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EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
by and among
PRINTCAFE, INC.
CONSTELLATION SOFTWARE INC.
CONSTELLATION SOFTWARE OF NEW HAMPSHIRE, INC.
LOGIC ASSOCIATES, INC.
and
CERTAIN STOCKHOLDERS
OF LOGIC ASSOCIATES, INC.
MARCH 10, 2000
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TABLE OF CONTENTS
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SECTION 1. SALE AND PURCHASE OF SHARES.............................................. 2
1.1 Sale and Purchase of Shares................................................. 2
1.2 Payment of Purchase Price................................................... 3
1.3 Closing..................................................................... 3
1.4 Deliveries at Closing....................................................... 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CSI AND CSINH.......................... 4
2.1 Organization; Subsidiaries.................................................. 5
2.2 Articles of Incorporation and Bylaws........................................ 5
2.3 Capital Structure........................................................... 5
2.4 Authority................................................................... 5
2.5 No Conflicts; Required Filings and Consents................................. 6
2.6 Financial Statements........................................................ 6
2.7 Absence of Undisclosed Liabilities.......................................... 6
2.8 Absence of Certain Changes.................................................. 7
2.9 Litigation.................................................................. 7
2.10 Permits; the Company Products; Regulation................................... 7
2.11 Property.................................................................... 8
2.12 Taxes....................................................................... 8
2.13 Employee Matters............................................................ 10
2.14 Interested Party Transactions............................................... 10
2.15 Compliance With Laws........................................................ 10
2.16 Minute Books................................................................ 10
2.17 Brokers' and Finders' Fees.................................................. 10
2.18 Third Party Consents........................................................ 10
2.19 Control of CSI; Size of CSI................................................. 11
2.20 Representations Complete.................................................... 11
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CSINH, COMPANY AND STOCKHOLDERS........ 11
3.1 Organization; Subsidiaries.................................................. 11
3.2 Articles of Incorporation and Bylaws........................................ 12
3.3 Capital Structure........................................................... 12
3.4 Authority................................................................... 13
3.5 No Conflicts; Required Filings and Consents................................. 13
3.6 Financial Statements........................................................ 13
3.7 Absence of Undisclosed Liabilities.......................................... 14
3.8 Absence of Certain Changes.................................................. 14
3.9 Litigation.................................................................. 16
3.10 Restrictions on Business Activities......................................... 16
3.11 Permits; the Company Products; Regulation................................... 16
3.12 Title to Property........................................................... 17
3.13 Intellectual Property....................................................... 18
3.14 Environmental Matters....................................................... 20
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TABLE OF CONTENTS
(continued)
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3.15 Taxes....................................................................... 21
3.16 Employee Benefit Plans...................................................... 23
3.17 Certain Agreements Affected by the Sale..................................... 25
3.18 Employee Matters............................................................ 25
3.19 Material Contracts.......................................................... 25
3.20 Interested Party Transactions............................................... 27
3.21 Insurance................................................................... 27
3.22 Compliance With Laws........................................................ 27
3.23 Minute Books................................................................ 28
3.24 Brokers' and Finders' Fees.................................................. 28
3.25 Accounts Receivable......................................................... 28
3.26 Customers and Suppliers..................................................... 28
3.27 Third Party Consents........................................................ 29
3.28 No Commitments Regarding Future Products.................................... 29
3.29 Termination of Shareholders Agreement....................................... 29
3.30 Representations Complete.................................................... 29
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR........................... 29
4.1 Organization, Standing and Power............................................ 30
4.2 Capital Structure........................................................... 30
4.3 Authority................................................................... 31
4.4 No Conflict; Required Filings and Consents.................................. 31
4.5 Financial Statements........................................................ 31
4.6 Absence of Undisclosed Liabilities.......................................... 32
4.7 Absence of Certain Changes.................................................. 32
4.8 Insurance................................................................... 32
4.9 Litigation.................................................................. 32
4.10 Governmental Authorization.................................................. 33
4.11 Compliance With Laws........................................................ 33
4.12 Minute Books................................................................ 33
4.13 Broker's and Finders' Fees.................................................. 33
4.14 Securities Laws............................................................. 33
4.15 Representations Complete.................................................... 33
SECTION 5. CONDUCT PRIOR TO THE CLOSING DATE........................................ 33
5.1 Conduct of Business......................................................... 33
5.2 Conduct of Business of Company.............................................. 34
5.3 Conduct of Business of CSINH................................................ 36
5.4 Conduct of Business of Acquiror and its Subsidiaries........................ 37
5.5 No Solicitation............................................................. 37
SECTION 6. ADDITIONAL AGREEMENTS.................................................... 37
6.1 Best Efforts and Further Assurances......................................... 37
6.2 Consents; Cooperation....................................................... 38
6.3 Access to Information....................................................... 38
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TABLE OF CONTENTS
(continued)
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6.4 Confidentiality............................................................. 39
6.5 Public Disclosure........................................................... 39
6.6 FIRPTA...................................................................... 39
6.7 Blue Sky Laws............................................................... 40
6.8 Securities Holder's Representation Agreements............................... 40
6.9 Additional Stockholders..................................................... 40
6.10 Termination of 401(k) Plan.................................................. 40
SECTION 7. CONDITIONS TO CLOSING.................................................... 40
7.1 Conditions to Obligations of Each Party to Closing.......................... 40
7.2 Additional Conditions to Obligations of CSI, CSINH Company and
Stockholders................................................................ 41
7.3 Additional Conditions to the Obligations of the Acquiror.................... 42
SECTION 8. TERMINATION, AMENDMENT AND WAIVER........................................ 44
8.1 Termination................................................................. 44
8.2 Effect of Termination....................................................... 45
8.3 Expenses.................................................................... 45
8.4 Amendment................................................................... 45
8.5 Extension; Waiver........................................................... 45
SECTION 9. ESCROW AND INDEMNIFICATION............................................... 45
9.1 Survival of Representations and Warranties.................................. 45
9.2 Escrow Fund................................................................. 46
9.3 Indemnification by CSI, CSINH, Company and Stockholders..................... 46
9.4 Damages Threshold........................................................... 47
9.5 Escrow Period............................................................... 47
9.6 Distributions; Voting....................................................... 48
9.7 Arbitration................................................................. 48
SECTION 10. GENERAL PROVISIONS....................................................... 49
10.1 Notices..................................................................... 49
10.2 Interpretation.............................................................. 50
10.3 Counterparts................................................................ 50
10.4 Entire Agreement; Nonassignability; Parties in Interest..................... 50
10.5 Severability................................................................ 50
10.6 Remedies Cumulative......................................................... 51
10.7 Governing Law............................................................... 51
10.8 Rules of Construction....................................................... 51
10.9 Amendments and Waivers...................................................... 51
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EXHIBITS
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Exhibit A - Stockholders of the Company
Exhibit B-1 - Note A
Exhibit B-2 - Note B
Exhibit C-1 - The Amended and Restated Right of First Refusal and Co-Sale Agreement
Exhibit C-2 - Amended and Restated Voting Agreement
Exhibit D - The Stockholder's Representation Agreement
Exhibit E - [Intentionally Omitted]
Exhibit F - Non-Competition Agreement
Exhibit G - Security Arrangements
Exhibit H - Amendment to Stock Purchase Agreement
SCHEDULES
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Schedule 1 - CSI, CSINH, Company and Stockholders Disclosure Schedule
Schedule 2 - Acquiror Disclosure Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of March 10, 2000, by and among printCafe, Inc., a Delaware corporation
(the "Acquiror"), Constellation Software Inc., an Ontario corporation ("CSI"),
Constellation Software of New Hampshire, Inc., a New Hampshire corporation
("CSINH"), Logic Associates, Inc., a New Hampshire corporation (the "Company"),
Xxxxxxxx Xxxx, Xxxxxx Xxxxxx and Xxxx Xxxxxxxx-Poor (each a "Founder" and
collectively the "Founders"), and certain other stockholders of the Company
listed on Exhibit A attached hereto (each, together with any other stockholders
added as parties hereto in accordance with Section 6.9, an "Other Stockholder"
and collectively the "Other Stockholders"). The Founders and the Other
Stockholders are hereinafter sometimes collectively referred to as the
"Stockholders."
RECITALS
A. CSI is the record holder of all the issued and outstanding shares of
common stock, without par value, of CSINH (the "CSINH Common Stock"). CSINH is
the record holder of 77.50% of the issued and outstanding shares of common stock
without par value, of the Company (the "Company Common Stock"). The Founders are
collectively the record holders of 13.71% of the Company Common Stock (the
"Founders Shares") and the Other Stockholders are collectively the record
holders of up to 8.79% of the Company Common Stock (the "Other Shares").
B. CSI desires to sell to the Acquiror and the Acquiror desires to buy
from CSI all of the shares of CSINH Common Stock owned by CSI (the "CSINH
Shares"). The Founders desire to sell to the Acquiror and the Acquiror desires
to buy from the Founders all of the Founders Shares and each Other Stockholder
desires to sell to the Acquiror and the Acquiror desires to buy from each such
Other Stockholder that number of the Other Shares set forth opposite each such
Other Stockholder's name on Exhibit A.
AGREEMENT
In consideration of the premises and the mutual representations,
warranties and covenants set forth below, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. SALE AND PURCHASE OF SHARES
1.1 SALE AND PURCHASE OF SHARES. At the closing of the transactions
contemplated by this Agreement (the "Closing") the following shall take place:
(a) CSI shall sell to the Acquiror and the Acquiror shall buy from
CSI the CSINH Shares in consideration of the two subordinated promissory notes,
one in the principal amount of Twenty-two Million dollars ($22,000,000) and one
in the principal amount of Twenty-one Million Two Hundred Thousand dollars
($21,200,000), substantially in the form of the notes attached hereto as Exhibit
B1 ("Note A") and Exhibit B2 ("Note B" and together with Note A, the "Note
Consideration"). The Notes will be secured by the security arrangements set out
in Exhibit G.
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(b) The Founders shall sell to the Acquiror and the Acquiror shall
buy from the Founders, the Founders Shares in consideration of 652,727 shares of
the common stock, $0.0001 par value, of the Acquiror (the "Acquiror Common
Stock") (the "Share Consideration") less that percentage of the Share
Consideration to be deposited in the Escrow Fund pursuant to Section 9. In
connection with the receipt of the Share Consideration, the Founders shall
become a party to the Amended and Restated Right of First Refusal and Co-Sale
Agreement and the Amended and Restated Voting Agreement, the forms of which are
attached hereto as Exhibit C1 and Exhibit C2 (collectively, the "Stockholder
Agreements").
(c) Each Other Stockholder shall sell to the Acquiror and the
Acquiror shall buy from such Other Stockholders that number of the Other Shares
set forth opposite each such Other Stockholder's name on Exhibit A in
consideration of subordinated promissory notes substantially similar to Note A
and Note B in the principal amounts set forth opposite each such other
stockholder's name on Exhibit A (collectively, the "Other Note Consideration")
less that percentage of the Other Note Consideration to be deposited in the
Escrow Fund pursuant to Section 9.
1.2 PAYMENT OF PURCHASE PRICE. At the Closing, Acquiror shall deliver to
CSI, the Founders and the Other Stockholders, respectively, the Note
Consideration, the Share Consideration and the Other Note Consideration, which
amounts are hereinafter sometimes collectively referred to as the "Purchase
Price," less, in the case of the Share Consideration and the Other Note
Consideration, that percentage thereof to be deposited into the Escrow Fund.
1.3 CLOSING. The Closing shall take place 15 days after the date hereof
or as soon as practicable thereafter after the satisfaction or waiver of each of
the conditions set forth in Section 7 below, or at such other time as the
parties agree (the "Closing Date"). The Closing shall take place at the offices
of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or
at such other location as the parties agree.
1.4 DELIVERIES AT CLOSING.
(a) At the Closing, CSI shall deliver to the Acquiror:
(i) stock certificates evidencing all the CSINH Shares, each
in form suitable for transfer, endorsed in blank or with executed blank stock
transfer powers, along with stock book, stock transfer ledger and minute book of
CSINH;
(ii) resignation of the directors and officers of CSINH
requested by the Acquiror;
(iii) receipt for the Note Consideration; and
(iv) each of the certificates and documents contemplated by
Section 7.3 below.
