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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered
into this 23rd day of August, 1999 by and among Digital Commerce Corporation, a
Delaware corporation (the "Purchaser"), and Datamatix, Inc., a Delaware
corporation ("Seller") and is effective with immediately after the close of
Seller's business on August 20, 1999.
Recitals
Seller desires to sell, transfer and assign to the Purchaser, and the
Purchaser desires to purchase from Seller, substantially all of the assets,
properties and business of Seller on the terms and conditions hereinafter set
forth.
Covenants
In consideration of the mutual representations, warranties and
covenants and subject to the conditions herein contained, the parties hereto
agree as follows:
ARTICLE I
Purchase and Sale of Assets
Section 1.1. Purchase of Assets of Seller. Seller hereby sells,
conveys, transfers, assigns and delivers to the Purchaser, free and clear of all
liens, mortgages, pledges, encumbrances and charges of every kind (except as may
be set forth on Schedule 3.14), on the terms and subject to the conditions set
forth in this Agreement, the properties, business and assets of Seller as
follows (collectively the "Purchased Assets"):
(a) all computer equipment, machinery, equipment, tools, supplies,
leasehold improvements, construction in progress, furniture and fixtures, and
other fixed assets owned by Seller identified in Schedule1.1 (a) hereto (the
"Purchased Fixed Assets");
(b) all receivables of Seller, including without limitation all
receivables identified on Schedule 1.1(b) hereof, all trade accounts receivable
arising from sales of inventory in the ordinary course of business, notes
receivable, insurance proceeds receivable, tax refunds receivable (whether
currently receivable or receivable in the future as a result of the transactions
contemplated hereby), and any funds loaned or advanced to any officer, director,
employee or consultant of the Seller (the "Purchased Receivables");
(c) all of the interest of and the rights and benefits accruing to
Seller as lessee under all leases or rental agreements covering machinery,
equipment, tools, supplies, furniture and fixtures, and other fixed assets (the
"Purchased Leasehold Rights");
(d) except as may be set forth on Schedule 1.2, all of the rights and
benefits accruing to Seller under all sales orders, sales contracts, license
agreements, supply contracts, purchase orders
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and purchase commitments made by Seller in the ordinary course of business, the
uncollected portions of all settlements of rights or claims, and all choses in
action, causes of action and other rights of Seller (the "Purchased Contract and
Other Rights");
(e) all operating data and records of Seller, including without
limitation customer lists, financial records, credit records, correspondence,
budgets and other similar documents and records (the "Purchased Records");
(f) all of the proprietary rights of Seller, including without
limitation all domestic and foreign trademarks, trademark applications, service
marks, service xxxx applications, trade names, patents, patent rights, patent
applications, copyrights, and all applications for such which are in the process
of being prepared, owned by or registered in the name of Seller, licenses for
any of the foregoing, trade secrets, technology, know-how, other databases,
formulae, designs and drawings, computer software, slogans, copyrights,
processes, operating rights, other licenses and permits, and other similar
intangible property and rights relating to the products or business of Seller,
whether or not registered or licensed with federal, state, or international
bodies (the "Purchased Proprietary Rights");
(g) the prepaid and deferred items of Seller identified on Schedule
1.1(g) hereto (the "Purchased Prepaid Items");
(h) all of Seller's right, title and interest in and to its corporate
and trade names and all of the other goodwill of Seller (the "Purchased
Goodwill");
(i) the October 20, 1997 Agreement of Lease between ChuRoad Associates,
LP as Landlord and Datamatix as Tenant (the "Lease"); and
(j) Seller's license to certain intellectual property as set forth in
that certain Settlement Agreement dated June 15, 1999 by and between Xxxxxx
Xxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxxxxxxx, Datatron, Inc. and the Seller.
Section 1.2. Excluded Assets. Anything to the contrary in Section 1.1
notwithstanding, the Purchased Assets shall exclude the following assets of
Seller: (i) Seller's other rights under this Agreement; (ii) any employee
benefit plans defined in Section 3.23; (iii) all minutes and other records of
the proceedings of the Seller's Board of Directors, all records pertaining to
the ownership interests in Seller, and any other record relating to the
organization of Seller or the amendment of any of Seller's organizational
documents; (iv) all bank accounts; and (v) the items described on Schedule 1.2
hereto.
ARTICLE II
PURCHASE PRICE
Section 2.1. Purchase Price. As consideration for the Purchased Assets
of Seller and subject to the terms, conditions and limitations set forth in this
Agreement, concurrent with the
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execution of this Agreement (the "Closing"), the Purchaser has delivered to an
escrow agent, pursuant to the provisions of the Stock Pledge Agreement executed
concurrently herewith, 329,632 shares of the common stock, $0.01 par value per
share, of the Purchaser (collectively the "Shares").
Section 2.2. Assumed Liabilities. The Purchaser hereby assumes and
agrees to perform when lawfully due all obligations of Seller relating to the
period from and after the date of this Agreement pursuant to any agreements
included within the Purchased Assets (collectively, the "Assumed Liabilities").
In addition, the Purchaser assumes and agrees to pay when lawfully due, those
specific expenses of Seller which are described in Schedule 2.2 hereto.
Section 2.3. Excluded Liabilities. Except as specifically provided in
Section 2.2 hereof, the Purchaser shall not be responsible for the payment of
any liabilities of Seller, including, but not limited to, the following
liabilities, contracts, commitments and other obligations of Seller (the
"Excluded Liabilities"):
(a) Seller's obligations and any liabilities arising under this
Agreement;
(b) any obligations of Seller for federal, state, local or foreign
income tax liability, payroll, property and sales taxes (including interest and
penalties) arising from the operations of Seller up to the date hereof or
arising out of the sale by Seller of the Purchased Assets pursuant hereto;
(c) any obligations of Seller for any transfer, sales or other taxes,
fees or levies (including motor vehicle sales taxes) imposed by any state or
other governmental entity on or arising out of the sale of the Purchased Assets
pursuant hereto;
(d) any obligation of Seller for expenses incurred in connection with
the sale of the Purchased Assets pursuant hereto, including without limitation
the fees and expenses of its counsel, independent auditors and financial
advisors;
(e) any liability, contract, commitment or other obligation of Seller,
known or unknown, fixed or contingent, the existence of which constitutes or
will constitute a breach of any representation or warranty of Seller contained
in or made pursuant to Article III of this Agreement;
(f) any liability of Seller for any breach of contract, breach of
warranty, malfeasance or misfeasance, act of negligence or intentional act by
Seller or any of its employees or any violation of any statute regulation or
other administrative rule of any governmental entity;
(g) any liability of Seller for any damages arising out of any cause of
action or claim against Seller arising out of any act or failure to act of
Seller which occurs prior to the date hereof, including without limitation, any
liability of Seller arising out of Xxxx, et al. v. Datamatix. Inc., et
Anticipation of Litigation., Xx. 00-0000, X.X. Xxxx. Xx., X.X. Xx. ("Xxxx");
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(h) any liability of Seller arising out of the design, development, or
sale of any software or service sold by Seller prior to the date hereof,
including without limitation, any liability of Seller arising out of any
intellectual property rights of Seller which were the subject of Xxxx;
(i) any liability of Seller arising under any pension, profit sharing,
401(k) plan or other employee benefit plan whether arising before or after the
date of this Agreement;
(j) any liability of Seller for any rent due for occupancy by Seller
prior to the date of this Agreement on any real estate leased by Seller;
(k) any liability associated with grants issued, supervised, or
controlled by the Commonwealth of Pennsylvania, Department of Community and
Economic Development; and
(l) any other liability of Seller not expressly assumed hereunder.
