated by the Shareholders, no Indemnified Party shall be
required to: (i) enter into or be bound by or obligated under any settlement (a)
that does not include the delivery by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
litigation, (b) if the Indemnified Party shall, in writing to the Shareholders
within the ten (10) day period prior to such proposed settlement, unreasonably
withhold its consent with respect to such settlement proposal as contemplated by
Section 8.2.2, and desire to have the Shareholders tender the defense of such
matter back to the Indemnified Party, or (c) that requires an Indemnified Party
to take any unreasonable affirmative actions as a condition of such settlement;
or (ii) consent to the entry of any judgment that does not include a full
dismissal of the litigation or proceeding against the Indemnified Party with
prejudice; provided, however, that should the Indemnified Party disapprove of a
-------- -------
settlement proposal pursuant to clause (b) above, the
41
Indemnified Party shall thereafter have all of the responsibility for defending,
contesting and settling such Third Party Claim but shall not be entitled to
indemnification by the Shareholders to the extent that, upon final resolution of
such Third Party Claim, the Shareholders' liability to the Indemnified Party but
for this proviso exceeds what the liability to the Indemnified Party would have
been if the Shareholders were permitted to settle such Third Party Claim in the
absence of the Indemnified Party exercising its right under clause (b) above.
8.2.4. If, in accordance with the foregoing provisions of this
Section 8.2, an Indemnified Party shall be entitled to indemnification against a
Third Party Claim, and if the Shareholders shall fail to accept the defense of a
Third Party Claim which has been tendered in accordance with this Section 8.2,
the Indemnified Party shall have the right, without prejudice to its rights of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable, provided at least ten (10) days prior to any such settlement,
written notice of its intention to settle is given to the Shareholders. If,
pursuant to this Section 8.2, the Indemnified Party defends or settles a Third
Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed by the
Shareholders for the reasonable attorneys' fees, expert fees and other expenses
of defending the Third Party Claim which are incurred from time to time,
forthwith following the presentation to Shareholders of itemized bills for said
attorneys' fees, court costs and other expenses. No failure by the Shareholders
to acknowledge in writing their indemnification obligations under this ARTICLE 8
shall relieve them of such obligations to the extent they exist.
8.3 Certain Information. The parties hereto shall furnish or cause to be
-------------------
furnished to each other (at reasonable times and at no charge) upon request as
promptly as practicable such information (including access to books and records)
pertinent to Acorn, the Shareholders, or Etinuum and assistance relating to
Acorn or Etinuum as is reasonably necessary for the preparation, review and
audit of financial statements, the preparation, review, audit and filing of any
Tax Return, the preparation for any audit or the prosecution or defense of any
claim, suit or proceeding relating to any proposed adjustment or which may
result in Shareholders or Etinuum being liable under the indemnification
provisions of this ARTICLE 8.
8.4 Release by Shareholders. Shareholders, as of the Closing Date,
-----------------------
hereby release and discharge Acorn and its officers and directors from, and
agree and covenant that in no event will Shareholders commence any litigation or
other legal or administrative proceeding against, Acorn or any of its officers
or directors, either in law or equity, relating to any and all claims and
demands, known and unknown, suspected and unsuspected, disclosed and
undisclosed, for damages, actual, consequential, or otherwise, past, present and
future, arising out of or in any way connected with their ownership of the
equity securities of Acorn or any employment or consulting relationship (other
than for wages or employee benefits accrued but not yet paid, or under debts for
borrowed money as listed on a Schedule hereto) prior to or at the Closing Date.
42
Except for this Amended and Restated Agreement and the agreements entered into
hereunder, as of the Closing without further action, all shareholders, voting,
preemptive, buy-sell, first refusal or similar rights, employment or consulting
rights, by agreement or statute, of a Shareholder of Acorn, shall terminate as
to securities of Acorn and as to Acorn. This Section shall in no way release,
waive or extinguish claims that any Shareholder or Acorn has or will have
against Etinuum arising in the past, present or future, including under this
Amended and Restated Agreement and the agreements entered into hereunder.