(b) At the Closing, the Founders and the Other Stockholders shall
deliver to the Acquiror:
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(i) stock certificates evidencing all the Founder Shares and
all the Other Shares being sold to the Acquiror hereunder, each in form suitable
for transfer, endorsed in blank or with executed blank stock transfer powers;
(ii) receipts for the Share Consideration and Other Note
Consideration; and
(iii) each of the certificates and documents contemplated by
Section 7.3 below.
(c) At the Closing, the Acquiror shall deliver to:
(i) CSI, the Note Consideration;
(ii) the Founders, the Share Consideration less that
percentage of the Share Consideration to be deposited into the Escrow Fund;
(iii) the Other Stockholder, the Other Notes less that
percentage of the Other Note Consideration to be deposited into the Escrow Fund;
and
(iv) CSI, the Founders and Other Stockholders, as the case may
be, each of the certificates and documents contemplated by Section 7.2 below.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CSI AND CSINH
In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects of such entity and its subsidiaries, taken as
a whole, or to prevent or materially delay consummation of the of the
transactions anticipated by this Agreement or otherwise to prevent such entity
and its subsidiaries from performing their obligations under this Agreement.
In this Agreement, any reference to "knowledge" means, (i) in the case
of CSI and CSINH, facts or information known to Xxxx Xxxxxxx or any executive
officer or director of CSI or CSINH, (ii) in the case of the Company, facts or
information known to Xxxxxxxx Xxxx, Xxxxxx Xxxxxx and Xxxx Xxxxxxxx-Poor after
due and diligent inquiry of other executive officers of the Company, (iii) in
the case of each Stockholder, facts or information known to such Stockholder,
and (iv) in the case of the Acquiror, facts or information known to any
corporate officer or director of the Acquiror.
Except as disclosed in a document dated as of the date of this Agreement
and delivered to the Acquiror prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Section 2
(the "Disclosure Schedule"), CSI and CSINH represent and warrant to the Acquiror
as follows:
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2.1 ORGANIZATION; SUBSIDIARIES. Each of CSI and CSINH is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Other than owning the Company Common Stock, CSINH
does not own, lease or operate any properties or carry on any business. Other
than the Company, CSINH does not own, have any investment in, or control,
directly or indirectly, any subsidiaries, associations or other business
entities. CSINH is not a participant in any joint venture or partnership.
2.2 ARTICLES OF INCORPORATION AND BYLAWS. Each of CSI and CSINH have
delivered to the Acquiror a true and correct copy of its Articles of
Incorporation and Bylaws or other charter documents ("Charter Documents"), each
as amended to date. Neither CSI nor CSINH is in violation of any of the
provisions of its Charter Documents.
2.3 CAPITAL STRUCTURE. The authorized capital stock of CSINH consists of
100,000 shares of common stock, without par value per share, of which $3,083.75
is issued and outstanding. There are no other outstanding shares of capital
stock or voting securities and no outstanding commitments to issue any shares of
capital stock or voting securities after the date hereof or any other rights or
securities granted or issued to any person to cause CSINH to issue, sell, redeem
or repurchase any shares of capital stock of CSINH. There does not exist nor is
there outstanding any right, option, warrant, convertible obligation or other
security or agreement entered into or granted by any stockholder of CSINH with
respect to any shares of capital stock of CSINH. All outstanding shares of CSINH
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are free of any liens or encumbrances or claims of any kind, and are not
subject to preemptive rights or rights of first refusal created by statute, the
Charter Documents of CSINH or any agreement to which CSINH or any stockholder of
CSINH is a party or by which it is bound. CSI is the lawful record and
beneficial owner of all issued and outstanding shares of CSINH Common Stock,
free and clear of all liens, encumbrances or claims of any kind. There does not
exist nor is there outstanding any right, option, warrant, convertible
obligation or other security or agreement entered into or grant by any CSINH
stockholder with respect to any shares of capital stock of CSINH. Except for the
rights created pursuant to this Agreement, there are no options, warrants,
calls, rights, commitments, agreements or arrangements of any character to which
CSINH is a party or by which CSINH is bound relating to the issued or unissued
capital stock of CSINH or obligating CSINH to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of CSINH or obligating CSINH to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of any
shares of CSINH capital stock between or among CSINH and the stockholder of
CSINH or to which CSINH or such stockholder is a party or by which it is bound.
2.4 AUTHORITY. Each of CSI and CSINH has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of CSI and CSINH. This
Agreement has been duly executed and delivered by each of CSI and CSINH and,
assuming due authorization, execution and delivery by the Acquiror, constitutes
the valid and binding obligation of each of CSI and CSINH enforceable against it
in accordance
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with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equitable remedies.
2.5 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Section 2.5(a) of the Disclosure
Schedule, the execution and delivery of this Agreement by each of CSI and CSINH
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (i)
any provision of CSI's or CSINH's Charter Documents, (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to CSINH or any of its properties or assets, or (iii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to CSI or any of its properties or
assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to CSI or CSINH in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (ii) the
Securities Act of 1933, as amended (the "Securities Act"), applicable state
securities laws and the securities laws of any foreign country; (iii) such
filings as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended ("HSR"); and (iv) such other consents, authorizations,
filings, approvals and registrations applicable to CSI and not CSINH which, if
not obtained or made, would not have a Material Adverse Effect on CSINH and
would not prevent, or materially alter or delay the consummation of any of the
transactions contemplated by this Agreement.
2.6 FINANCIAL STATEMENTS. Section 2.6 of the Disclosure Schedule
includes a true, correct and complete copy of the audited, consolidated
financial statements of CSI for each of the fiscal years ended December 31, 1997
and December 31, 1998, the unaudited, consolidated financial statements of CSI
for the fiscal year ended December 31, 1999 and the audited financial statements
of CSINH for the fiscal period ended December 31, 1999 (collectively, the "CSI
Financial Statements"). The CSI Financial Statements have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated and with each
other. The CSI Financial Statements accurately set out and describe the
financial condition and operating results of CSI and CSINH as of the dates, and
for the periods, indicated therein, subject to normal year-end audit
adjustments.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. CSINH does not have obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth in CSINH's balance sheet for the fiscal period ended
December 31, 1999 (the "CSINH Balance Sheet"), which liabilities consist solely
of indebtedness incurred to finance equity investments in the Company, which
indebtedness has been converted into equity prior to the date of this
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Agreement, and (ii) those incurred in connection with the execution of this
Agreement. CSI does not have obligations or liabilities of any nature (matured
or unmatured, fixed or contingent) other than (i) those set forth in the CSI's
balance sheet for the period ended December 31, 1999 (the "CSI Balance Sheet"),
(ii) those incurred in the ordinary course of business and not required to be
set forth in the CSI Balance Sheet under GAAP, (iii) those incurred in the
ordinary course of business since the date of the CSI Balance Sheet and
consistent with past practice, and (iv) those incurred in connection with the
execution of this Agreement.
2.8 ABSENCE OF CERTAIN CHANGES. Since the date of the CSINH Balance
Sheet (the "CSINH Balance Sheet Date") there has not been, occurred or arisen,
except for equity investments in the Company and the issuance of stock and
incurrence of debt in connection therewith, any:
(a) transaction by CSINH;
(b) amendments or changes to CSINH's Charter Documents;
(c) capital expenditure or commitment by CSINH;
(d) declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of CSINH, or any direct or indirect
redemption, purchase or other acquisition by CSINH of any of its capital stock;
or
(e) agreement by CSINH or any officer, director or agent of CSINH
to do any of the things described in the preceding clauses (a) through (d)
(other than negotiations with the Acquiror and its representatives regarding the
transactions contemplated by this Agreement).
Since the date of the CSI Balance Sheet (the "CSI Balance Sheet Date")
there has not been, occurred or arisen any event or condition of any character
that has or could reasonably be expected to have a Material Adverse Effect on
CSI.
2.9 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic or threatened against CSINH or any of its
officers or directors (in their capacities as such). There is no judgment,
decree or order against CSINH or any of CSINH's directors or officers (in their
capacities as such).
2.10 PERMITS; THE COMPANY PRODUCTS; REGULATION. CSINH is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders necessary
for CSINH to carry on its business as it is now being conducted (the
"Authorizations") and no suspension or cancellation of any Authorization is
pending or threatened. CSINH is not in conflict with, or in default or violation
of, (i) any laws applicable to CSINH or by which any property or asset of CSINH
is bound or affected, (ii) any Authorization, or (iii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which CSINH is a party or by which CSINH or any
property or asset of CSINH is bound or affected.
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2.11 PROPERTY. Other than the Company Shares, CSINH does not, at the
date hereof, own, license or otherwise possess, nor has it ever owned, licensed
or otherwise possessed, any interest or right in any property, tangible or
intangible, including patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, service marks, copyrights, and any applications
for any of the foregoing, maskworks, net lists, schematics, industrial models,
inventions, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material
2.12 TAXES.
(a) For purposes of this Agreement, the following definitions shall
apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, withholding taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which are required to be paid, withheld or collected,
(B) any liability for the payment of amounts referred to in (A) as a result of
being a member of any affiliated, consolidated, combined or unitary group, or
(C) any liability for amounts referred to in (A) or (B) as a result of any
obligations to indemnify another person.
(ii) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns required to be
filed in connection with any Taxes, including information returns with respect
to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of CSINH have
been duly filed on a timely basis, and each such Return is true, complete and
correct in all material respects. All Taxes shown to be payable on such Returns
or on subsequent assessments with respect thereto, and all payments of estimated
Taxes required to be made by or on behalf of CSINH under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis, and no other material Taxes are payable by CSINH with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns). CSINH has withheld and paid over all Taxes required
to have been withheld and paid over, and complied with all information reporting
and backup withholding in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of CSINH with respect to Taxes, other than liens for Taxes not
yet due and payable or for Taxes that CSINH is contesting in good faith through
appropriate proceedings. CSINH is not and has not been at any time a member of
an affiliated
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group of corporations filing consolidated, combined or unitary income or
franchise tax returns for a period for which the statute of limitations for any
Tax potentially applicable as a result of such membership has not expired.
(c) The amount of CSINH's liabilities for unpaid Taxes for all periods
through the date of the CSINH Financial Statements do not, in the aggregate,
materially exceed the amount of the current liability accruals for Taxes
reflected on the CSINH Financial Statements, and the CSINH Financial Statements
properly accrue in accordance with GAAP all liabilities for Taxes of CSINH
payable after the date of the CSINH Financial Statements attributable to
transactions and events occurring prior to such date. No liability for Taxes of
CSINH has been incurred (or prior to Closing will be incurred) since such date
other than in the ordinary course of business.
(d) The Acquiror has been furnished by CSINH true and complete copies of
(i) relevant portions of income tax audit reports, statements of deficiencies,
closing or other agreements received by or on behalf of CSINH relating to Taxes,
and (ii) all federal, state and foreign income or franchise tax Returns for or
including CSINH for all periods since CSINH's inception.
(e) No audit of the Returns of or including CSINH by a government or
taxing authority is in process, threatened or, to CSI or CSINH's knowledge,
pending (either in writing or orally, formally or informally). No deficiencies
exist or have been asserted (either in writing or orally, formally or
informally) and not resolved or are expected to be asserted with respect to
Taxes of CSINH, and CSINH has not received notice (either in writing or orally,
formally or informally) nor does it expect to receive notice that it has not
filed a Return or paid Taxes required to be filed or paid. CSINH is not a party
to any action or proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened (either in writing or orally, formally or
informally) against CSINH, or any of its assets. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of CSINH.
CSINH has disclosed on its federal and state income and franchise tax returns
all positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.
(f) CSINH is not (nor has it ever been) a party to any tax sharing
agreement. Since January 1, 1998, CSINH has not been a distributing corporation
or a controlled corporation in a transaction described in Section 355(a) of the
Code.
(g) CSINH is not, nor has it been, a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. CSINH is
not a "consenting corporation" under Section 341(f) of the Code. CSINH has not
entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a nondeductible expense to
CSINH pursuant to Section 280G of the Code or an excise tax to the recipient of
such payment pursuant to Section 4999 of the Code. CSINH has not agreed to, nor
is it required to make, other than by reason of the transactions anticipated by
this Agreement, any adjustment under Code Section 481(a) by reason of, a change
in accounting method, and CSINH will not otherwise have any income reportable
for a period ending after the Closing Date
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attributable to a transaction or other event (e.g., an installment sale)
occurring prior to the Closing Date with respect to which CSINH received the
economic benefit prior to the Closing Date. CSINH is not, nor has it been, a
"reporting corporation" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder.