Section 2.4 . Allocation of the Purchase Price among the Purchased
Assets. The Purchase price for the Purchased Assets shall be allocated among
each item or class of the Purchased Assets as specifically set forth in or
determined pursuant to Schedule 2.4. Seller and the Purchaser agree that they
will prepare and file their federal and any state or local income tax returns
based on such allocation of the Purchase Price of the Purchased Assets, and that
they will prepare and file any notices or other filings (including but not
limited to IRS Form 8594) required pursuant to Section 1060 of the Internal
Revenue Code of 1986, and that any such notices or filings will be prepared
based on such allocation of the purchase price for the Purchased Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereunder, Seller represents and
warrants as follows:
Section 3.1. Organization.
(a) Seller is a corporation organized under the laws of the state of
Delaware. A true and correct copy of the Articles of Incorporation and Bylaws,
as amended and in full force and effect as of the date hereof (the
"Organizational Documents"), have been delivered to the Purchaser. Seller is
duly licensed and qualified to do business as a foreign corporation and is in
good standing in each of the jurisdictions listed on Schedule 3.1 hereto, such
jurisdictions being the only jurisdictions in which the nature of the business
transacted by it or the character of the properties owned or leased by it
require such licensing or qualification.
(b) Seller has all requisite power and authority and holds all material
licenses, permits and other required authorizations from governmental
authorities necessary to own its properties and assets and to conduct its
business as it is now being conducted.
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(c) Except as provided in this Agreement, Seller has not has not sold,
or agreed to sell, any of its assets to any person or entity other than in the
ordinary course of business.
Section 3.2. Authorization, Validity and Enforceability of this
Agreement.
(a) Seller has full legal power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. The execution,
delivery and performance by Seller of this Agreement and all other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
have been authorized by all necessary corporate action of Seller, and will not
violate any provision of law (except for violations that could not reasonably be
expected, individually or in the aggregate to have a material adverse effect),
any order of any court or other agency of government, the Articles of
Incorporation or Bylaws of Seller or any instrument or other restriction to
which Seller is a party or by which it is bound.
(b) This Agreement has been duly executed and delivered by Seller and
constitutes the legal, valid, and binding obligation of Seller, enforceable
against it in accordance with its terms except as enforceability may be limited
by applicable bankruptcy, insolvency, moratorium or similar laws from time to
time in effect that affect creditors' rights generally and by legal and
equitable limitations on the availability of specific remedies.
Section 3.3. Governmental Consents, Etc. Except as may be necessary to
transfer certain contracts of Seller, no consent, approval or authorization of,
or declaration, registration or filing with any person, entity or governmental
authority on the part of Seller is required for the valid execution, delivery
and performance of this Agreement or the valid consummation of the transactions
contemplated hereby.
Section 3.4. Financial Statements. The audited financial statements of
Seller for the year ending December 31, 1996, and the unaudited financial
statements for years ending December 31, 1997, December 31, 1998 and the six and
one-half month period ended July 15, 1999, together with notes thereto (the
"Financial Statements"), copies of which are included herewith as Schedule 3.4,
are accurate, true, and complete, have been prepared in accordance with
generally accepted accounting principles consistently applied, and fairly
present, in all material respects, the financial position of the Company, the
results of operations and cash flows for the years ended December 31, 1996, 1997
and 1998 and the six and one-half month period ended July 15, 1999,
respectively.
Section 3.5. No Adverse Changes. Since July 15, 1999, (i) there have
been no changes in the condition or prospects (financial or otherwise except as
may relate to economic conditions generally) of Seller that, in the aggregate,
would materially adversely affect the organization, business, properties,
operations, financial condition, business prospects or operating results of
Seller, (ii) none of the business, prospects, financial condition, operations,
property or affairs of Seller has been materially adversely affected by an
occurrence or development, individually or in the aggregate, whether or not
insured against and (iii) there is not, to the best of Seller's knowledge, any
threatened or prospective event or condition of any character whatsoever which
could materially and adversely affect the Purchased Assets or the business,
financial condition or results of operations of Seller.
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Section 3.6 . No Defaults. Except as set forth in Schedule 3.6, Seller
is not in default in the performance or observance of any material obligations,
agreement, covenant, or condition contained in its Articles of Incorporation or
Bylaws or in any material contract, indenture, mortgage, loan agreement, lease,
note or other instrument to which it is a party or by which it may be bound. The
execution and delivery of this Agreement will not violate any provision of law
and will not conflict with, or result in a breach of any of the terms of, or
constitute a default under, Seller's Organizational Documents, or any agreement,
instrument, or other restriction to which Seller is a party or by which it is
bound.
Section 3.7. Material Transactions. Except as disclosed on the
Financial Statements or in Schedule 3.7 hereto, Seller has not:
(a) borrowed any funds or incurred or become subject to any obligations
or liabilities (absolute or contingent), except as incurred in the ordinary
course of business;
(b) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities
reflected in or shown on the Financial Statements and obligations referred to in
(a) above;
(c) declared or made any distribution to its stockholders of or
purchased or redeemed any shares of its common stock or other securities;
(d) paid any bonus or increased the rate of compensation of any of its
employees;
(e) sold or transferred or agreed to sell or transfer any of its assets
other than in the ordinary course of business;
(f) made or obligated itself to make any capital expenditures;
(g) incurred any material obligations or liabilities (including any
indebtedness) or entered into any material transaction, except for this
Agreement and the transactions contemplated hereby;
(h) suffered any theft, damage, destruction or casualty loss;
(i) entered into any agreements or arrangements for the purchase of, or
granting any preferential rights to purchase, any of the equity interests in or
assets, properties, or rights of Seller (including management and control
thereof), or requiring the consent of any party to a transfer or assignment of
such assets, properties or rights (or change in the management or control
thereof), or providing for the merger or consolidation of Seller into or with
another corporation or entity or the purchase of a majority of the ownership
interests in Seller;
(j) suffered any material losses, waived any rights of substantial or
material value or canceled any debts or claims;
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(k) except in the ordinary course of business, made or permitted any
amendment or termination of any material contract, agreement, or license to
which it is a party;
(l) changed any accounting method or practice, including, without
limitation, any change in depreciation or amortization policies or rates;
(m) made any loan to any person or entity, including but not limited to
any officer, director, employee, or owner of an equity interest in Seller;
(n) entered into any transaction other than in the ordinary course of
business; or
(o) entered into an agreement to do any of the things described in
clauses (a) through (n) above.