8.5 Indemnification by Etinuum. Subject to the provisions of this
--------------------------
ARTICLE 8, Etinuum agrees to indemnify, defend and hold each of the Shareholders
harmless against, and will reimburse the Shareholders on demand for, any Damages
(as defined in Section 8.1) sustained or incurred by any of the Shareholders as
a result of, arising out of or by virtue of any misrepresentation, breach of any
warranty or representation, or non-fulfillment of any agreement or covenant on
the part of Etinuum, whether contained in this Amended and Restated Agreement,
any Document or any exhibit or schedule hereto or thereto or any written
statement or certificate furnished or be to furnished to Etinuum pursuant hereto
or in any Document delivered by Etinuum to Acorn or the Shareholders in
connection herewith. The procedures set forth in Sections 8.2 and 8.3 shall be
applied mutatis mutandis to any claim under this Section by a Shareholder, and
----------------
the Shareholders shall be the "Etinuum Indemnitees" and "Indemnified Party" for
such purposes and Etinuum shall be the " Shareholders." Such obligations apply
regardless of the presence of a Third Party Claim.
8.6 Exclusive Remedy. The remedies provided in this ARTICLE 8 are, to
----------------
the extent permitted by law, the sole and exclusive remedies related to
representations, warranties or covenants made or to be performed at or before
the Closing, and there are no other remedies otherwise available to any of the
parties, for any claim by one party against any other party under this Amended
and Restated Agreement or with respect to the transactions contemplated by it
related to representations, warranties or covenants made or to be performed at
or before the Closing, except for equitable injunctive relief. No party shall
make any claim under any theory, in tort, contract, statute or otherwise, which
could not be brought directly hereunder due to the time or dollar limitations
set forth in Section 8.8.
8.7 No Rights of Shareholders Against Acorn. No Shareholder has any
---------------------------------------
claim or cause of action, directly, by contribution, by subrogation or
otherwise, against Acorn for any matter for which a Shareholder must provide
indemnification, defense or hold harmless hereunder or under any other document
or agreement.
8.8 Limits on Indemnification; Escrow.
---------------------------------
8.8.1. Neither Etinuum, Acorn nor the Shareholders shall
assert any claim for indemnification hereunder against the other until such time
as, and solely to the extent that, the aggregate of all claims which such party
may have against the other shall exceed $75,000 (the "Indemnification
Threshold"). For purposes of determining whether a claim is
43
subject to indemnification under this ARTICLE 8, and counted toward the
Indemnification Threshold, claims which in the aggregate are Material shall be
counted toward the Indemnification Threshold and indemnifiable hereunder even if
any such claims individually are not Material.
8.8.2. No indemnification payment hereunder shall exceed the
aggregate maximum Purchase Price payable hereunder in cash and the value of the
Options, or Option Shares received upon exercise thereof, (adjusted for stock
splits, stock dividends, stock combinations, and recapitalizations, and without
adjustment for the Spider spin off), whether actually paid or exercised or not
as of the date of the claim for indemnification, such amount to be calculated
net of Taxes payable on receipt of such cash and Common Stock less any Tax
benefit as a result of the indemnification payment.
8.8.3. Key Shareholders' Escrow. Etinuum and the Key Shareholders
------------------------
shall enter into an agreement in the form of Exhibit 8.8.3 with a mutually
agreed upon escrow agent for the creation of an interest-bearing escrow account
(the "Escrow") into which an amount equal to ten percent (10%) of the Purchase
Price paid (exclusive of the Base Consideration and the Contingent
Consideration) within the a period expiring fifteen (15) months after the
Closing (the "Escrow Consideration") will be placed. The Escrow Consideration
will be held in the Escrow until the expiration of eighteen (18) months after
the Closing, at which time the portion of the Escrow Consideration which remains
in the Escrow and is not reserved against for the payment of any indemnification
claims made by Etinuum prior to such expiration, along with accrued interest and
less the cost of establishing and maintaining the Escrow, shall be disbursed to
the Key Shareholders according to each Key Shareholder's proportionate ownership
of such Escrow Consideration as of such date of disbursement. Etinuum shall make
claims initially against, and such claims shall be paid by, the Escrow and only
after that Escrow Consideration has been exceeded will a claim be made against
the Key Shareholders.
8.8.4. Indemnity obligations hereunder may be satisfied through the
payment of cash or the delivery of the Options, or Option Shares received upon
exercise thereof, or a combination thereof. Solely for purposes of calculating
the value of the Options received or delivered pursuant hereto for
indemnification purposes (including for purposes of determining the
Indemnification Threshold and the amount of any indemnity paid), the Options
shall be valued at the difference between the $10.00 per share exercise price
(adjusted for stock splits, stock dividends, stock combinations, and
recapitalizations, and without adjustment for the Spider spin off) and the per
share fair market value on the date of such claim, which shall be measured by
the closing price of the Common Stock as quoted on the Nasdaq National Market
System on such date, or the next trading day, if listed on such system. Solely
for purposes of calculating the value of the Non-Employee Shares received or
delivered pursuant hereto for indemnification purposes (including for purposes
of determining the Indemnification Threshold and the amount of any indemnity
paid), the Non-Employee Shares shall be valued at $12.00 per share.