(h) The Acquiror has been furnished accurate and complete
information in writing regarding CSINH's acquisition of the Company Common Stock
owned by CSINH sufficient to determine the tax basis and holding period for such
shares.
(i) Acquiror has been furnished accurate and complete information
regarding CSINH's net operating losses for federal and each state tax purposes
other than losses incurred in connection with the transactions contemplated by
this Agreement. CSINH has no net operating losses and credit carryovers or other
tax attributes currently subject to limitation under Sections 382, 383, or 384
of the Code, not taking into account any such limitation resulting from the
transactions contemplated by this Agreement.
2.13 EMPLOYEE MATTERS. At the date hereof, CSINH does not have, nor has
it ever had, any employees and it does not participate in or sponsor, nor has it
ever participated in or sponsored, any employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")).
2.14 INTERESTED PARTY TRANSACTIONS. Neither CSI nor CSINH is indebted to
any director, officer, employee or agent of either CSI or CSINH (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to CSINH.
2.15 COMPLIANCE WITH LAWS. CSINH has complied with, is not in violation
of, and has not received any notices of any violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business.
2.16 MINUTE BOOKS. The minute books of CSINH have been made available to
the Acquiror and contain a summary of all meetings of directors and stockholders
or actions by written consent since the time of incorporation of CSINH through
the date of this Agreement, and reflect all transactions referred to in such
minutes accurately in all material respects.
2.17 BROKERS' AND FINDERS' FEES. Neither CSI nor CSINH has incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
2.18 THIRD PARTY CONSENTS. Except as specified in Section 2.5(b), no
consent or approval is needed by CSI or CSINH from any third party in order to
consummate any of the transactions contemplated hereby.
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2.19 CONTROL OF CSI; SIZE OF CSI.
(a) No person (including all parent corporations, subsidiaries and
divisions and all related corporations under common control with any of the
foregoing) has beneficial ownership, whether direct or indirect, through
fiduciaries, agents, controlled entities or other means, of 50% or more of the
voting securities of CSI. Pursuant to a shareholders agreement among the
shareholders of CSI, the shareholders have agreed to vote for the election of
the eight members of the board of directors of CSI as follows: the Ontario
Municipal Employee Retirement System ("OMERS") has the contractual power to
designate three of the directors, Toronto Dominion Bank ("TD") has the
contractual power to designate two of the directors, the Chief Executive Officer
of CSI is to be a member of the Board, and OMERS and TD, acting jointly, have
the contractual power to designate two Independent persons (defined as person
who are not affiliated directly or indirectly, with CSI, OMERS or TD). OMERS
does not have the contractual power to designate the Chief Executive Officer of
CSI.
(b) The annual consolidated net sales of CSI, both domestic and
foreign, for the fiscal year ended December 31, 1999, as stated in the
unaudited, consolidated financial statements of CSI for the year ended December
31, 1999, were less than $100 million. The total consolidated assets of CSI,
both domestic and foreign, as stated on its balance sheet as of December 31,
1999, were less than $100 million. The income statement of CSI for the year
ended December 31, 1999 and the balance sheet of CSI as at such date are the
most recent regularly prepared financial statements of CSI.
2.20 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by CSI or CSINH herein or in any Schedule hereto, including the Disclosure
Schedule, or certificate furnished by CSI or CSINH pursuant to this Agreement,
when all such documents are read together in their entirety, contains or will
contain at the Closing Date any untrue statement of a material fact, or omits or
will omit at the Closing Date to state any material fact necessary in order to
make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CSINH, COMPANY AND STOCKHOLDERS.
Except as disclosed in the Disclosure Schedules and referring to the
representations and warranties in this Section 3, CSINH and the Company jointly
and severally, and the Stockholders severally, represent and warrant to the
Acquiror as follows:
3.1 ORGANIZATION; SUBSIDIARIES. Each of the Company and each Subsidiary
(as hereinafter defined) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation. Each of
the Company and each Subsidiary has the requisite corporate power and authority
and all necessary government approvals to own, lease and operate its properties
and to carry on its business as now being conducted and as proposed to be
conducted, except where the failure to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or such Subsidiary. Each of the Company
and each Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
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makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or such Subsidiary.
Section 3.1 of the Disclosure Schedule sets forth each jurisdiction where each
of the Company and each Subsidiary is qualified to do business. Except as set
forth in Section 3.1 of the Disclosure Schedule, the Company does not have any
investment in, or control, directly or indirectly, any subsidiaries,
associations or other business entities ( each, a "Subsidiary" or
"Subsidiaries"). Each Subsidiary is wholly-owned by the Company. The entire
capital stock of each Subsidiary is owned by the Company, free and clear of all
liens, encumbrances or claims of any kind None of the Subsidiaries has any
Subsidiaries. Neither the Company nor any Subsidiary is a participant in any
joint venture or partnership.
3.2 ARTICLES OF INCORPORATION AND BYLAWS. The Company has delivered to
the Acquiror a true and correct copy of the Charter Documents of the Company and
each Subsidiary, each as amended to date. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its Charter Documents.
3.3 CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 2,000,000 shares, consisting of 1,000,000 shares of common stock,
with no par value per share, of which 12,932.124 shares are issued and
outstanding, and 1,000,000 shares of preferred stock, none of which is issued or
outstanding. The Company has issued options to purchase 231.907 shares of common
stock of the Company. There are no other outstanding shares of capital stock or
voting securities and no outstanding commitments to issue any shares of capital
stock or voting securities after the date hereof or any other rights or
securities granted or issued to any person to cause the Company to issue, sell,
redeem or repurchase any shares of capital stock of the Company. All outstanding
shares of the Company Common Stock are duly authorized, validly issued, fully
paid and non-assessable and are free of any liens or encumbrances or claims of
any kind, and are not subject to preemptive rights or rights of first refusal
created by statute, the Charter Documents of the Company or any agreement to
which the Company or any stockholder of the Company is a party or by which it is
bound. CSINH and the Stockholders are the lawful record and beneficial owners of
that number of issued and outstanding shares of the Company Common Stock set
forth on Exhibit A, free and clear of all liens, encumbrances or claims of any
kind. Except as disclosed in this Section 3.3, there does not exist nor is there
outstanding any right, option, warrant, convertible obligation or other security
or agreement entered into or granted by the Company with respect to any shares
of capital stock of the Company. Except (i) for the rights created pursuant to
this Agreement (ii) as set forth in this Section 3.3 or (iii) set forth in
Section 3.3 of the Disclosure Schedule, there are no options, warrants, calls,
rights, commitments, agreements or arrangements of any character to which the
Company is a party or by which the Company is bound relating to the issued or
unissued capital stock of the Company or obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of the Company or
obligating the Company to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of any shares of the Company
capital stock (i) between or among the Company and any of the stockholders of
the Company or (ii) between or among any of the stockholders of the Company.
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3.4 AUTHORITY.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and assuming due authorization, execution
and delivery by the Acquiror, constitutes the valid and binding obligation of
the Company enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equitable remedies.
(b) Each Stockholder has the requisite capacity to enter into this
Agreement and to consummate the transaction contemplated hereby. This Agreement
has been duly executed and delivered by each Stockholder and constitutes a valid
and binding obligation enforceable against him or her in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equitable remedies.
3.5 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company,
the Founders and the Other Stockholders does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Charter
Documents of the Company or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any Subsidiary or any of its properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to the Company in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the Exchange Act, (ii) the
Securities Act, applicable state securities laws and the securities laws of any
foreign country; (iii) such filings as may be required under the HSR; and (iv)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on the Company
and would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
3.6 FINANCIAL STATEMENTS. Section 3.6 of the Disclosure Schedule
includes a true, correct and complete copy of the audited, consolidated
financial statements for each of the fiscal years ended December 31, 1998 and
1999 for the Company and each Subsidiary (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated and
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with each other. The Company Financial Statements accurately set out and
describe the financial condition and operating results the Company as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. The Company maintains and will continue to maintain a system of
accounting administered in accordance with GAAP.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
Subsidiary has any obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the Balance Sheet for the period ended December 31, 1999 (the
"Company Balance Sheet"), (ii) those incurred in the ordinary course of business
and not required to be set forth in the Company Balance Sheet under GAAP, (iii)
those incurred in the ordinary course of business since the date of the Company
Balance Sheet and consistent with past practice, and (iv) those incurred in
connection with the execution of this Agreement.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.8 of
the Disclosure Schedule, since date of the Company Balance Sheet (the "Company
Balance Sheet Date") there has not been, occurred or arisen any:
(a) transaction by the Company or any Subsidiary except in the
ordinary course of business in a manner consistent with past practices;
(b) amendments or changes to the Company's or any Subsidiary's
Charter Documents;
(c) capital expenditure or commitment by the Company or any
Subsidiary, in any individual amount exceeding $5,000, or in the aggregate,
exceeding $20,000;
(d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), business or customer of the Company or
any Subsidiary (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to the
Company or such Subsidiary;
(e) strike, lockout or slowdown or, to the Company's knowledge, any
threat thereof, or claim of wrongful discharge or other unlawful labor practice
or action affecting the Company or any Subsidiary;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates, any change in policies in
making or reversing accruals, or any change in capitalization of software
development costs) by the Company or any Subsidiary;
(g) revaluation by the Company or any Subsidiary of any of its
assets;
(h) declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
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(i) increase in the salary or other compensation payable or to
become payable by the Company or any Subsidiary to any officers, directors,
employees or advisors of the Company or any Subsidiary, except in the ordinary
course of business consistent with past practice, or the declaration, payment,
or commitment or obligation of any kind for the payment by the Company or any
Subsidiary of a bonus or other additional salary or compensation to any such
person except as otherwise contemplated by this Agreement, the establishment of
any bonus, insurance, deferred compensation, pension, retirement, profit
sharing, stock option (including without limitation, the granting of stock
options, stock appreciation rights, performance awards), stock purchase or other
employee benefit plan;
(j) sale, lease, license of other disposition of any of the assets
or properties of the Company or any Subsidiary, except in the ordinary course of
business and not in excess of $20,000 in the aggregate;
(k) termination or material amendment of any Material Contract (as
hereafter defined) to which the Company or any Subsidiary is a party or by which
it is bound;
(l) loan by the Company or any Subsidiary to any person or entity,
or guaranty by the Company or any Subsidiary of any loan;
(m) waiver or release of any right or claim of the Company or any
Subsidiary, including any write-off or other compromise of any account
receivable of the Company or any Subsidiary, in excess of $20,000 in the
aggregate;
(n) the commencement or notice or, to the Company's knowledge,
threat of commencement of any lawsuit or proceeding against or, to the Company's
knowledge, investigation of the Company or any Subsidiary or its affairs;
(o) to the Company's knowledge, any notice of any claim of
ownership by a third party of the Intellectual Property (as hereinafter defined)
or of infringement by the Company or any Subsidiary of any third party's
Intellectual Property rights;
(p) issuance or sale by the Company or any Subsidiary of any of its
shares of capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by the Company or
any Subsidiary to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed the Intellectual Property to the Company or
such Subsidiary;
(r) event or condition of any character that has or could
reasonably be expected to have a Material Adverse Effect on the Company or any
Subsidiary; or
(s) agreement by the Company or any Subsidiary or any director,
officer or employee of the Company or any Subsidiary to do any of the things
described in the preceding clauses (a) through (r) (other than negotiations with
the Acquiror and its representatives regarding the transactions contemplated by
this Agreement).
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3.9 LITIGATION. There is no private or governmental action, suit,
proceeding, claim or arbitration pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of the Company, threatened against the
Company or any Subsidiary or any of its properties or any of its officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Company.
There is no judgment, decree or order against the Company or, to the knowledge
of the Company, any of the Company's or any Subsidiary's directors or officers
(in their capacities as such), that could prevent, enjoin, or materially alter
or delay any of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on the Company. All
litigation to which the Company or any Subsidiary is a party (or, to the
knowledge of the Company, threatened to become a party) is disclosed in the
Disclosure Schedule.