Section 3.8. Material Agreements. Except as disclosed in Schedule 3.8
hereto, Seller is not a party to any written or oral:
(a) contract for employment that may not be terminated on not more than
30 days notice without liability to Seller;
(b) pension or profit sharing plan, retirement plan, bonus plan, stock
purchase or stock option plan, or any similar plan, formal or informal, whether
covering one or more employees or former employees;
(c) contract involving payment by or to Seller of more than $10,000 or
the performance of which may extend more than 90 days from the date hereof; or
(d) other material contract, agreement, or understanding, whether
formal or informal.
All material contracts, agreements and understandings are set forth in Schedule
3.8 and are in full force and effect, and Seller has not received any notice of
default, nor is Seller in default, nor does any condition now exist which, with
notice or the lapse of time or both, would render Seller, or, to Seller's
knowledge, any other party in default under any contract, understanding, or
agreement to which Seller may be a party. There are no disputes or proceedings
relating to any such contract, understanding or agreement or to exercise or not
exercise any option or rights under such contract, understanding, or agreement.
Section 3.9. Status of Transferred Contracts. All Transferred
Contracts (as defined in Section 6.2) are and will be at the time of the Closing
fully compliant with all the terms of such contracts. Seller is in good standing
with the customer with respect to each of the Transferred Contracts, to the
knowledge of the Company, and there are no outstanding complaints or claims by
any customer for failure to perform any service to be provided pursuant to such
Transferred Contracts.
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Section 3.10. No Litigation. Except as set forth in Schedule 3.10,
there is no action or proceeding at law or in equity pending or, to the
knowledge of Seller, threatened against or affecting Seller, at law or in
equity, before any federal, state, local or foreign court or governmental
department, commission, board, bureau, agency or instrumentality, and there is
no such proceeding pending or, to the knowledge Seller, threatened, in
arbitration or before any administrative agency and, to the knowledge of Seller,
there are no facts, events or occurrences by reason of which any such action or
proceeding may be brought. There is no judgment, consent, decree, injunction,
rule, or other judicial or administrative order outstanding against Seller.
Section 3.11. Certain Transactions. Seller is not indebted, except as
provided in Schedule 3.11, directly or indirectly, to any of its officers or
directors or to their respective spouses or children, in any amount whatsoever
and none of Seller's officers or directors or any members of their immediate
families are indebted to Seller or have any direct or indirect ownership
interest in any firm or corporation with which Seller is affiliated or with
which Seller has a business relationship, or any firm or corporation that
competes with Seller. Seller is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
Section 3.12. Liabilities. All liabilities of Seller as of the date
hereof are set forth in the July 15, 1999 Financial Statements or on Schedule
3.12.
Section 3.13. Taxes. Except as provided in Schedule 3.13:
(a) Seller has filed all federal, state, county and local tax returns
that are required to be filed by it, and such returns are true and correct, and
all taxes shown thereon to be due have been timely paid with exceptions not
material to Seller. The Federal income tax returns of Seller have not been
examined by the Internal Revenue Service or any state or local taxing
authorities, and no controversy with respect to taxes of any type is pending or,
to the knowledge of Seller, threatened.
(b) All taxes and other assessments and levies which Seller is required
by law to withhold or to collect, including any applicable sales taxes and
employee withholding, have been duly withheld and collected, and have been paid
over to the proper governmental entity or are being held by Seller for such
payment.
Section 3.14. Property and Assets.
(a) Except as set forth on Schedule 3.14, Seller has good and
marketable title to all of the Purchased Assets (other than the Purchased
Leasehold Premises and the Purchased Leasehold Rights), free and clear of all
liens, mortgages, pledges, encumbrances or charges of every kind, nature, and
description whatsoever.
(b) All of the Purchased Fixed Assets currently in use are in good
operating condition, normal wear and tear excepted.
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(c) All licenses held by Seller are current and enforceable, and, upon
assignment to the Purchaser, will convey to the Purchaser all the rights set
forth therein.
Section 3.15. Leases. Seller enjoys peaceful and undisturbed possession
under all material leases under which it is operating as lessee and all such
leases are valid and subsisting and in full force and effect. Other than as
disclosed on Schedule 3.15 hereto, no consent of any lessor is required under
any such lease in order to keep such lease in full force and effect after the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
Section 3.16. Receivables. Schedule 1.1(b) hereto contains a complete
list of all receivables of Seller as of the date hereof, including accounts
receivable, notes receivable, insurance proceeds receivable, and taxes
receivable. All of the receivables either listed on Schedule 1.1(b) or set forth
or reflected in the July 15, 1999 Financial Statements were, as of the dates as
of which the information is given valid accounts receivable. Except as set forth
on Schedule 1.1(b), the Seller is not aware of any reason or circumstance
relating to such accounts receivable which would prevent the Purchaser from
collecting the full amount of the Purchased Receivables within 90 days after the
date hereof.
Section 3.17. Compliance with Laws. Seller has complied in all material
respects with all material federal, state, and local laws and regulations
applicable to its business, and the present uses by Seller of its properties and
the conduct by Seller of its business does not in any material respect violate
any such laws or regulations.
Section 3.18. Insurance. Seller currently maintains, with respect to
its properties and business, and with financially sound and reputable insurers,
the insurance that is set forth on Schedule 3.18 hereto.
Section 3.19. Intellectual Property.
(a) The Purchased Proprietary Rights include all proprietary rights (i)
necessary to conduct the business of the Seller as it is now conducted and is
proposed to be conducted, (ii) the failure to possess which would have a
material adverse effect on the business, financial condition or results of
operations of Seller (including without limitation inventions, patents, trade
secrets, technology, know-how, copyrights, trademarks, trade names, and any
rights to any of the foregoing) and (iii) necessary to carry on Seller's
business as now being conducted without conflict with valid proprietary rights
of others. Schedule 3.19 contains a complete list of all of the Purchased
Proprietary Rights.
(b) Seller wrote all of the content contained on any world wide web
site operated by Seller and either owns or possesses licenses to use, all
copyrightable material, trademarks, service marks and other intellectual
property contained on such web sites
(c) Except as sets forth in Schedule 3.19, Seller has not received any
notice of infringement or conflict with (and knows of no infringement with or
conflict with or potential claim
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of infringement or conflict with) asserted rights of others with respect to any
Purchased Proprietary Rights. No product or process of Seller infringes or
conflicts with any rights or copyright, trademark, or patent, or any discovery,
invention, product or process that is the subject of an outstanding patent,
patent application, trademark, trademark application, service xxxx, service xxxx
application or copyright.