44
8.8.5. Etinuum shall have the right, upon written
notice, to offset indemnification amounts due to it pursuant to this Amended and
Restated Agreement against payments due to the Shareholders under this Amended
and Restated Agreement or any contract contemplated by, or referred to in, this
Amended and Restated Agreement except for Base Compensation payable under and as
defined in the Employment Agreements.
8.8.6. Notwithstanding any other term of this Amended
and Restated Agreement, no Shareholder shall be liable under this Section 8.8
for an amount which exceeds the amount of proceeds received by such Shareholders
in cash and in the Non-Employee Shares and the Options, or Option Shares
received upon exercise thereof, valued in accordance with Section 8.8.4, in
connection with the sale of the Acorn stock.
8.8.7. The foregoing limitations on damages do not apply
to violations of Sections 5.11 ("Confidentiality") or 5.12 ("Covenant Not to
Compete").
ARTICLE 9
MISCELLANEOUS
-------------
9.1 Notice. Any notice required or permitted hereunder shall be in
------
writing and shall be sufficiently given if (i) personally delivered, (ii) mailed
by certified or registered United States mail, return receipt requested, or
(iii) sent by recognized air express courier for next business day delivery,
addressed as follows:
If to Etinuum: Etinuum Inc.
0000 XXX Xxxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. X'Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Copy to: Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.
0000 00xx Xxxxxx
Xxxxxxx, XX 00000
Attn: G. Xxxxx Xxxxxxxx, Jr.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Key Shareholders: Acorn Information Services, Inc.
0 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
45
Copy to: Xxxxxx & Xxxx
Three Stamford Plaza
Stamford, CT 06901
Attn: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Xxxxxxx Xxxxx: Xxxxxxx Xxxxx
00 Xxxxxx Xxxx
Xxxxxx, XX
Telephone:
Facsimile:
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered, three business days after so mailed, or one business day after the
date delivered to the air express courier.
9.2 Execution of Additional Documents. The parties hereto will at any
---------------------------------
time, and from time to time after the Closing Date, upon reasonable request of
the other party, execute, acknowledge and deliver all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances as may be
required to carry out the intent of this Amended and Restated Agreement, and to
transfer and vest title to any securities being transferred hereunder, and to
protect the right, title and interest in and enjoyment of all of the securities
transferred, delivered and conveyed pursuant to this Amended and Restated
Agreement; provided, however, that this Amended and Restated Agreement shall be
--------
effective regardless of whether any such additional documents are executed.
9.3 Binding Effect; Benefits. This Amended and Restated Agreement shall
------------------------
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors, executors, administrators and assigns.
Notwithstanding anything contained in this Amended and Restated Agreement to the
contrary, nothing in this Amended and Restated Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Amended and
Restated Agreement.
9.4 Entire Agreement. This Amended and Restated Agreement, together with
----------------
the exhibits, schedules and other documents contemplated hereby, constitute the
final written expression of all of the agreements between the parties, and is a
complete and exclusive statement of those terms. It supersedes all
understandings and negotiations concerning the matters specified herein. Any
representations, promises, warranties or statements made by either party that
differ in any way from the terms of this Amended and Restated Agreement and the
exhibits, schedules and other documents contemplated hereby, shall be given no
force or effect.
46
The parties specifically represent, each to the other, that there are no
additional or supplemental agreements between them related in any way to the
matters herein contained unless specifically included or referred to herein. No
addition to or modification of any provision of this Amended and Restated
Agreement shall be binding upon any party unless made in writing. This Amended
and Restated Agreement does not, however, supersede the Bridge Loan, or the
security agreement and personal guarantees execution in connection therewith,
nor does it supersede Standstill Agreement, dated June 4, 1999, between Acorn
and Etinuum, which is incorporated herein by reference.
9.5 Governing Law. This Amended and Restated Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of Colorado exclusive
of the conflict of law provisions thereof.