3.10 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon the Company or any Subsidiary
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice of the Company or
any Subsidiary, any acquisition of property by the Company or any Subsidiary or
the overall conduct of business by the Company or any Subsidiary as currently
conducted or as proposed to be conducted by the Company. Neither the Company nor
any Subsidiary has entered into any agreement under which the Company or any
Subsidiary is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
3.11 PERMITS; THE COMPANY PRODUCTS; REGULATION.
(a) Each of the Company and each Subsidiary is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for each of
the Company and such Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Authorizations") and no
suspension or cancellation of any Authorization is pending or, to the knowledge
of the Company, threatened, except where the failure to have, or the suspension
or cancellation of, any Authorization would not have a Material Adverse Effect
on the Company. Neither the Company nor any Subsidiary is in conflict with, or
in default or violation of, (i) any laws applicable to the Company or such
Subsidiary or by which any property or asset of the Company or such Subsidiary
is bound or affected, (ii) any Authorization, or (iii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or such Subsidiary is a party or
by which the Company or any property or asset of the Company or such Subsidiary
is bound or affected, except for any such conflict, default or violation that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(b) Except as would not have a Material Adverse Effect on the
Company, there have been no written notices, citations or decisions by any
governmental or regulatory body that any product produced, manufactured,
marketed or distributed at any time by the Company or any Subsidiary (the
"Products") is defective or fails to meet any applicable standards promulgated
by any such governmental or regulatory body. To the knowledge of the
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Company, each of the Company and each Subsidiary has complied in all material
respects with the laws, regulations, policies, procedures and specifications
with respect to the design, manufacture, labeling, testing and inspection of the
Products. Except as disclosed in Section 3.11(b) of the Disclosure Schedule,
there have been no recalls, field notifications or seizures ordered or, to the
Company's knowledge, threatened by any such governmental or regulatory body with
respect to any of the Products.
(c) Except as set forth in Section 3.11(c) of the Disclosure
Schedule, each of the Company and each Subsidiary has obtained, in all countries
where the Company and such Subsidiary is marketing or has marketed its Products,
all applicable licenses, registrations, approvals, clearances and authorizations
required by local, state or federal agencies in such countries regulating the
safety, effectiveness and market clearance of the Products currently or
previously marketed by the Company or such Subsidiary in such countries, except
for any such failures as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company has identified and made
available for examination by the Acquiror all information relating to regulation
of the Products, including licenses, registrations, approvals and permits. The
Company has identified in writing to the Acquiror all international locations
where regulatory information and documents are kept.
3.12 TITLE TO PROPERTY.
(a) The Company (or a Subsidiary) has good and marketable title to
all of its properties, interests in properties and assets, real and personal,
reflected in the Company Balance Sheet or acquired after the Company Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Company Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges, charges
or encumbrances of any kind or character, except (i) the lien of current taxes
not yet due and payable, (ii) such imperfections of title, liens and easements
as do not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties, and (iii) liens securing debt
which is reflected on the Company Balance Sheet. The plants, property and
equipment of the Company and each Subsidiary that are used in the operations of
its businesses are in good operating condition and repair. All properties used
in the operations of the Company or any Subsidiary are reflected in the Company
Balance Sheet to the extent GAAP require the same to be reflected. Section
3.12(a) of the Disclosure Schedule sets forth a true, correct and complete list
of all real property owned or leased by the Company or any Subsidiary, the name
of the lessor, the date of the lease and each amendment thereto and the
aggregate annual rental and other fees payable under such lease. Such leases are
in good standing, are valid and effective in accordance with their respective
terms, and there is not under any such leases any existing default or event of
default (or event which with notice or lapse of time, or both, would constitute
a default).
(b) Section 3.12(b) of the Disclosure Schedule also sets forth a
true, correct and complete list of all equipment having a value in excess of
$1,000 owned or leased the Company or any Subsidiary, and such equipment is,
taken as a whole, in conjunction with the equipment having a value of less than
$1,000, (i) adequate for the conduct of the Company's and
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such Subsidiary's business, consistent with its past practice, and (ii) in good
operating condition (except for ordinary wear and tear).
3.13 INTELLECTUAL PROPERTY.
(a) Each of the Company and each Subsidiary owns, or has licensed
or otherwise possess legally enforceable rights to use all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, copyrights, and any applications for any of the foregoing, maskworks, net
lists, schematics, industrial models, inventions, technology, know-how, trade
secrets, inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used or proposed to be used in the business of the Company or any Subsidiary
as currently conducted by the Company or such Subsidiary.
(b) Section 3.13 of the Disclosure Schedule lists (i) all patents
and patent applications and all registered and unregistered trademarks, trade
names and service marks, registered and unregistered copyrights, and maskworks
registered by the Company or any Subsidiary, included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to which any
person is authorized to use any Intellectual Property except for licenses to
customers granted in the ordinary course of business, and (iii) all material
licenses, sublicenses and other agreements as to which the Company or any
Subsidiary is a party and pursuant to which any person is authorized the use any
third party patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part of
any product that is material to its business, excluding Third Party Intellectual
Property Rights for word processing software or similar software validly
obtained and licensed by the Company. Neither the Company nor any Subsidiary is
in violation of any license, sublicense or agreement described in Section 3.13
of the Disclosure Schedule. The execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated hereby, will
neither cause the Company or any Subsidiary to be in violation or default under
any such license, sublicense or agreement, nor entitle any other party to any
such license, sublicense or agreement to terminate or modify such license,
sublicense or agreement. Except as set forth in Section 3.13 of the Disclosure
Schedule, the Company (or a Subsidiary) is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of any
liens), the Intellectual Property, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Intellectual Property is being
used.
(c) There is no material unauthorized use, disclosure, infringement
or misappropriation of any Intellectual Property rights of the Company or any
Subsidiary, any trade secret material to the Company or any Subsidiary or any
Intellectual Property right of any third party to the extent licensed by or
through the Company or any Subsidiary, by any third party, including any
employee of the Company or any Subsidiary. Neither the Company nor any
Subsidiary has entered into any agreement to indemnify any other person against
any charge of
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infringement of any Intellectual Property, other than indemnification provisions
contained in purchase orders arising in the ordinary course of business.
(d) Neither the Company nor any Subsidiary is nor will be as a
result of the execution and delivery of this Agreement or the performance of the
Company's obligations under this Agreement, in breach of any license, sublicense
or other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights, the breach of which would have a Material Adverse
Effect on the Company.
(e) All patents, registered trademarks, service marks and
copyrights held by the Company and each Subsidiary are valid and existing and,
to the knowledge of the Company, there is no assertion or claim (or basis
therefor) challenging the validity of any Intellectual Property of the Company
or any Subsidiary. Neither the Company nor any Subsidiary has been sued in any
suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party. Neither the conduct of the
business of the Company or any Subsidiary as currently conducted nor the
manufacture, sale, licensing or use of any of the products of the Company or any
Subsidiary as now manufactured, sold or licensed or used, nor the use in any way
of the Intellectual Property in the manufacture, use, sale or licensing by the
Company or any Subsidiary of any products currently proposed, infringes on or
will infringe or conflict with, in any way, any license, trademark, trademark
right, trade name, trade name right, patent, patent right, industrial model,
invention, service xxxx or copyright of any third party that, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect on the
Company. All registered trademarks, service marks and copyrights held by the
Company or any Subsidiary are valid and existing. To the Company's knowledge, no
third party is challenging the ownership by the Company, or the validity or
effectiveness of, any of the Intellectual Property. The Company has not brought
any action, suit or proceeding for infringement of Intellectual Property or
breach of any license or agreement involving Intellectual Property against any
third party. There are no pending, or to the knowledge of the Company,
threatened interference, re-examinations, oppositions or nullities involving any
patents, patent rights or applications therefor of the Company except such as
may have been commenced by the Company. There is no breach or violation of or,
to the knowledge of the Company, threatened or actual loss of rights under any
license agreement to which the Company is a party.
(f) Each of the Company and each Subsidiary has secured valid
written assignments from all consultants and employees who contributed to the
creation or development of Intellectual Property of the rights to such
contributions that the Company (or a Subsidiary) does not already own by
operation of law.
(g) Each of the Company and each Subsidiary has a policy requiring
each employee, consultant and independent contractor to execute proprietary
information and confidentiality agreements substantially in the Company's or
such Subsidiary's standard forms and all current and former employees,
consultant and independent contractors of the Company and such Subsidiary have
executed such an agreement. All use, disclosure or appropriation of the
Intellectual Property owned by the Company or any Subsidiary and not otherwise
protected by patents, patent applications or copyright ("Confidential
Information") has been pursuant to the terms of a written agreement between the
Company or a Subsidiary and a third party. All
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use, disclosure or appropriation by the Company or any Subsidiary of
Confidential Information not owned by the Company or a Subsidiary has been
pursuant to the terms of a written agreement between the Company or such
Subsidiary and the owner of such Confidential Information, or is otherwise
lawful.
3.14 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders,
as currently in effect, that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of air, water
or groundwater with respect to, or that require reporting with respect to,
Hazardous Materials; which regulate the manufacture, handling, transport,
treatment, storage or disposal of Hazardous Materials, or which are intended to
assure the good health of employees or other persons, including the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws; petroleum and petroleum products including crude oil and any
fractions thereof; natural gas and any mixtures thereof; radon and asbestos.
(iii) "Property" shall mean all real property leased or owned
by the Company either currently or in the two-year period prior to the Closing.
(iv) "Facilities" shall mean all buildings and improvements on
the Property of the Company.
(b) Except as would not have a Material Adverse Effect on the
Company or its Subsidiaries considered as a whole: (i) no asbestos is contained
in or has been used at or released from the Facilities in violation of
Environmental and Safety Laws; (ii) the Company has not received notice (verbal
or written) of any noncompliance of the Facilities or of its past or present
operations with Environmental and Safety Laws; (iii) no notices, administrative
actions or suits are pending or, to the knowledge of the Company, CSINH and the
Founders, threatened against the Company, CSINH or the Founders relating to
Hazardous Materials or a violation of any Environmental and Safety Laws; (iv)
the Company has not received notice that it is a potentially responsible party
under the federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), or any state analog statute, arising out of events
occurring prior to the Closing Date; (v) to the knowledge of the Company, CSINH
and the Founders, there has not been in the past, and there is not now, any
contamination, disposal, spilling, dumping, incineration, discharge, storage, or
treatment of Hazardous Materials on, under or migrating from the Facilities or
Property (including without limitation, soils and surface and ground waters);
(vi) except in material compliance with Environmental and Safety Laws, there are
not now any underground tanks at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or oil xxxxx; (vii) to the
knowledge of the
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Company, CSINH and the Founders, there are no polychlorinated biphenyls ("PCBs")
deposited, stored, disposed of or located on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts per
million; (viii) to the knowledge of the Company, CSINH and the Founders, there
is no formaldehyde on the Property or in the Facilities, nor any insulating
material containing urea formaldehyde in the Facilities; (ix) the Facilities and
the Company's activities therein, within applicable statutes of limitation, have
complied in all material respects with all Environmental and Safety Laws; (x)
the Company and each Subsidiary has all the permits and licenses required under
Environmental and Safety Laws to operate its business as currently conducted and
the Company is in compliance in all material respects with the terms and
conditions of those permits; and (xi) neither the Company nor any Subsidiary has
not received notice that it is liable for any off-site contamination involving
Hazardous Materials.
3.15 TAXES.
(a) All Returns required to be filed by or on behalf of the Company
and each Subsidiary have been duly filed on a timely basis, except where the
failure to timely file such Return will not have a Material Adverse Effect on
the Company, and each such Return is true, complete and correct in all material
respects. All Taxes shown to be payable on such Returns or on subsequent
assessments with respect thereto, and all payments of estimated Taxes required
to be made by or on behalf of the Company under Section 6655 of the Code or
comparable provisions of state, local or foreign law, have been paid in full on
a timely basis, and no other material Taxes are payable by the Company with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns). Each of the Company and each Subsidiary has
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other third party. There are no liens on any of the assets of the Company or any
Subsidiary with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that the Company is contesting in good faith through
appropriate proceedings. The Company is not and has not been at any time a
member of an affiliated group of corporations filing consolidated, combined or
unitary income or franchise tax returns for a period for which the statute of
limitations for any Tax potentially applicable as a result of such membership
has not expired.
(b) The amount of the Company's liabilities for unpaid Taxes
(including Subsidiaries) for all periods through the date of the Company
Financial Statements do not, in the aggregate, materially exceed the amount of
the current liability accruals for Taxes reflected on the Company Financial
Statements, and the Company Financial Statements properly accrue in accordance
with GAAP all liabilities for Taxes of the Company or any Subsidiary payable
after the date of the Company Financial Statements attributable to transactions
and events occurring prior to such date. No liability for Taxes of the Company
or any Subsidiary has been incurred (or prior to Closing will be incurred) since
such date other than in the ordinary course of business.