(d) Seller has taken all adequate steps, and has in place and enforces
appropriate policies and procedures, to protect the Purchased Proprietary Rights
and all of its proprietary information. Seller has not disclosed any of its
proprietary information to third parties without appropriate restrictions on use
or disclosure thereof. As used herein, "proprietary information" means any
information that Seller considers confidential or secret material information of
Seller, including without limitation (whether verbal, written or embodied in any
other medium): all confidential business and marketing data and information of
Seller (including but not limited to customer lists, prospective customer lists,
invoices, confidential selling and profit information, special pricing and cost
information, finances, earnings, volume of business, outlets, methods, products
or services under development, information relating to Seller's business
contracts, marketing studies conducted by or for Seller, marketing strategies,
any other secret or confidential matter relating or pertaining to the products,
services, sales, or other business of Seller); all confidential technical data
and information of Seller (including but not limited to systems, practices,
plans, processes, procedures, drawings, databases, computer hardware, firmware,
and software whether in the form of object codes, source codes or otherwise,
inventions, improvements, manufacturing techniques or systems, formulas,
development or experimental work, work in process, and research data used by
Seller); all passwords, entry codes, access sequences, and the like; and all
other items of trade secret, trade knowledge, and trade know-how of Seller.
(e) Seller has taken adequate steps, and has in place and enforces
appropriate policies and procedures to protect any confidential information
disclosed to or obtained by Seller through confidential relationships with any
third parties, including without limitation (whether verbal, written or embodied
in any other medium): any Intellectual Property of a third party possessed by
Seller pursuant to a license or other arrangement; confidential data or
information submitted to Seller from time to time by a customer or a customer's
client; any confidential data or information regarding the business of a
customer or a customer's client learned in the course of providing services
and/or products to such customer or its client; and the identity of any third
party in a confidential relationship with Seller as the source of such data or
information.
(f) To Seller's knowledge, no person employed by or affiliated with
Seller has violated any confidential relationship which such person may have had
with any third party in connection with the development, manufacture or sale of
any product or proposed product or the development or sale of any service or
proposed service of Seller.
Section 3.20. Sensitive Payments. Neither Seller nor anyone acting on
behalf of Seller, has made or received any "sensitive" payments. "Sensitive"
payments means, whether legal or illegal, (a) payments to or from government
officials or employees, (b) commercial bribes or kickbacks, (c) amounts paid
with an understanding that rebates or refunds will be made in contravention of
the
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laws of any jurisdiction, either directly or through a third party, (d)
political contributions, and (e) payments or commitments (whether made in the
form of commissions, payments of fees for goods or services received, or
otherwise) made with the understanding or under circumstances that would
indicate that all or part thereof is to be paid by the recipient to government
officials or employees or as a commercial bribe, influence payment or kick-back,
provided, however, that "sensitive" payments shall not include contributions to
political campaigns or organizations that are permissible under federal and
state election laws.
Section 3.21. Books and Records. All of Seller's operating data and
records, including without limitation customer lists and financial, accounting
and credit records (the "Company Records"), are accurate and complete in all
material respects and there are no material matters as to which appropriate
entries have not been made in the Company Records.
Section 3.22. Environmental Matters.
(a) To the knowledge of Seller, neither the real property or the
buildings, improvements, fixtures or equipment, forming a part of the real
property operated by Seller (the "Facilities"), is in violation of or the
subject of any investigations or inquiry or enforcement action by any
governmental authority for the recovery of environmental response costs or for
compliance with remedial obligations under any applicable law pertaining to
"Hazardous Substances" as the term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1990, as amended, as codified at 42
U.S.C. Section 9601 et seq. ("CERCLA"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq. ("RCRA"); any applicable state or local
governmental statutes, ordinances or regulations (referred to hereafter
collectively as "Environmental Laws").
(b) Seller has not transported, stored, treated or disposed of, nor has
it allowed or arranged for any third parties to transport, store, treat or
dispose of Hazardous Substances. Seller does not use and has not used any
Underground Storage Tanks. For the purposes of this Section 3.22(b),
"Underground Storage Tanks" shall have the meaning given it in RCRA.
Section 3.23. Labor Relations.
(a) A true and correct list of all of the employees of Seller is
attached hereto as Schedule 3.23. Seller is not a party to any contract with any
labor union.
(b) Seller has not, within the past 24 months, committed any act which
is discriminatory under Title VII of the Civil Rights Act, as amended, the Age
Discrimination in Employment Act, as amended, the Americans with Disabilities
Act of 1990, or the Pennsylvania Human Rights Act, as amended, and there is not
now pending or, to the best of Seller's knowledge, threatened any charge or
complaint against Seller by or with the Equal Employment Opportunity Commission
or any state agency with respect to any alleged discriminatory act.
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(c) Seller is in compliance with all federal and state laws and
regulations governing the compensation of employees.
Section 3.24. Employee Benefits.
(a) Schedule 3.24 lists all of Seller's pension, profit sharing,
retirement, bonus, incentive, supplemental unemployment benefit, severance,
deferred compensation, health and welfare, stock purchase, and any other
employee agreements, plans, programs, policies, and arrangements, whether
written or unwritten, whether or not funded, and whether or not terminated,
including, without limitation, all employee benefit plans, as defined by Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, the "Employee Benefit Plans").
(b) With respect to each Employee Benefit Plan, Seller has provided to
the Purchaser a complete copy, if applicable, of the plan document, the most
current summary plan description ("SPD"), the three most recently filed IRS
Forms 5500 and any Financial Statements attached thereto, the most recent IRS
determination letter, and copies of all nondiscrimination testing for the last
three (3) years. Further, Seller has delivered a true and complete copy of all
documents pertaining to employee agreements, programs, policies and
arrangements.
(c) Except with respect to any assumed liabilities that are
specifically contemplated in Section 2.2 of this Agreement, the consummation of
the transactions contemplated by this Agreement will not result in any
obligation or liability of the Purchaser to any current or former employee of
Seller (with respect to accrued benefits under any Employee Benefit Plan or
otherwise). No amendment to, termination of, or withdrawal from, any active,
inactive, or terminated Employee Benefit Plan at any time before or after the
Closing Date by Seller has or will subject Seller, the Purchaser, or assets of
Seller to any liability to any Employee Benefit Plan; to the Pension Benefit
Guaranty Corporation ("PBGC"), the Department of Labor ("DOL"), the Internal
Revenue Service ("IRS") or any other governmental entity; to any current or
former employee of Seller; or to any other person or party.
(d) With respect to each active, inactive, or terminated Employee
Benefit Plan, all contributions (including all employer contributions and
employee salary reduction contributions) and payments due from Seller as of the
Closing Date have been made as of the Closing Date, and all benefits accrued
under any unfunded Employee Benefit Plan have been paid, accrued, or otherwise
adequately reserved on the Financial Statements. Seller does not have any
current or projected liability in respect of pre-employment or post-retirement
health or medical or life insurance benefits for retired or former employees of
Seller.
(e) No active, inactive, or terminated Employee Benefit Plan or assets
of such Plans have been subject to any liability, contingent or otherwise, or
the imposition of a lien. No action, suit, proceeding, hearing, investigation,
audit or examination with respect to the administration or the investment of the
assets of any active, inactive, or terminated Employee Benefit Plan is pending
or threatened. Seller has no knowledge of any basis for any such action, suit,
proceeding, hearing, investigation, audit or examination.