9.6 Arbitration; Consent to Jurisdiction. Except as provided below in
------------------------------------
this paragraph, any and all disputes arising under or related to this Amended
and Restated Agreement shall be submitted to binding arbitration before the
American Arbitration Association ("AAA") in accordance with its rules of
Commercial Arbitration. The decision of the arbiter shall be final and binding
upon the parties, and it may be entered in any court of competent jurisdiction.
The arbitration shall take place in Chicago, Illinois. The arbiter shall be
bound by the laws of the State of Colorado applicable to all relevant privileges
and the attorney work product doctrine. The arbiter shall have the power to
grant equitable relief where applicable under Colorado law and shall not be
entitled to make an award of punitive damages. The arbiter shall issue a
written opinion setting forth its decision and the reasons therefor within
thirty (30) days after the arbitration proceeding is concluded. The obligation
of the parties to submit any dispute arising under or related to this Amended
and Restated Agreement to arbitration as provided in this Section shall survive
the expiration or earlier termination of this Amended and Restated Agreement.
Notwithstanding the foregoing, any party may seek an injunction or other
appropriate relief from a court of competent jurisdiction to preserve or protect
the status quo with respect to any matter pending conclusion of the arbitration
proceeding, but no such application to a court shall in any way be permitted to
stay or otherwise impede the progress of the arbitration proceeding.
The Shareholders, Etinuum, and Acorn hereby consent to the
jurisdiction of the AAA and the courts of the State of Illinois and the United
States District Courts for the Northern District of Illinois, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any arbitration, suit, action or other proceeding arising out
of any of their obligations arising hereunder or with respect to the
transactions contemplated hereby and expressly waive any and all objections they
may have as to venue in any of such courts.
9.7 Attorneys' Fees and Costs. In the event of any arbitration or
-------------------------
litigation being filed or instituted between two or more of the parties
concerning this Amended and Restated Agreement, the Prevailing Party will be
entitled to receive from the other party or parties its attorneys' fees,
experts' fees, costs and expenses, whether or not such
47
controversy, claim or action is prosecuted to judgment or other form of relief.
The "Prevailing Party" is that party which is awarded judgment or other legal or
equitable relief as a result of trial or arbitration, or who receives or is
entitled to receive a payment of money from the other party in settlement of
claims asserted by such party. If both parties receive a judgment or other award
of relief, the court or the arbiter shall determine which party is the
Prevailing Party, taking into consideration the merits of the claims asserted by
each party, the relative values of the judgments or other forms of relief
received by each party, and the relative equities between the parties.
9.8 Survival. All of the terms, covenants, conditions, warranties and
--------
representations contained in this Amended and Restated Agreement and any
Document shall survive the execution hereof and the Closing hereunder in
accordance with their terms and all representations and warranties shall survive
for forty (40) months following the Closing.
9.9 Counterparts. This Amended and Restated Agreement may be executed in
------------
any number of counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
9.10 Headings. Headings of the Sections of this Amended and Restated
--------
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
9.11 Waivers. Etinuum, the Shareholders, or Acorn may, by written notice
-------
to the other: (i) extend the time for the performance of any of the obligations
or other actions of the other under this Amended and Restated Agreement; (ii)
waive any inaccuracies in the representations or warranties of the other
contained in this Amended and Restated Agreement or in any document delivered
pursuant to this Amended and Restated Agreement; (iii) waive compliance with any
of the conditions or covenants of the other contained in this Amended and
Restated Agreement; or (iv) waive performance of any of the obligations of the
other under this Amended and Restated Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Amended and Restated
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Amended and Restated Agreement. The waiver by any
party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder nor as a waiver of any claim for breach of representation,
warranty or covenant.
9.12 Merger of Documents. This Amended and Restated Agreement and all
-------------------
agreements and documents contemplated hereby constitute one agreement and are
interdependent upon each other in all respects.
48
9.13 Incorporation of Exhibits and Schedules. All exhibits and schedules
---------------------------------------
attached hereto are by this reference incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
9.14 Severability. If for any reason whatsoever any one or more of the
------------
provisions of this Amended and Restated Agreement shall be held or deemed to be
inoperative, unenforceable or invalid as applied to any particular case or in
all cases, such circumstances shall not have the effect of rendering such
provision invalid in any other case or of rendering any of the other provisions
of this Amended and Restated Agreement inoperative, unenforceable or invalid.
9.15 Assignability. Neither this Amended and Restated Agreement nor any
-------------
of the parties' rights or obligations hereunder shall be assignable by any party
hereto without the prior written consent of the other parties hereto. No
assignment shall relieve a party of its obligations hereunder.