(c) The Acquiror has been furnished by the Company true and
complete copies of (i) relevant portions of income tax audit reports, statements
of deficiencies, closing or other agreements received by or on behalf of the
Company and each Subsidiary relating to
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Taxes, and (ii) all federal, state and foreign income or franchise tax Returns
for or including the Company or any Subsidiary for all periods since the
inception of the Company.
(d) Except as set forth in Section 3.15 of the Disclosure Schedule,
no audit of the Returns of or including the Company or any Subsidiary by a
government or taxing authority is in process, threatened or, to the Company's
knowledge, pending (either in writing or orally, formally or informally). No
deficiencies exist or have been asserted (either in writing or orally, formally
or informally) and not resolved or are expected to be asserted with respect to
Taxes of the Company or any Subsidiary, and neither the Company nor any
Subsidiary has received notice (either in writing or orally, formally or
informally) nor does it expect to receive notice that it has not filed a Return
or paid Taxes required to be filed or paid. Neither the Company nor any
Subsidiary is a party to any action or proceeding for assessment or collection
of Taxes, nor has such event been asserted or threatened (either in writing or
orally, formally or informally) against the Company or any Subsidiary or any of
their respective assets. No waiver or extension of any statute of limitations is
in effect with respect to Taxes or Returns of the Company or any Subsidiary. The
Company has disclosed on their federal and state income and franchise tax
returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662 or comparable
provisions of applicable state tax laws.
(e) The Company is not (nor has it ever been) a party to any tax
sharing agreement. Since January 1, 1998, the Company has never been a
distributing corporation or a controlled corporation in a transaction described
in Section 355(a) of the Code.
(f) The Company is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
The Company is not a "consenting corporation" under Section 341(f) of the Code.
The Company has not entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a nondeductible
expense to the Company pursuant to Section 280G of the Code or an excise tax to
the recipient of such payment pursuant to Section 4999 of the Code. The Company
has agreed to, nor is it required to make, other than by reason of the
transactions contemplated hereunder, any adjustment under Code Section 481(a) by
reason of, a change in accounting method, and the Company will not otherwise
have any income reportable for a period ending after the Closing Date
attributable to a transaction or other event (e.g., an installment sale)
occurring prior to the Closing Date with respect to which the Company received
the economic benefit prior to the Closing Date. The Company is not, nor has it
been, a "reporting corporation" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder.
(g) The Disclosure Schedule contains accurate and complete
information regarding the Company's net operating losses for federal and each
state tax purposes. The Company will not have net operating losses and credit
carryovers or other tax attributes currently subject to limitation under
Sections 382, 383, or 384 of the Code, not taking into account any such
limitation resulting from the transactions contemplated hereunder.
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3.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.16 lists, with respect to the Company and any trade
or business (whether or not incorporated) which is treated as a single employer
with CSINH (an "ERISA Affiliate") within the meaning of Section 414(b), (c), (m)
or (o) of the Code, (i) all employee benefit plans (as defined in Section 3(3)
of ERISA), (ii) each loan to a non-officer employee, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
Section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all contracts and agreements
relating to employment and all severance agreements, with any of the directors,
officers or employees of the Company (other than, in each case, any such
contract or agreement that is terminable by the Company at will or without
penalty or other adverse consequence), (iv) all bonus, pension, profit sharing,
savings, deferred compensation or incentive plans, programs or arrangements, (v)
other fringe or employee benefit plans, programs or arrangements that apply to
senior management of the Company and that do not generally apply to all
employees, and (vi) any current or former employment or executive compensation
or severance agreements, written or otherwise, as to which unsatisfied
obligations of the Company remain for the benefit of, or relating to, any
present or former employee, consultant or director of the Company (together, the
"Employee Plans").
(b) The Company has furnished to the Acquiror a copy of each of the
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each Employee
Plan which is subject to ERISA reporting requirements, provided copies of the
Form 5500 reports filed for the last three plan years. Any Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has applied to the
Internal Revenue Service for such a determination letter prior to the expiration
of the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable determination with
the exception of any amendments required by such subsequent legislation for
which the period during which a determination letter may be requested from the
Internal Revenue Service has not yet expired under such applicable Treasury
regulation or Internal Revenue Service pronouncements. The Company has also
furnished the Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Employee Plan, and nothing
has occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Employee Plan
subject to Code Section 401(a). This Section 3.16(b) is limited by the
disclosure set forth in Section 3.16(b) of the Disclosure Schedule.
(c) Except as set forth in Section 3.16(c) of the Disclosure
Schedule, (i) none of the Employee Plans promises or provides retiree medical or
other retiree welfare or life insurance benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Employee
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Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect; (iii) each Employee Plan has been administered in accordance
with its terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect, and the Company has
performed all obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
material default or violation by any other party to, any of the Employee Plans;
(iv) neither the Company nor any ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Employee Plans; (v) all material contributions required to
be made by the Company or ERISA Affiliate to any Employee Plan have been made on
or before their due dates and a reasonable amount has been accrued for
contributions to each Employee Plan for the current plan years; (vi) with
respect to each Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the thirty day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 or ERISA has occurred; (vii)
no Employee Plan is covered by, and neither the Company nor any ERISA Affiliate
has incurred or expects to incur any direct or indirect liability under, arising
out of or by operation of Title IV of ERISA in connection with the termination
of, or an employee's withdrawal from, any Employee Plan or other retirement plan
or arrangement, and no fact or event exists that could give rise to any such
liability, or under Section 412 of the Code; (viii) the Company has not incurred
any liability under, and have complied in all respects with, the Worker
Adjustment Retraining Notification Act, (the "WARN Act")and no fact or event
exists that could give rise to liability under such act; and (ix) no
compensation paid or payable to any employee of the Company has been, or will
be, non-deductible by reason of application of Section 162(m) of the Code. With
respect to each Employee Plan subject to ERISA as either an employee pension
plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA, the Company has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct as of the date filed to the best of the Company's knowledge) and has
properly and timely filed and distributed or posted all notices and reports to
employees required to be filed, distributed or posted with respect to each such
Employee Plan, except to the extent that the failure to comply would not, in the
aggregate, have a Material Adverse Effect. No suit, administrative proceeding,
action or other litigation has been brought, or to the best knowledge of the
Company is threatened, against or with respect to any such Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor.
Neither the Company or any ERISA Affiliate is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Employee Plan, the Company has complied
with (i) the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of the Company or
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any ERISA Affiliate to severance benefits or any other payment (including,
without limitation, unemployment compensation, golden parachute or bonus),
except as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting of any such benefits, or increase the amount of compensation
due any such employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any ERISA Affiliate
relating to, or change in participation or coverage under, any Employee Plan
which would materially increase the expense of maintaining such Plan above the
level of expense incurred with respect to that Plan for the most recent fiscal
year included in the Company's financial statements.
3.17 CERTAIN AGREEMENTS AFFECTED BY THE SALE. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any director or employee of the Company, (ii) materially increase any benefits
otherwise payable by the Company, or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
3.18 EMPLOYEE MATTERS. The Company and each Subsidiary is in compliance
in all material respects with all currently applicable federal, state, local and
foreign laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
labor practice. There are no pending claims against the Company or any
Subsidiary under any workers compensation plan or policy or for long term
disability. There are no controversies pending or, to the knowledge the Company,
threatened, between the Company or any Subsidiary and any of its respective
employees, which controversies have or could reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any Subsidiary
is a party to any collective bargaining agreement or other labor unions contract
nor does the Company know of any activities or proceedings of any labor union or
other group to organize any such employees.
3.19 MATERIAL CONTRACTS.
(a) Subsections (i) through (ix) of Section 3.19(a) of the
Disclosure Schedule contain a list of the following contracts and agreements to
which the Company or any Subsidiary is a party or by which it is bound
(collectively, the "Material Contracts").
(i) each contract (other than routine purchase orders and
pricing quotes in the ordinary course of business covering a period of less than
1 year) for the purchase of inventory, spare parts, other materials or personal
property with any supplier or for the furnishing of services to the Company or
such Subsidiary under the terms of which the Company or such Subsidiary: (A)
paid or otherwise gave consideration of more than $100,000 in the aggregate
during the calendar year ended December 31, 1999, (B) is required by its terms
to pay or pursuant to which the Company or such Subsidiary presently anticipates
that it will pay more than $100,000 in the aggregate during the calendar year
ended December 31, 2000, (C) is required by its terms to pay or pursuant to
which the Company or such Subsidiary presently anticipates that it will pay more
than $100,000 in the aggregate over the remaining term of such
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contract, or (D) cannot be cancelled by the Company or such Subsidiary without
penalty or further payment of less than $100,000;
(ii) each customer contract and agreement (other than routine
purchase orders, pricing quotes with open acceptance and other tender bids, in
each case, entered into in the ordinary course of business and covering a period
of less than one year) to which the Company or such Subsidiary is a party which
(A) involved consideration of more than $100,000 in the aggregate during the
calendar year ended December 31, 1999, (B) is required by its terms to pay or
pursuant to which the Company or such Subsidiary presently anticipates that it
will pay more than $100,000 in the aggregate during the calendar year ended
December 31, 2000, (C) is required by its terms to pay or pursuant to which the
Company or such Subsidiary presently anticipates that it will pay more than
$100,000 in the aggregate over the remaining term of the contract, or (D) cannot
be cancelled by the Company or such Subsidiary without penalty or further
payment of less than $100,000;
(iii) (A) all distributor, manufacturer's representative,
broker, franchise, agency and dealer contracts and agreements to which the
Company or such Subsidiary is a party (specifying on a matrix, in the case of
distributor agreements, the name of the distributor, product, territory,
termination date and exclusivity provisions) and (B) all sales promotion, market
research, marketing and advertising contracts and agreements to which the
Company or such Subsidiary is a party which: (1) involved consideration of more
than $100,000 in the aggregate during the calendar year ended December 31, 1999,
(2) are required by its terms to pay or pursuant to which the Company or such
Subsidiary presently anticipates that it will pay more than $100,000 in the
aggregate during the calendar year ended December 31, 2000, or (3) are required
by its terms to pay or pursuant to which the Company or such Subsidiary
presently anticipates that it will pay or pursuant to which the Company or such
Subsidiary presently anticipates that it will pay more than $100,000 in the
aggregate over the remaining term of the contract;
(iv) all management contracts with independent contractors or
consultants (or similar arrangements) to which the Company or such Subsidiary is
a party and which (A) involved consideration or more than $50,000 in the
aggregate during the calendar year ended December 31, 1999, (B) are likely to
involve consideration of more than $50,000 in the aggregate during the calendar
year ended December 31, 2000, or (C) are required by its terms to pay or
pursuant to which the Company or such Subsidiary presently anticipates that it
will pay or pursuant to which the Company or such Subsidiary presently
anticipates that it will pay more than $50,000 in the aggregate over the
remaining term of the contract;
(v) all contracts and agreements (excluding routine checking
account overdraft agreements involving xxxxx cash amounts) under which the
Company or such Subsidiary has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness in excess of $25,000 or under
which the Company or such Subsidiary has imposed (or may impose) a security
interest or lien on any of their respective assets, whether tangible or
intangible, to secure indebtedness in excess of $25,000;
(vi) all contracts and agreements that limit the ability of
the Company or such Subsidiary or, after the Closing Date, the Acquiror or any
of its affiliates, to compete in
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any line of business or with any person or in any geographic area or during any
period of time, or to solicit any customer or client;
(vii) all contracts and agreements between or among the
Company or such Subsidiary, on the one hand, and any affiliate of the Company or
such Subsidiary, on the other hand;
(viii) all contracts and agreements to which the Company or
such Subsidiary is a party under which it has agreed to supply products to a
customer at specified prices, whether directly or through a specific
distributor, manufacturer's representative or dealer; and
(ix) all other contracts or agreements (A) which are material
to the Company or such Subsidiary or the conduct of their respective businesses,
(B) the absence of which would have a Material Adverse Effect on the Company, or
(C) which are believed by the Company to be of unique value even though not
material to the business of the Company.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, each Company license, each Material
Contract and each other material contract or agreement of the Company or such
Subsidiary which would not have been required to be disclosed in Section 3.19(a)
of the Disclosure Schedule is a legal, valid and binding agreement, and none of
the Company licenses or Material Contracts is in default by its terms or has
been cancelled by the other party and the Company or such Subsidiary is not in
receipt of any claim of default under any such agreement; and the Company does
not anticipate any termination or change to, or receipt of a proposal with
respect to, any such agreement as a result of the transactions to be consummated
hereunder or otherwise. The Company has furnished the Acquiror with true and
complete copies of all such agreements together with all amendments, waivers or
other changes thereto.