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(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Seller that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the Code as a result of this transaction.
(g) With respect to any present or former employee of Seller, Seller
has not at any time (i) contributed to (or been obligated to contribute to) any
multi-employer plan (as defined in Section 4001 of ERISA) or (ii) been a party
to any collective bargaining agreement, nor has Seller ever been a member of a
controlled group of organizations, within the meaning of Sections 414(b), (c),
(m), or (o) of the Code. Further, there have never been any leased employees,
within the meaning of Section 414(n) of the Code, who perform services for
Seller.
(h) Seller has not at any time maintained or contributed to a defined
benefit pension plan (as defined in Section 3(35) of ERISA) or to any other
Employee Benefit Plan that is subject to Section 302 of ERISA or Section 412 of
the Code or Title IV of ERISA.
(i) Seller, its active, inactive and terminated Employee Benefit Plans,
and fiduciaries of such Employee Benefit Plans have complied in all respect with
ERISA, the Code and the regulations thereunder and all other applicable federal
or state statutes or regulations. Each Employee Benefit Plan intended to qualify
under Section 401(a) of the Code so qualifies and each trust forming a part of
any such Plan is exempt from taxation under Section 501 (a) of the Code. No
"reportable event" (within the meaning of Section 4043 of ERISA), nor any
"prohibited transaction" (within the meaning of Section 406 or 407 or ERISA or
Section 4975 of the Code), has occurred with respect to any Employee Benefit
Plan, and Seller has not incurred any liability for any tax imposed under
Section 4971 through 4980B of the Code or civil liability under Sections 502(i)
or (1) of ERISA.
(j) For notices and payments related to events occurring on, before, or
after the Closing Date, Seller shall be responsible for any notices required to
be given to employees pursuant to the Worker Adjustment and Retraining
Notification Act ("WARN"), the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"), the Health Insurance Portability and Accountability Act of 1996
("HIPAA"), and Section 402(f) of the Code ("Rollover Notice"), and for any
payments or benefits required pursuant to such laws or on account of violation
of any requirement of such laws.
(k) Each Employee Benefit Plan may be amended or terminated by Seller
in any manner and at any time without the consent of any person covered by such
Plan and without any further liability for benefits that may be accrued or
expenses that may be incurred after the date of such termination or amendment,
other than benefits that may be required under the terms of such Plan or
benefits required under Part 6 of Title I of ERISA or Section 4980B of the Code.
Section 3.25. Year 2000. Seller believes that its products are Year
2000 Compliant, but Seller has taken no steps to determine whether its products
are Year 2000 Complaint or whether any of its hardware or software systems are
Year 2000 Compliant. Seller has not developed any contingency plans for the
operation of its business in the event that any of its systems which are mission
critical to the operation of Seller's business are not Year 2000 Compliant. For
the purposes
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of this Section 3.25, "Year 2000 Compliant" shall mean the ability of any of
Seller's systems to record, store, process, calculate and present calendar dates
falling on or after January 1, 2000 and the ability of any of Seller's systems
to calculate any information dependent on or relating to such dates in the same
manner and with the same functionality, data integrity and performance as such
computer systems record, store, process, calculate and present calendar dates on
or before December 31, 1999.
Section 3.26. Necessary Consents. Except as set forth on Schedule
3.26, no third party has the right, by contract or otherwise, to approve or
disapprove of any of the transactions contemplated hereby, including, without
limitation, the assignment of any contract or agreement hereunder.
Section 3.27. Brokers' Commissions. No broker, finder, investment
banker or financial advisory firm, or any other person or entity is entitled to
receive any brokerage, finder's or other fee or commission or transaction fee as
a result of the execution of this Agreement or the consummation of any of the
transactions contemplated herein.
Section 3.28. Securities.
(a) All of the members of the Board of Directors of Seller represent,
are employed by, or are otherwise affiliated with, entities which are engaged in
the business of purchasing interests in or otherwise investing in securities of
entities such as Seller and Purchaser. Accordingly, Seller, either alone or
together with its purchaser representative(s), has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the prospective ownership of the Shares.
(b) Seller acknowledges that it has had an opportunity to ask questions
of and receive answers from Purchaser regarding the business properties,
prospects, and financial condition of the Purchaser and to obtain additional
information (to the extent the Purchaser possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to Seller or to which Seller had access.
Seller acknowledges that the acquisition of the Shares represents a speculative
investment, involving a high degree of risk. Seller acknowledges that it has had
sufficient opportunity to read and understand the Purchaser's Confidential
Private Placement Memorandum, dated as of August 11, 1999, prior to executing
this Agreement and consummating the transactions set forth herein.
(c) Seller acknowledges that Shares have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933 ("1933 Act")
or under state securities laws and that the Securities are being delivered and
sold pursuant to an exemption from registration under the 1933 Act and
applicable exemptions under state securities laws and agrees that the Shares
cannot be sold or otherwise transferred unless registered under federal and
state securities laws or unless an exemption from registration is available
under the federal and state securities laws and will bear a legend to that
effect to such effect:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(d) Seller represents that it is acquiring the Shares for its own
account, for investment, and not with a view to the transfer, resale or
distribution of all or of any part thereof, and Seller has no present intention
of selling, transferring, granting any participation in, or otherwise
distributing the Shares (either directly or to its shareholders).
(e) Seller has its principal office at the address specified in Section
8.6 of this Agreement, and will be the beneficial owner of the Shares standing
in its name.
(f) Seller acknowledges that certain other persons have been issued
rights to acquire the Common Stock of the Purchaser and that the Purchaser may
issue other such rights and may sell additional shares of its Common Stock and
Preferred Stock, as a result of which the ownership interest of Seller in the
Purchaser will be diluted.
Section 3.29. Accuracy of Information. No representation, statement or
information made or furnished by Seller to the Purchaser contained in this
Agreement and the various schedules attached hereto, nor any representation,
statement or information relating to material historical factual information
concerning Seller previously furnished by Seller to the Purchaser which is not
superseded by a similar representation or statement contained in this Agreement
and the various schedules attached hereto, contains any untrue statement of a
material fact or omits or shall omit any material fact necessary to make the
information contained therein, in light of the circumstances in which they were
made, not misleading.
Section 3.30. Disclosure. Seller is not aware of any fact relating to
the business, affairs, operation, condition or prospects of Seller that
materially adversely affects the same and that has not been set forth in this
agreement or otherwise disclosed in writing to the Purchaser in connection with
this transaction.
Section 3.31. Survival of Representations and Warranties.
Notwithstanding any investigation at any time made by or on behalf of the
Purchaser, the representations and warranties of Seller contained herein shall
survive the execution and delivery of this Agreement and the purchase of the
Purchased Assets.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce Seller to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Purchaser makes the
following representations and warranties:
Section 4.1. Organization; Power and Authority of the Purchaser. The
Purchaser is a corporation duly organized and validly existing under the laws of
the State of Delaware, with full corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
Section 4.2. Due Authorization; Binding Obligation. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and is a valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms. Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) conflict with or violate any
provision of the certificate of incorporation or bylaws of the Purchaser, or of
any decree or order of any court or administrative or other governmental body
which is either applicable to, binding upon or enforceable against the
Purchaser; or (ii) result in any breach of or default under any mortgage,
contract, agreement, indenture, will, trust or other instrument which is either
binding upon or enforceable against the Purchaser.