9.16 No Action for Failure to Deliver Opinions, Etc. No party shall have
----------------------------------------------
any claim or right of action against the legal counsel or accountants of the
other party for the failure or refusal of such counsel or accountants to deliver
any opinion, certification or letter requested hereunder.
9.17 Effectiveness of Agreement. Notwithstanding any other provision
--------------------------
herein, the parties acknowledge and agree that the effective date of this
Amended and Restated Agreement shall be the date when signed and delivered by
each of the parties hereto, provided, however, that the indemnification
obligations and the date as of which representations and warranties are made
hereunder shall be deemed made as of the Closing. There are no third party
beneficiaries of this Amended and Restated Agreement.
9.18 Reference to Shareholders' Agreement. This Amended and Restated
------------------------------------
Agreement refers to the Shareholders Agreement. The parties acknowledge that
they have reviewed and understand the Shareholders Agreement, including, without
limitation, the provisions regarding amendment and termination, and that the
Shareholders Agreement may be amended from time to time or may be terminated in
accordance with the terms of the Shareholders Agreement and Section 2.2 herein,
whether before or after shares of Common Stock are issued hereunder.
9.19 Action by Shareholders. Any consent, approval or similar act which
----------------------
requires the act of the "Shareholders" or the "Key Shareholders" is authorized
if approved by those Shareholders holding 80% or more of the Acorn Shares before
the Closing.
9.20 Shareholder Family LLC's.' Notwithstanding anything to the contrary
-------------------------
herein, certain Shareholders have transferred their Acorn Shares to the limited
liability companies listed on the signature page hereof for estate planning
purposes (the "Shareholder Family LLC's"). All ownership interests of the
Shareholder Family LLC's are held by the respective Shareholder and his or her
spouse, lineal descendents and/or immediate family members, and no transfer,
assignment or disposition of any membership or ownership interest in, or
admission of new
49
members to, a Shareholder Family LLC, other than to the spouse, line descendent
and/or immediate family members of the respective Shareholder, may be made
without the prior written consent of Etinuum. All of the rights of the
respective Shareholder hereunder shall inure to, and all of the obligations
(including the indemnification obligations under ARTICLE 8) of the respective
Shareholder hereunder shall bind, the Shareholder Family LLC, and any permitted
assignees thereof, to which a Shareholder Transferred his or her Acorn Shares.
The Shareholder Family LLC's shall execute and deliver a copy of the
Shareholders Agreement, if any, upon receipt of any Common Stock hereunder and
shall be bound by the restrictions on Transfer designated in Section 2.3 herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
50
IN WITNESS WHEREOF, the parties hereby execute this Amended and Restated
Share Purchase Agreement as of the date first written above.
ETINUUM, INC., ACORN INFORMATION SERVICES, INC.,
a Delaware corporation a Delaware corporation
By:/s/ Xxxxxxx X'Xxxxxxx By:/s/ Xxxxxx Xxxxxx
----------------------------- -----------------------------
Xxxxxxx X'Xxxxxxx, President Xxxxxx Xxxxxx, President
By: Xxxxxx Xxxxx By:/s/ Sharmla Sharma
----------------------------- -----------------------------
Its: Secretary Its: Assistant Secretary
KEY SHAREHOLDERS:
/s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxxxxxx
---------------------------------
Xxxx Xxxxxxxxxx
/s/ Xxxxx Xxxxx
---------------------------------
Xxxxx Xxxxx
SHAREHOLDER
/s/ Xxxxxxx Xxxxx
---------------------------------
Xxxxxxx Xxxxx
51
SHAREHOLDER FAMILY LLC'S:
Sharma Family LLC
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Its:
---------------------------------
Murali Family LLC
By: /s/ Xxxxx Xxxxxx
---------------------------------
Its:
---------------------------------
Xxxxxxxxxx Family LLC
By: /s/ Xxxx Xxxxxxxxxx
---------------------------------
Its:
---------------------------------
52
Schedule 2.2.2
Percentage Basis for Contingent Consideration Payment
Xxxxxx Xxxxxx 39.0%
Xxxxx Xxxxxx 31.5%
Xxxx Xxxxxxxxxx 19.5%
Xxxxx Xxxxx 10.0%
Percentage Basis for Stock Option Issuance
Xxxxxx Xxxxxx 39.0%
Xxxxx Xxxxxx 31.5%
Xxxx Xxxxxxxxxx 19.5%
Xxxxx Xxxxx 10.0%
53