3.20 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Financial
Statements, neither the Company nor any Subsidiary is indebted to any director,
officer, employee or agent of the Company or such Subsidiary (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses),
and no such person is indebted to the Company or such Subsidiary.
3.21 INSURANCE. Section 3.21 of the Disclosure Schedule lists the
policies of insurance and bonds carried by the Company and its Subsidiaries.
There is no material claim pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and the Company or a Subsidiary is otherwise in compliance
with the terms of such policies and bonds. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
3.22 COMPLIANCE WITH LAWS. The Company and each Subsidiary has complied
with and has not received any notices of violation with respect to, any federal,
state, local or foreign statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for such
violations or failures to comply as could not reasonably
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be expected to have a Material Adverse Effect on the Company or its Subsidiaries
considered as a whole.
3.23 MINUTE BOOKS. The minute books of the Company and each Subsidiary
have been made available to the Acquiror and contain a summary of all meetings
of directors and stockholders or actions by written consent since the time of
incorporation of the Company and each Subsidiary through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
3.24 BROKERS' AND FINDERS' FEES. The Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.25 ACCOUNTS RECEIVABLE.
(a) The Company has made available to the Acquiror a list of all
accounts receivable of the Company and each Subsidiary reflected on the Company
Financial Statements ("Accounts Receivable") along with a range of days elapsed
since invoice.
(b) All Accounts Receivable arose in the ordinary course of
business and are carried at values determined in accordance with GAAP
consistently applied. Except as disclosed in the Company Financial Statements,
no person has any lien on any of such Accounts Receivable and no request or
agreement for deduction or discount has been made with respect to any of such
Accounts Receivable.
(c) All of the inventories of the Company and each Subsidiary
reflected in the Company Financial Statements and the Company's books and
records on the date hereof were purchased, acquired or produced in the ordinary
and regular course of business and in a manner consistent with the Company's
regular inventory practices and are set forth on the Company's books and records
in accordance with the practices and principles of the Company consistent with
the method of treating said items in prior periods. None of the inventory of the
Company or any Subsidiary reflected on the Company Financial Statements or on
the Company's books and records as of the date hereof (in either case net of the
reserve therefor) is obsolete, defective or in excess of the needs of the
business of the Company reasonably anticipated for the normal operation of the
business consistent with past practices and outstanding customer contracts. The
presentation of inventory on the Company Financial Statements conforms to GAAP
and such inventory is stated at the lower of cost or net realizable value.
3.26 CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer which
individually accounted for more than 5% of the Company's gross revenues during
the 12-month period preceding the date hereof, and no supplier of the Company,
has cancelled or otherwise terminated, or made any written threat to the Company
to cancel or otherwise terminate its relationship with the Company, or has at
any time on or after the Company Balance Sheet Date decreased materially its
services or supplies to the Company in the case of any such supplier, or its
usage of the services or products of the Company in the case of such customer,
and to the Company's knowledge, no such supplier or customer intends to cancel
or otherwise terminate its
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relationship with the Company or to decrease materially its services or supplies
to the Company or its usage of the services or products of the Company, as the
case may be. From and after the date hereof, no customer which individually
accounted for more than 5% of the Company's gross revenues during the 12 month
period preceding the Closing Date, has cancelled or otherwise terminated, or
made any written threat to the Company to cancel or otherwise terminate, for any
reason, including without limitation the consummation of the transactions
contemplated hereby, its relationship with the Company, and to the Company's
knowledge, no such customer intends to cancel or otherwise terminate its
relationship with the Company or to decrease materially its usage of the
services or products of the Company. The Company has not knowingly breached, so
as to provide a benefit to the Company that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of the Company.
3.27 THIRD PARTY CONSENTS. Except as set forth in Section 3.27 of the
Disclosure Schedule or specified in Section 2.5(b), no consent or approval is
needed from any third party in order to effect the consummation of the
transactions contemplated hereby.
3.28 NO COMMITMENTS REGARDING FUTURE PRODUCTS. Neither the Company nor
any Subsidiary has made any sales to customers that are contingent upon
providing future enhancements of existing products, to add features not
presently available on existing products or to otherwise enhance the performance
of its existing products (other than beta or similar arrangements pursuant to
which the Company's or such Subsidiary's customers from time to time test or
evaluate products). The products the Company or any Subsidiary has delivered to
customers substantially comply with published specifications for such products
and neither the Company nor any Subsidiary has received material complaints from
customers about its products that remain unresolved.
3.29 TERMINATION OF SHAREHOLDERS AGREEMENT. Immediately prior to the
execution and delivery of this Agreement, the Shareholders Agreement dated as of
October 1, 1999 among the Company and the shareholders of the Company was
terminated by written agreement of shareholders of the Company holding in excess
of 95% of the Company Common Stock (including for purposes hereof shares
entitled to be purchased by optionholders).
3.30 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by CSINH, the Company or the Stockholders herein or in any Schedule hereto,
including the Disclosure Schedule, or certificate furnished by CSINH, the
Company or the Stockholders pursuant to this Agreement, when all such documents
are read together in their entirety, contains or will contain at the Closing any
untrue statement of a material fact, or omits or will omit at the Closing to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR.
Except as disclosed in a document dated as of the date of this Agreement
and delivered collectively to CSI, CSINH, the Company and the Stockholders prior
to the execution and delivery of this Agreement and referring to the
representations and warranties in this
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Section 4 (the "Acquiror Disclosure Schedule"), the Acquiror hereby represents
and warrants to CSI, CSINH, Company and the Stockholders as follows:
4.1 ORGANIZATION, STANDING AND POWER. The Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Acquiror has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on the Acquiror. The Acquiror has delivered
a true and correct copy of its Charter Documents, each as amended to date, to
CSI, CSINH and the Stockholders. The Acquiror is not in violation of any
material provisions of Charter Documents.
4.2 CAPITAL STRUCTURE. The authorized capital stock of Acquiror consists
of (i) 150,000,000 shares of Common Stock, $0.0001 par value, of which (A)
118,750,000 have been designated Class A Common Stock, 10,818,819 shares of
which were issued and outstanding as of the close of business on the date of
this Agreement (the "Capitalization Date"), (B) 31,250,000 have been designated
Class B Common Stock, none of which were issued and outstanding as of the close
of business on the Capitalization Date, and (C) 1,150,000 have been designated
Class C Common Stock, 1,132,502 of which were issued and outstanding as of the
close of business on the Capitalization Date, and (ii) 46,940,082 shares of
Preferred Stock, $0.0001 par value, of which (A) 2,500,000 shares have been
designated Series A Preferred Stock, 2,455,798 of which were issued and
outstanding as of the close of business on the Capitalization Date, (B)
10,250,000 shares have been designated Series A-1 Preferred Stock, 9,534,148 of
which were issued and outstanding as of the close of business on the
Capitalization Date, (C) 31,250,000 have been designated Series B Preferred
Stock, 31,186,312 of which were issued and outstanding as of the close of
business on the Capitalization Date, (D) 2,015,082 have been designated Series C
Preferred Stock, 1,765,082 of which were issued and outstanding as of the close
of business on the Capitalization Date, (E) 150,000 have been designated Series
C-1 Preferred Stock, all of which were issued and outstanding as of the close of
business on the Capitalization Date, (F) 550,000 have been designated Series D
Preferred Stock, 58,125 of which were issued and outstanding as of the close of
business on the Capitalization Date and (G) 225,000 have been designated Series
D-1 Preferred Stock, 225,000 of which were issued and outstanding as of close of
business on the Capitalization Date. As of the close of business on the
Capitalization Date, the Acquiror has reserved 382,215 shares of Class A Common
Stock and 516,976 shares of Series A-1 Preferred Stock (collectively, "Option
Stock") for issuance to officers, directors, employees and consultants of the
Acquiror pursuant to its 1999 Revised Stock Plan duly adopted by the Board of
Directors and approved by the Acquiror's stockholders (the "1999 Revised Stock
Plan"), and the Acquiror has reserved 10,000,000 shares of Common Stock for
issuance to officers, directors, employees and consultants of the Acquiror
pursuant to its 2000 Incentive Stock Plan duly adopted by the Board of Directors
and approved by the Acquiror's stockholders (the "2000 Incentive Stock Plan"
and, together with the 1999 Revised Stock Plan, the "Stock Plans"). Of such
reserved shares of Option Stock under the 1999 Revised Stock Plan, no shares
have been issued pursuant to restricted stock purchase agreements, options to
purchase 382,215 shares of Class A Common Stock and 516,976 shares of Series A-1
Preferred Stock have been granted and are currently outstanding, and no shares
of Class A Common Stock remain available for issuance to officers, directors,
employees and consultants
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pursuant to the 1999 Revised Stock Plan. Of such reserved shares of Class A
Common Stock under the 2000 Incentive Stock Plan, no shares have been issued
pursuant to restricted stock purchase agreements, options to purchase 1,096,169
shares of Class A Common Stock have been granted and are currently outstanding,
and 8,903,831 shares of Class A Common Stock remain available for issuance to
officers, directors, employees and consultants pursuant to the 2000 Incentive
Stock Plan. The Company has issued warrants to purchase an aggregate of
2,516,421 shares of Class A Common Stock as of the close of business on the
Capitalization Date. Other than as contemplated under this Agreement or as set
forth in the Acquiror Disclosure Schedule, there are no other options, warrants,
calls, rights, commitments or agreements of any character to which Acquiror is a
party or by which either of them is bound obligating Acquiror to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of Acquiror or obligating Acquiror
to grant, extend or enter into any such option, warrant, call, right, commitment
or agreement. The shares of Acquiror Common Stock to be issued pursuant to this
Agreement will be duly authorized, validly issued, fully paid, and
non-assessable.
4.3 AUTHORITY. The Acquiror has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Acquiror. This Agreement
has been duly executed and delivered by the Acquiror and constitutes the valid
and binding obligations of the Acquiror, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equitable remedies.
4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Acquiror
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under (i)
any provision of the Charter Documents of the Acquiror, as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Acquiror or its properties or
assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to the Acquiror in connection with the execution and delivery
of this Agreement by the Acquiror or the consummation by the Acquiror of the
transactions contemplated hereby, except for (i) any filings as may be required
under applicable state securities laws and the securities laws of any foreign
country and (ii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on the Acquiror and would not prevent, materially alter or delay any the
transactions contemplated by this Agreement.
4.5 FINANCIAL STATEMENTS. Section 4.5 of the Disclosure Schedule
includes a true, correct and complete copy of the Acquiror's audited financial
statements for the fiscal years ended December 31, 1998 and 1999, (collectively,
the "Acquiror Financial Statements"). The
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Acquiror Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods indicated and with each other. The
Acquiror Financial Statements accurately set out and describe the financial
condition and operating results of the Acquiror as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section
4.7 of the Disclosure Schedule, the Acquiror has no material obligations or
liabilities of any nature (matured or unmatured, fixed or contingent) other than
(i) those set forth or adequately provided for in the Balance Sheet for the
period ended December 31, 1999 (the "Acquiror Balance Sheet"), (ii) those
incurred in the ordinary course of business and not required to be set forth in
the Acquiror Balance Sheet under GAAP, (iii) those incurred in the ordinary
course of business since the Acquiror Balance Sheet Date and consistent with
past practice, and (iv) those incurred in connection with the execution of this
Agreement.
4.7 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 4.7 of
the Disclosure Schedule, since the date of the Acquiror Balance Sheet (the
"Acquiror Balance Sheet Date"), the Acquiror has conducted its business in the
ordinary course in a manner consistent with past practice and there has not
occurred: (i) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to result in, a
Material Adverse Effect to the Acquiror; (ii) any declaration, setting aside, or
payment of a dividend or other distribution with respect to the shares of the
Acquiror, or any direct or indirect redemption, purchase or other acquisition by
the Acquiror of any of its shares of capital stock; (iii) any material amendment
or change to the Acquiror's Charter Documents; or (iv) any negotiation or
agreement by the Acquiror to do any of the things described in the preceding
clauses (i) through (iii) (other than negotiations with the other parties hereto
and their representatives regarding the transactions contemplated by this
Agreement).