Section 4.3. Brokers' Commissions. No broker, finder or investment
banker is entitled to receive any brokerage, finder's or other fee or commission
from the Purchaser as a result of the execution of this Agreement or the
consummation of any of the transactions contemplated herein.
Section 4.4. Authorized Stock. The Shares being sold and purchased
hereunder have been duly and validly authorized, will be validly issued, fully
paid and nonassessable after issuance and sale to Seller pursuant to this
Agreement and will be free of any liens or encumbrances (except for those
contemplated by this Agreement) created by or as the result of action by
Purchaser.
Section 4.5. Accuracy of Information. None of the information
concerning the Purchaser set forth in that certain Confidential Private
Placement Memorandum of the Purchaser dated August 11, 1999 contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the information contained therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE V
CLOSING AND CONDITIONS TO CLOSING
Section 5.1. Deliveries by Seller at Closing. At the Closing Seller
shall deliver copies of each of the following documents to Purchaser:
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(a) a certified copy of the resolutions of Seller's Board of Directors
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(b) a certified copy of the resolutions of the shareholders of Seller
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(c) a duly executed xxxx of sale for the Purchased Assets, a copy of
which is attached hereto as Exhibit B;
(d) the Stock Pledge Agreement (the "Pledge Agreement"), executed by
Seller, and stock powers duly executed in blank, appointing the Purchaser as
agent for Seller to transfer the Shares to the Purchaser pursuant to the terms
and conditions of the Pledge Agreement and this Agreement;
(e) duly executed Assignments of Registration for the trademarks;
(f) a duly executed Assignment for the patent application;
(g) a duly executed Assignment of the copyrights;
(h) duly executed assignments of the domain names
(i) a Certificate of Good Standing from Delaware and each state in
which Seller is registered to do business as a foreign corporation;
(j) an opinion of counsel from attorneys for Seller in a form
satisfactory to counsel for Purchaser;
(k) a duly executed and acknowledged Certificate of Amendment to the
Certificate of Incorporation of Purchaser and such other documents which may be
required to change the corporate name to a new name which does not incorporate
the name "Datamatix" or words similar thereto and which will not suggest,
directly or indirectly, that Seller retains any interest in Seller's Assets;
(l) the assents of the State of Connecticut and Fairfax County to the
assignment to Purchaser of their contracts with Seller or evidence satisfactory
to Purchaser that such parties have agreed to assign such contracts to Seller;
(n) a certificate from the Department of Revenue showing that all
Pennsylvania state tax reports have been filed and all state taxes, unemployment
compensation contributions paid to the date of the proposed transfer;
(o) an assignment and assumption agreement for the ChuRoad Associates
Lease; and
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(p) a release or assent from Ben Franklin Technology Center of
Southeastern Pennsylvania as to the transfer of the Purchased Assets from Seller
to Purchaser.
Section 5.4. Deliveries by Purchaser. At Closing, the Purchaser shall
deliver copies of each of the following documents:
(m) to Seller, a certified copy of the resolutions of Purchaser's Board
of Directors approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(n) to Seller, a certificate of Good Standing from the State of
Delaware;
(o) to Seller, a duly executed Pledge Agreement; and
(p) to the escrow agent under the Pledge Agreement, a duly executed
Stock Certificate for 329,632 shares which shall be issued in the name of the
Purchaser (the "Pledged Shares").
ARTICLE VI
CERTAIN ACTIONS AFTER THE CLOSING
Section 6.1. Purchaser to Act as Agent for Seller. This Agreement shall
not constitute an agreement to assign any claim, contract, license, lease,
commitment, sales order or purchase order if any attempted assignment of the
same without the consent of the other party thereto would constitute a breach
thereof or in any way affect the rights of Seller thereunder. If such consent is
not obtained or if any attempted assignment would be ineffective or would affect
Seller's rights thereunder so that the Purchaser would not in fact receive all
such rights, then, subject to the terms and conditions of Section 6.4 hereof,
the Purchaser shall act as the agent for Seller in order to obtain for the
Purchaser the benefits thereunder. In the event that the Purchaser is unable to
secure the consent of any lessor of a Purchased Leasehold Right to the
assignment of such rights to the Purchaser, Purchaser shall return the related
equipment in the same condition as of the date of Closing and thereafter Seller
shall resume liability for all payments due and owing pursuant to such lease.
Section 6.2. Novation/Assignment of Transferred Contracts;
Subcontracting.
(a) Upon Closing, the Purchaser shall initiate with the responsible
government or corporate officials the applicable documentation to novate or
assign to the Purchaser the contracts listed on Schedule 6.2 hereto (the
"Transferred Contracts"). The Seller shall provide all necessary support to the
Purchaser to facilitate the proposed novation or assignment.
(b) Both parties agree that until a novation or assignment is approved
by the contractual clients, and subject to the provisions of subsections 6.2(d)
and (e) below, the Purchaser shall perform all work under the Transferred
Contracts as an agent of or a subcontractor to Seller. Seller shall not
"xxxx-up" invoices of the Purchaser or add additional costs or fees in
processing the Purchaser's
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invoices for payment by the customer, except for previously approved reasonable
out-of-pocket expenses that Seller incurs and which Purchaser agrees to
reimburse to Seller upon receipt of invoice and supporting documentation.
(c) In the event a novation or assignment is not approved by the
client, the parties shall continue to perform in accordance with paragraph (b)
above, until the Transferred Contracts expire.
(d) To the extent permitted prior to contract novation or assignment,
operational management of each Transferred Contract shall transfer to the
Purchaser concurrent with the Closing. Operational management includes, but is
not limited to: the Purchaser performing the duties of interfacing with clients;
managing the development and submission of deliverables, reports, and invoices;
preparing and negotiating task plans; and assignment of staff.
(e) Responsibility for all matters related to performance of each
Transferred Contract prior to the Closing shall permanently remain with Seller.
Section 6.3. Delivery of Property Received by Seller After Closing.
From and after the Closing the Purchaser shall have the right and authority to
collect, for the account of the Purchaser, all Purchased Receivables and other
items which shall be transferred or are intended to be transferred to Purchaser
as part of the Purchased Assets as provided in this Agreement, and to endorse
with the name of Seller any checks or drafts received on account of any such
receivables or other items of the Purchased Assets. Seller hereby agrees that it
will transfer or deliver to the Purchaser, promptly after the receipt thereof,
any cash or other property which Seller receives after the date hereof in
respect of any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, receivables of any character or any other items transferred or
intended to be transferred to Purchaser as part of the Purchased Assets under
this Agreement.
Section 6.4. Purchaser Appointed Attorney for Seller. Effective as of
the date hereof Seller hereby constitutes and appoints the Purchaser, its
successors and assigns, the true and lawful attorney of Seller in the name of
either the Purchaser or Seller (as the Purchaser shall determine in its sole
discretion) but for the benefit and at the expense of the Purchaser (except as
otherwise herein provided), (i) to institute and prosecute all proceedings which
the Purchaser may deem proper in order to collect, assert or enforce any claim,
right or title of any kind in or to the Purchased Assets as provided for in this
Agreement; (ii) to defend or compromise any and all actions, suits or
proceedings in respect of any of the Purchased Assets, and to do all such acts
and things in relation thereto as the Purchaser shall deem advisable; and (iii)
to take all action which the Purchaser may reasonably deem proper in order to
provide for the Purchaser the benefits under any of the Purchased Assets where
any required consent of another party to the sale or assignment thereof to the
Purchaser pursuant to this Agreement shall not have been obtained. Seller hereby
acknowledges that the foregoing powers are coupled with an interest and shall be
irrevocable. The Purchaser shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
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Section 6.5. Execution of Further Documents. From and after the
Closing, upon the reasonable request of the Purchaser, Seller shall execute,
acknowledge and deliver all such further acts, deeds, bills of sale,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably required to convey and transfer to and vest in the Purchaser and
protect its right, title and interest in all of the Purchased Assets, and as may
be appropriate otherwise to carry out the transactions contemplated by this
Agreement.
Section 6.6. Proprietary Information. Seller recognizes and
acknowledges that it or he has received, developed, or otherwise acquired
Proprietary Information, as defined herein. Except as authorized by the
Purchaser, Seller agrees to hold in strict confidence and not to disclose to any
third party or use for its own benefit or for the benefit of any other party,
directly or indirectly, any Proprietary Information of Seller whether verbal,
written, or in any other medium. For purposes of this agreement, Proprietary
Information shall mean any corporate, technical, business or financial
information of Seller which is of a secret or confidential nature, including,
without limitation, any inventions, ideas, technical data, devices, methods,
strategies or tactics employed on behalf of clients, improvements, products,
product specifications, services, processes, procedures, formulae, tools,
machinery, apparatus, prices, proposals, bid rates, discounts, manufacturing
costs, computer and information systems (including software, which shall
encompass, without limitation, source code, object code, documentation, diagrams
and flow charts), unpublished works of any nature (whether or not
copyrightable), future plans, policies, and all other information and knowledge
in whatever form used in management, engineering, manufacturing, marketing,
purchasing, finance, operations, or otherwise, concerning the business of
Seller. The restrictions herein shall not apply to any information that is or
later falls within the public domain, provided that Seller was not responsible
for such information entering the public domain.
Section 6.7. Covenant Not-to-Compete. In consideration of the
Purchasers consummating the transactions set forth in this Agreement, Seller
hereby agrees that for a period of two (2) years after the date hereof, it will
not (without the affirmative resolution of the Board of Directors or the
President of the Purchaser) personally or through any business (as an owner, or
as director, officer, employee or in any other capacity calling for the
rendition of acts of management or control) engage in any business in
competition with the business of Seller as of the date hereof.
Section 6.8. Injunctive Relief; Reformation.
(a) Seller recognizes that a breach by it, its agents, or employees of
the provisions of Section 6.6 or 6.7 hereof would cause the Purchaser
irreparable injury and damage which cannot be reasonably or adequately
compensated by damages at law. Seller, therefore, expressly agrees that the
Purchaser shall be entitled to injunctive and/or other equitable relief to
prevent a breach of such sections in addition to any other remedies legally
available to it. No bond or other security shall be required in obtaining such
equitable relief, and Seller hereby consents to the issuance of such injunction
and to the ordering of specific performance.
(b) In the event that any of the provisions of Sections 6.6 or 6.7
should ever be deemed to exceed the temporal, geographic or occupational
limitations permitted by applicable laws, then
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such provision(s) shall be and hereby are reformed to the maximum temporal,
geographic or occupational limitations permitted by law.
Section 6.9 . Termination of Employee Benefit Plans. Except with
respect to any Employee Benefit Plan that is expressly assumed by the Purchaser
as an Assumed Liability under Section 2.2 of this Agreement, the Seller shall
terminate all Employee Benefits Plans as soon as possible, but no later than
December 31, 1999, in accordance with all oral and written contract terms and
all laws, rules, and regulations, including, without limitation, ERISA and the
Code.
Section 6.10. Access to Records. Seller shall provide Purchaser with
unrestricted access to and/or copies of all of accounting and other business
records of Seller necessary for Seller to wind up its affairs.
Section 6.11. Process Bank Loan. Seller and Purchaser are entering into
an Assignment, Assumption and Amendment Agreement with Progress Bank
("Progress"), under which Seller is assigning to Purchaser all of its rights,
title and interests in and to the Business Loan Agreement, dated February 18,
1998, between Seller and Progress (the "Progress Loan Agreement") and its
related line of credit with Progress (the "Progress Loan"), Purchaser is
agreeing to assume all of the payment, performance and other obligations of
Seller thereunder and Progress is consenting to the transactions contemplated by
this Agreement. Purchaser agrees that (i) on or before October 31, 1999,
Purchaser shall either (a) pay the Progress Loan in full or (b) use its best
efforts to cause Seller, without any payment or posting of collateral by Seller,
to be released from any and all obligations under the Progress Loan Agreement;
and (ii) it will not agree to or enter into any agreement or amendment to the
Progress Loan Agreement which could be interpreted to impose upon or have the
effect of imposing upon Seller any additional obligation or duty (payment or
otherwise) with respect to the Progress Loan unless as part of such agreement or
amendment Seller is released in full from any and all obligations it may have
under the Progress Loan Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Survival. All representations, warranties and covenants
contained in this Agreement, including those contained in the exhibits,
schedules and other documents delivered pursuant to this Agreement, shall
survive the execution and delivery of this Agreement.
Section 7.2. Agreement by Seller to Indemnify.
(a) Seller shall indemnify, defend and hold the Purchaser harmless in
respect of the aggregate of all Indemnifiable Damages of the Purchaser. For the
purposes of this Section 7.2, "Indemnifiable Damages" means the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including
related counsel fees and expenses) incurred or suffered by the Purchaser
resulting from (i) any inaccurate representation or warranty made by Seller in
or pursuant to Article III hereof, (ii) any default in the performance of any of
the covenants or agreements made by Seller in this Agreement, (iii) the failure
of Seller to pay, discharge or perform any liability or
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obligation of Seller which is not expressly assumed by the Purchaser pursuant to
this Agreement or resulting from any dispute concerning any such liability or
obligation, (iv) any act or failure to act of Seller prior to the date hereof,
(v) any violation of the 1933 Act or applicable state securities laws as a
result of any sale or distribution by Seller in violation of the 1933 Act or any
state securities laws, (vi) any liability arising under any Employee Benefit
Plan, (vii) any inability of Purchaser to collect at least fifty percent (50%)
of the accounts receivable listed on Schedule 1.1(b) within sixty (60) days
after the date of this Agreement, or (viii) any claims that may be asserted
against Purchaser under bulk sales law provisions, including but not limited to
taxes imposed under 72 P.S. Section 1403 and 69 P.S. Section 529. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, the Purchaser shall have the right to be put in the same
financial position as it would have been in had each of the representations and
warranties of Seller been true and correct, had each of the covenants of the
Seller been performed in full, or if no claim had been filed.