4.8 INSURANCE. Section 4.8 of the Disclosure Schedule lists the policies
of insurance and bonds carried by the Acquiror. There is no material claim
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and the Acquiror is otherwise in compliance with the terms of such policies and
bonds. The Acquiror has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
4.9 LITIGATION. Except as set forth in Section 4.9 of the Disclosure
Schedule, there is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of the Acquiror, threatened against
the Acquiror or any of its respective properties or any of their respective
officers or directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Acquiror. There is no judgment, decree or order against the Acquiror or, to the
knowledge of the Acquiror, any of its directors or officers (in their capacities
as such) that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on the Acquiror.
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4.10 GOVERNMENTAL AUTHORIZATION. Except as set forth in Section 4.10 of
the Disclosure Schedule, the Acquiror has obtained each federal, state, county,
local or foreign governmental consent, license, permit, grant, or other
authorization of a Governmental Entity that is required for the operation of the
Acquiror's business (the "Acquiror Authorizations"), and all of such the
Acquiror Authorizations are in full force and effect, except where the failure
to obtain or have any of such the Acquiror Authorizations could not reasonably
be expected to have a Material Adverse Effect on the Acquiror.
4.11 COMPLIANCE WITH LAWS. The Acquiror has complied with, are not in
violation of, and have not received any notices of violation with respect to,
any federal, state, local or foreign statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its business,
except for such violations or failures to comply as could not reasonably be
expected to have a Material Adverse Effect on the Acquiror.
4.12 MINUTE BOOKS. The minute books of the Acquiror have been made
available to the CSI and the Stockholders and contain a complete summary of all
meetings of directors and stockholders or actions by written consent since the
time of incorporation of the Acquiror through the date of this Agreement, and
reflect all transactions referred to in such minutes accurately in all material
respects.
4.13 BROKER'S AND FINDERS' FEES. The Acquiror has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
4.14 SECURITIES LAWS. Subject in part to the representations and
warranties of the other parties hereto, all outstanding shares of capital stock
of the Acquiror were issued, and the shares of the Acquiror Common Stock to be
issued pursuant to this Agreement will be issued, in compliance with all
applicable federal and state securities laws.
4.15 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by the Acquiror herein or in any Schedule hereto, or certificate furnished
by the Acquiror pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain at the Closing any untrue
statement of a material fact, or omits or will omit at the Closing to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
SECTION 5. CONDUCT PRIOR TO THE CLOSING DATE.
5.1 CONDUCT OF BUSINESS. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing Date, each of CSINH, the Company and the Acquiror agrees (except
to the extent expressly contemplated by this Agreement or as consented to in
writing by the other), to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
debts and Taxes when due subject, in the case of Taxes of CSINH or the Company,
to the Acquiror's consent to the filing of material Tax Returns if applicable,
to pay or perform other obligations when due, and to use all reasonable efforts
consistent with past practice and policies
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to preserve intact its present business organization, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Closing. Each such party hereto
agrees to promptly notify the other parties hereto of any event or occurrence
not in the ordinary course of its business, and of any event which could have a
Material Adverse Effect. Without limiting the foregoing, except as expressly
contemplated by this Agreement, CSI, CSINH, the Company and the Stockholders
shall not do, cause or permit any of the following with respect to each of CSINH
and the Company, without the prior written consent of the Acquiror:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
Charter Documents;
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its Subsidiaries;
(c) STOCK OPTIONS, ETC. Accelerate, amend or change the period of
exercisability or vesting of any options or authorize cash payments in exchange
for any options; or
(d) OTHER. Take, or agree in writing or otherwise to take, any of
the actions described in Sections 5.1(a) through (c) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
5.2 CONDUCT OF BUSINESS OF COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, except as expressly contemplated by this
Agreement, CSI, CSINH, the Company and the Stockholders shall not do, cause or
permit any of the following, or allow, cause or permit CSINH or the Company to
do, cause or permit any of the following, without the prior written consent of
the Acquiror:
(a) MATERIAL CONTRACTS. Enter into any Material Contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of the Material Contracts, other than in the ordinary course of business
consistent with past practice;
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of the Company's capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
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(c) INTELLECTUAL PROPERTY. Transfer to any person or entity any
rights to the Intellectual Property;
(d) EXCLUSIVE RIGHTS. Enter into or amend any agreements pursuant
to which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of the Company's products or
technology;
(e) DISPOSITIONS. Sell, lease, license or otherwise dispose of or
encumber any properties or assets of the Company, except in the ordinary course
of business consistent with past practice;
(f) INDEBTEDNESS. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(g) LEASES. Enter into any operating lease;
(h) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount
in excess of $10,000 in any one case or $25,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financial Statements;
(i) CAPITAL EXPENDITURES. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice;
(j) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) TERMINATION OR WAIVER. Terminate or waive any right and
heretofore have been disclosed to the Acquiror, other than in the ordinary
course of business;
(l) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt or
amend any employee benefit or stock purchase or option plan, or hire any new
director level or officer level employee, pay any special bonus or special
remuneration to any employee or director, or increase the salaries or wage rates
of any employees;
(m) SEVERANCE ARRANGEMENT. Grant any severance or termination pay
(i) to any director or officer of the Company or (ii) to any employee of the
Company except payments made pursuant to standard written agreements outstanding
on the date of this Agreement and which heretofore have been disclosed to the
Acquiror;
(n) LAWSUITS. Commence any lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of any aspect
of business of the Company, provided that it consults with the Acquiror prior to
the filing of such a suit, or (iii) for a breach of this Agreement;
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(o) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of the Company;
(p) TAXES. Other than in the ordinary course of business, make or
change any election in respect of Taxes, adopt or change any accounting method
in respect of Taxes, file any Tax Return or any amendment to a material Tax
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(q) NOTICES. The Company shall give all notices and other
information required to be given to the employees of the Company, any collective
bargaining unit representing any group of employees of the Company, and any
applicable government authority under the National Labor Relations Act, the
Internal Revenue Code, COBRA, and other applicable law in connection with the
transactions provided for in this Agreement;
(r) REVALUATION. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(s) OTHER. Take or agree in writing or otherwise to take, any of
the actions described in Sections 5.2(a) through (r) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
5.3 CONDUCT OF BUSINESS OF CSINH. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, except as expressly contemplated by this
Agreement, CSI and CSINH shall not do, cause or permit any of the following, or
allow, cause or permit CSINH to do, cause or permit any of the following,
without the prior written consent of the Acquiror:
(a) CONTRACTS; ACTIVITIES. Enter into any contract or commitment,
incur any obligation or liability, or engage in any business activity other than
the ownership of common stock of the Company;
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of CSINH's capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, except capital stock issued as a result of the
conversion of CSINH's existing debt into equity;
(c) DISPOSITIONS. Sell or otherwise dispose of or encumber the
securities of the Company held by CSINH;
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(d) TAXES. Other than in the ordinary course of business, make or
change any election in respect of Taxes, adopt or change any accounting method
in respect of Taxes, file any Tax Return or any amendment to a material Tax
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(e) OTHER. Take or agree in writing or otherwise to take, any of
the actions described in Sections 5.3(a) through (d) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
5.4 CONDUCT OF BUSINESS OF ACQUIROR AND ITS SUBSIDIARIES. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing Date, except as expressly
contemplated by this Agreement, the Acquiror (which term for the purposes of
this Section 5.4 means the Acquiror and its subsidiaries) shall not do, cause or
permit any of the following, or allow, cause or permit the Acquiror to do, cause
or permit any of the following, without the prior written consent of CSI and the
Stockholders:
(a) INTELLECTUAL PROPERTY. Transfer to any person or entity any
rights to the Intellectual Property except for a transfer to a wholly-owned
subsidiary of Acquiror; or
(b) OTHER. Take or agree in writing or otherwise to take, any of
the actions described in Section 5.2(a) above, or any action which would make
any of its representations or warranties contained in this Agreement untrue or
incorrect or prevent it from performing or cause it not to perform its covenants
hereunder.
5.5 NO SOLICITATION. None of CSI, CSINH, the Company, the Stockholders
or the officers, directors, employees or other agents of CSINH or the Company
will, directly or indirectly, (i) take any action to solicit, initiate,
encourage or approve any Takeover Proposal (as defined below) or (ii) engage in
negotiations with, or disclose any nonpublic information relating to CSINH or
the Company, or afford access to the properties, books or records of CSINH or
the Company to any person that has advised CSINH or the Company that it may be
considering making, or that has made, a Takeover Proposal. For purposes of this
Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
CSINH or the Company or the acquisition of any significant equity interest in,
or a significant portion of the assets of, CSINH or the Company, other than the
transactions contemplated by this Agreement.
SECTION 6. ADDITIONAL AGREEMENTS.
6.1 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
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6.2 CONSENTS; COOPERATION.
(a) Each party hereto shall use its reasonable best efforts to
promptly (i) obtain from any Governmental Entity any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made in connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereunder and
(ii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement required under the Securities Act
and the Exchange Act and any other applicable federal, state or foreign
securities laws.
(b) From the date of this Agreement until the earlier of the
Closing Date or the termination of this Agreement, each party shall promptly
notify the other party in writing of any pending or, to the knowledge of such
party, threatened action, proceeding or investigation by any Governmental Entity
or any other person (i) challenging or seeking material damages in connection
with this Agreement or the transactions contemplated hereunder or (ii) seeking
to restrain or prohibit the consummation of the transactions contemplated
hereunder or otherwise limit the right of the Acquiror or its subsidiaries to
own or operate all or any portion of the businesses or assets of CSINH or the
Company.
(c) Each party hereto shall give or cause to be given any required
notices to third parties, and use its reasonable best efforts to obtain all
consents, waivers and approvals from third parties (i) necessary, proper or
advisable to consummate the transactions contemplated hereunder, (ii) disclosed
or required to be disclosed in the Disclosure Schedule or the Acquiror
Disclosure Schedule, or (iii) required to prevent a Material Adverse Effect on
CSINH, the Company or the Acquiror from occurring prior or after the Closing
Date. In the event that the Acquiror, the Company or CSINH shall fail to obtain
any third party consent, waiver or approval described in this Section 6.2(c), it
shall use its reasonable best efforts, and shall take any such actions
reasonably requested by the other party, to minimize any adverse effect upon the
Acquiror, the Company, CSINH or any of their respective subsidiaries and their
respective businesses resulting (or which could reasonably be expected to result
after the Closing Date) from the failure to obtain such consent, waiver or
approval.
(d) Each party hereto, and will take or cause to be taken, all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
6.3 ACCESS TO INFORMATION.
(a) CSINH and the Company shall afford the Acquiror and its
accountants, counsel and other representatives reasonable access during normal
business hours during the
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period prior to the Closing Date to (i) all of CSINH's and the Company's
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of CSINH or the
Company as the Acquiror may reasonably request. Each of CSINH and the Company
agrees to provide to the Acquiror and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
The Acquiror shall afford each of CSI, the Founders, CSINH and the Company and
its accountants, counsel and other representatives reasonable access during
normal business hours during the period prior to the Closing Date to (i) all of
the Acquiror's and its subsidiaries' properties, books, contracts, commitments
and records, and (ii) all other information concerning the business, properties
and personnel of the Acquiror and its subsidiaries as CSI, the Founders, CSINH
or the Company may reasonably request. The Acquiror agrees to provide to each of
CSI, the Founders, CSINH and the Company and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof
until the Closing Date, the Acquiror, CSINH and the Company shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 6.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the transactions contemplated hereunder.
6.4 CONFIDENTIALITY. Any information concerning any party hereto
disclosed to any other party hereto or any party's affiliates or representatives
in connection with this Agreement or the transactions contemplated hereby, which
has not been publicly disclosed shall be kept strictly confidential by such
party, its affiliates and/or representatives. Each party hereto shall keep, and
shall cause its affiliates and/or representatives to keep, such confidential
information in strict confidence.