(b) In the even that any software developed by Seller is not Year 2000
Compliant and such failure to be Year 2000 Compliant renders such software
incapable of performing any material function, Seller agrees to indemnify
Purchaser for such losses, costs and damages (including lost revenue) incurred
or suffered by Purchaser as a result of such failure; provided however, that the
maximum amount of losses, costs and damages to be paid by Seller pursuant to
this Section 7.2(b) shall not exceed $250,000.
Section 7.3. Agreements by the Purchaser to Indemnify. The Purchaser
agrees to indemnify and hold Seller harmless in respect of the aggregate of all
Indemnifiable Damages of Seller. For the purposes of this Section 7.3,
"Indemnifiable Damages" of Seller means the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including related counsel fees and
expenses) incurred or suffered by Seller resulting from any inaccurate
representation or warranty made by the Purchaser in Article IV hereof or
resulting from any default in the performance of any of the covenants or
agreements made by the Purchaser in this Agreement. Without limiting the
generality of the foregoing, with respect to the measurement of Indemnifiable
Damages, Seller shall have the right to be put in the same financial position as
it or he would have been in had each of the representations and warranties of
the Purchaser been true and correct and had each of the covenants of the
Purchaser been performed in full.
Section 7.4. Limitations on Indemnification. Buyer shall not be
required to make any payment for Indemnifiable Damages unless the amount of
damages suffered by Seller, together with all claims asserted therewith or
previously asserted under this Section 7 by Seller, shall exceed $20,000 (the
"Basket Amount"). Notwithstanding the preceding sentence, in the event Purchaser
is entitled to indemnification pursuant to Section 7.2 hereof and the Assumed
Liabilities plus the Basket Amount would collectively exceed $800,000, then the
Basket Amount available to Purchaser shall be reduced to an amount equal to
$800,000 minus the amount of the Assumed Liabilities. In the event that either
Purchaser or Seller is able to completely satisfy any Assumed Liability
outstanding as of the date hereof for an amount less than the stated amount of
such Assumed Liability as of the date hereof, then, solely for the purposes of
calculation of the amount of the Basket Amount pursuant to this Section 7.4, the
total amount of Assumed Liabilities shall be reduced proportionately.
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Section 7.5. Remedies.
(a) Each party agrees to use its best efforts to provide prompt written
notice to the other of each claim for Indemnifiable Damages which it believes it
has suffered; provided, however, that no delay in the giving of such notice
which does not effect the defense or amount of Indemnifiable Damages shall
affect the rights of the Indemnified Party to recover Indemnifiable Damages
hereunder.
(b) In the event of any claim or demand asserted against the
indemnified party by a third party upon which the indemnified party may claim
indemnification, the indemnifying party shall give written notice to the
indemnified party within 15 days after receipt of notice from the indemnified
party indicating whether the indemnifying party intends to assume the defense of
such claim or demand. Notwithstanding such assumption, the indemnified party
shall have the right to participate in such defense, by written notice given tot
he indemnifying party within 15 days from the date of the indemnifying party's
notice, provided that such participation shall be at the expense of the
indemnified party unless there is a conflict of interest between the indemnified
party of the indemnifying party, in which case the cost of such participation
(including attorney's fees for counsel selected by the indemnified party) shall
be reimbursed by the indemnifying party. If the indemnifying party assumes the
defense and the indemnified party elects not to participate, the indemnifying
party shall have the right fully to control and to settle the proceeding. If the
indemnified party elects to participate in such defense, the parties shall
cooperate in the defense o f the proceeding and shall not settle the same
without the consent of each, which consent shall not be unreasonably withheld or
delayed. If the indemnifying party elects not to assume the defense, the
indemnified party shall have the right to do so (at the expense of the
indemnifying party);provided, however, that the indemnified party may not settle
the same without the consent of the indemnifying party, which consent shall not
be unreasonably withheld or delayed.
(c) In the event Purchaser is entitled to any Indemnifiable Damages or
damages pursuant to, Section 7.2(b) hereof (collectively "Damages"), Purchaser
shall first look to the Pledged Shares for payment of any such Damages. For the
purposes of this Agreement, "Pledged Shares" shall mean those shares which are
subject to that certain Stock Pledge Agreement to be executed at the Closing.
The number of shares to be returned to the Purchaser as payment of such Damages
shall be determined by dividing the amount of such Damages by the value of one
share of the common stock of the Purchaser as of the date of payment of such
Damages. In the event that, at any time, there does not remain subject to the
Pledge Agreement such number of Pledged Shares having a Value equal to or
greater than the amount of any Indemnifiable Damages owed to Purchaser by Seller
then the Purchaser shall have the right to proceed against Seller for such
Indemnifiable Damages in excess of the Pledged Shares.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Amendment and Modification. The parties hereto may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
Section 8.2. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and legal representatives.
Section 8.3. Entire Agreement. This instrument and the exhibits and
schedules attached hereto contain the entire agreement of the parties hereto
with respect to the purchase of the Purchased Assets and the other transactions
contemplated herein, and supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof. Any reference herein to
this Agreement shall be deemed to include the schedules and exhibits attached
hereto.
Section 8.4. Headings. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
Section 8.5. Execution in Counterpart. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original.
Section 8.6. Notices. Any notice, request, information or other
document to be given hereunder to any of the parties by any other party shall be
in writing and delivered personally or sent by prepaid overnight express
courier, addressed as follows:
If to Seller, to it at: 000 Xxxx Xxxxxx Xxxx
Xxxx xx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
with a copy to: Obermayer Xxxxxxx Xxxxxxx & Hippel LLP
One Penn Center, 0000 XXX Xxxxxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx, Esq.
If to Purchaser, to it at: 00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxx
with a copy to: Xxxxxx & King, P.C.
0000 X Xxxxxx, X. X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxx, Esq.
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Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given on the date it is so delivered, and any notice delivered by overnight
courier shall be deemed to have been given on the date it is received.
Section 8.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia applicable
to contracts made and to be performed therein.
Section 8.8. Further Representations. Each party acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences of
the transactions contemplated by this Agreement and is not relying on any
representations or statements made by the other party as to such tax
consequences.
[signatures on next page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DIGITAL COMMERCE CORPORATION DATAMATIX, INC.
/s/ Xxxx Xxxxxx /s/ Xxxxxxx X. Xxxxxx
----------------------------- ------------------------------------
Xxxx Xxxxxx, President Xxxxxxx X. Xxxxxx, Vice President
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