6.5 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement, the
Acquiror, on one hand and, XXX, XXXXX and the Company, on the other hand, shall
consult with each other before issuing any press release or otherwise making any
public statement or making any other public (or non-confidential) disclosure
(whether or not in response to an inquiry) regarding the terms of this Agreement
and the transactions contemplated hereby, and neither shall issue any such press
release or make any such statement or disclosure without the prior approval of
the other (which approval shall not be unreasonably withheld), except as may be
required by law.
6.6 FIRPTA. Each of CSINH and the Company shall, prior to the Closing
Date, provide the Acquiror with a properly executed Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA") Notification Letter, which shall state that
neither the shares of capital stock of CSINH nor the shares of capital stock of
the Company constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying the Acquiror's obligations under
Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously with
delivery of such Notification Letter, each of CSINH and the Company shall have
provided to the Acquiror, as agent for each of CSINH and the Company, a form of
notice to the Internal Revenue Service
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in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2)
along with written authorization for the Acquiror to deliver such notice form to
the Internal Revenue Service on behalf of CSINH and the Company upon the
Closing. Collectively, documents to be delivered to the Acquiror pursuant to
this Section 6.6 are hereinafter sometimes referred to as the "FIRPTA
Documents."
6.7 BLUE SKY LAWS. The Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
within the United States which are applicable to the issuance of the Acquiror
Common Stock in connection with this Agreement. CSI shall take such steps as may
be necessary to comply with the securities laws of all jurisdictions within
Canada which are applicable to the sale of the Company Common Stock in
connection with this Agreement. Each party hereto shall use its, his or her best
efforts to assist the Acquiror and CSI as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of the Acquiror Common Stock and the sale of
Company Common Stock in connection with this Agreement.
6.8 SECURITIES HOLDER'S REPRESENTATION AGREEMENTS. Each Stockholder will
execute and deliver to the Acquiror a Securities Holder's Representation
Agreement substantially in the form attached hereto as Exhibit D (the
"Securities Holder's Representation Agreement").
6.9 ADDITIONAL STOCKHOLDERS. Promptly after the execution and delivery
of this Agreement, the Acquiror shall offer to purchase, in compliance with
applicable securities laws, all of the shares of Company Common Stock held of
record by the shareholders of the Company (including for purposes hereof the
holders of options to acquire shares of Company Common Stock) who are not
parties to this Agreement as of the date hereof for the same purchase price per
share, in subordinated promissory notes substantially similar to Note A and Note
B, at which Other Stockholders parties hereto as of the date hereof have agreed
to sell their shares of Company Common Stock, such purchase price being, for
each share of Company Common Stock, a promissory note substantially similar to
Note A in the principal amount of $2,156.4137 and a promissory note
substantially similar to Note B in the principal amount of $2,077.9987, after
taking into account such modifications as may be necessary or desirable in
Acquiror's discretion in order to comply with applicable securities laws. This
Agreement may be amended from time to time prior to Closing to add other
shareholders as Other Shareholders hereunder by the execution and delivery of an
amendment in the form of Exhibit H hereto. Notwithstanding Section 10.9, any
such amendment shall require only the signatures of the Acquiror and the
shareholders party thereto.
6.10 TERMINATION OF 401(k) PLAN. The Company agrees to terminate its
401(k) plan immediately prior to Closing, unless Acquiror, in its sole and
absolute discretion, agrees to sponsor and maintain such plan by providing the
Company with notice of such election prior to the Closing.
SECTION 7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO CLOSING. The respective
obligations of each party to this Agreement to consummate the transactions
contemplated hereby shall be
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subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the transactions contemplated hereby,
nor shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable which makes the consummation of the transaction contemplated hereby
illegal. In the event an injunction or other order shall have been issued, each
party agrees to use its reasonable diligent efforts to have such injunction or
other order lifted.
(b) GOVERNMENTAL APPROVAL. The parties hereto shall have timely
obtained from each Governmental Entity all approvals, waivers and consents, if
any, necessary for consummation of the several transactions contemplated hereby,
including, without limitation, such approvals, waivers and consents as may be
required under the Securities Act and under any state securities laws.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CSI, CSINH COMPANY AND
STOCKHOLDERS. The obligations of CSI, CSINH the Company and the Stockholders to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, by each party:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
representations and warranties of the Acquiror in this Agreement that is
expressly qualified by a reference to materiality shall be true in all respects
as so qualified, and each of the representations and warranties of the Acquiror
in this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Closing Date as though such representation
or warranty had been made on and as of such time (except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), and (ii) the Acquiror shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Closing Date.
(b) CERTIFICATES OF THE ACQUIROR.
(i) COMPLIANCE CERTIFICATE XX XXX XXXXXXXX. XXX, XXXXX, the
Company and the Stockholders shall have been collectively provided with a
certificate executed on behalf of the Acquiror by its President or its Chief
Financial Officer to the effect that, as of the Closing Date, each of the
conditions set forth in Sections 7.1(a) has been satisfied with respect to the
Acquiror.
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(ii) CERTIFICATE OF SECRETARY OF THE ACQUIROR. CSI, CSINH, the
Company and the Stockholders shall have been collectively provided with a
certificate executed by the Secretary or Assistant Secretary of the Acquiror
certifying:
A. resolutions duly adopted by the Board of Directors of
the Acquiror authorizing the execution of this Agreement and the execution,
performance and delivery of all agreements, documents and transactions
contemplated hereby;
B. its Charter Documents, as in effect immediately prior
to the Closing Date, including all amendments thereto; and
C. the incumbency of the officers of the Acquiror
executing this Agreement and all agreements and documents contemplated hereby.
(c) LEGAL OPINION. CSI, CSINH, the Company and the Stockholders
shall have received a legal opinion from the Acquiror's legal counsel in form
and substance reasonably satisfactory to CSI, CSINH, the Company and the
Stockholders.
(d) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations, results
of operations or prospects of the Acquiror and its subsidiaries, taken as a
whole.
(e) GOOD STANDING. CSI, CSINH, the Company and the Stockholders
shall have collectively received a certificate or certificates of the Secretary
of State of the State of Delaware and any applicable franchise tax authority of
such state, certifying as of a date no more than 5 business days prior to the
Closing Date that each of the Acquiror has filed all required reports, paid all
required fees and taxes and is, as of such date, in good standing and authorized
to transact business as a domestic corporation.
(f) SECURITY AGREEMENTS. CSI and the Stockholders shall have
received the duly authorized and executed security agreements in support of the
Notes contemplated in Exhibit B.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE ACQUIROR. The
obligations of the Acquiror to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, by the Acquiror:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
representations and warranties of each of CSI, CSINH, the Company and the
Stockholders in this Agreement that is expressly qualified by a reference to
materiality shall be true in all respects as so qualified, and each of the
representations and warranties of CSI, CSINH, the Company and the Stockholders
in this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Closing Date as though such representation
or warranty had been made on and as of such time (except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), and (ii) each of CSI,
CSINH, the Company and the Stockholders shall have performed and complied in all
material
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respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it, him or her as of the Closing
Date.
(b) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations, results
of operations or prospects of CSINH or the Company.
(c) CERTIFICATES OF CSI, CSINH, COMPANY AND STOCKHOLDERS
(i) COMPLIANCE CERTIFICATE. The Acquiror shall have been
provided with a certificate from each of CSI, CSINH and the Company, executed by
its President or its Chief Financial Officer and a certificate executed by each
Stockholder, each to the effect that, as of the Closing Date, each of the
conditions set forth in Section 7.3(a) and (b) above has been satisfied.
(ii) CERTIFICATE OF SECRETARY OF CSI, CSINH AND THE COMPANY.
The Acquiror shall have been provided with a certificate from each of CSI, CSINH
and the Company, executed by its Secretary certifying:
A. resolutions duly adopted by its Board of Directors and
stockholders authorizing the execution of this Agreement and the execution,
performance and delivery of all agreements, documents and transactions
contemplated hereby;
B. its Charter Documents, as in effect immediately prior
to the Closing Date, including all amendments thereto; and
C. the incumbency of the officers executing this
Agreement and all agreements and documents contemplated hereby.
(d) THIRD PARTY CONSENTS. The Acquiror shall have been furnished
with evidence satisfactory to it that CSI, CSINH or the Company, as the case may
be, has obtained those consents, waivers, approvals or authorizations of those
Governmental Entities and third parties whose consent or approval are required
in connection with the transactions contemplated by this Agreement.
(e) LEGAL OPINION. The Acquiror shall have received a legal opinion
from each of CSI's, CSINH's, the Company's and the Stockholders' legal counsel,
each in form and substance reasonably satisfactory to the Acquiror.
(f) FIRPTA CERTIFICATE. Each of CSINH and the Company shall, prior
to the Closing Date, provide the Acquiror with properly executed FIRPTA
Documents.
(g) STOCKHOLDER'S REPRESENTATION AGREEMENTS. The Acquiror shall
have received from the each Stockholder, duly executed and delivered the
Stockholder's Representation Agreements.
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(h) NON-COMPETITION AGREEMENTS. Each of the Founders shall have
executed a Non-Competition Agreement substantially in the form attached hereto
as Exhibit F.
(i) GOOD STANDING. The Acquiror shall have received a certificate
or certificates of the Secretary of State of the State of incorporation or other
authorized official in the jurisdiction of incorporation of each of CSI, CSINH
and the Company and any applicable franchise tax authority of such state,
certifying as of a date no more than 5 business days prior to the Closing Date
that each of CSINH and the Company has filed all required reports, paid all
required fees and taxes and is, as of such date, in good standing and authorized
to transact business as a domestic corporation.
(j) STOCK CERTIFICATES. Each of CSI, CSINH and the Stockholders
shall deliver to the Acquiror for cancellation the stock certificates, in form
suitable for transfer, evidencing all the CSINH Shares, the Founders Shares and
the Other Shares, as the case may be, each endorsed in blank or with an executed
blank stock transfer power attached thereto.
(k) SUBSIDIARY CHARTER DOCUMENTS AND CERTIFICATES. The Company
shall have delivered to the Acquirer, Charter Documents, as in effect
immediately prior to the Closing Date, including all amendments thereto for each
of the Company's Subsidiaries and certificates of the Secretary of State of
incorporation or other authorized official in the jurisdiction of incorporation
certifying as of a date no more than 5 business days prior to the Closing Date,
that each of the Company's Subsidiaries has filed all required reports, paid all
required fees and taxes and is, as of such date, in good standing and authorized
to transact business in such jurisdiction.
SECTION 8. TERMINATION, AMENDMENT AND WAIVER.
8.1 TERMINATION. At any time prior to the Closing Date, this Agreement
may be terminated:
(a) by mutual consent of the parties hereto;
(b) by either the Acquiror, on the one hand or CSI, CSINH, the
Company and the Stockholders, on the other hand, if, without fault of the
terminating party;
(i) the Closing Date shall not have occurred on or before
April 10, 2000 (or such later date as may be agreed upon in writing by the
parties); or
(ii) there shall be any applicable federal, provincial or
state law that makes consummation of the transaction contemplated hereunder
illegal or otherwise prohibited or if any court of competent jurisdiction or
Governmental Entity shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation of
the transactions hereunder and such order, decree, ruling or other action shall
have become final and nonappealable.
(c) by the Acquiror, if any of CSI, CSINH, the Company or the
Stockholders shall materially breach any of its or their representations,
warranties or obligations hereunder, provided that the Acquiror is not in
material breach of any of its representations, warranties or obligations
hereunder;
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(d) by CSI, CSINH, the Company and the Stockholders, if the
Acquiror shall materially breach any of its representations, warranties or
obligations, provided that none of CSI, CSINH, the Company or the Stockholders
is in material breach of any of its representations, warranties or obligations
hereunder.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto or their
respective officers, directors, stockholders or affiliates, except to the extent
that such termination results from the breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement; provided
that, the provisions of Section 6.4 (Confidentiality), Section 8.3 (Expenses)
and this Section 8.2 shall remain in full force and effect and survive any
termination of this Agreement.
8.3 EXPENSES. Whether or not the transactions contemplated hereunder are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated including, without limitation, filing fees and
the fees and expenses of advisors, accountants, legal counsel and financial
printers, shall be paid by the party having incurred such cost and expense.
8.4 AMENDMENT. The parties hereto may cause this Agreement to be amended
at any time by execution of an instrument in writing signed on behalf of each of
the parties.
8.5 EXTENSION; WAIVER. At any time prior to the Closing Date any party
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
SECTION 9. ESCROW AND INDEMNIFICATION.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants to be
performed prior to the Closing Date, and all representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing Date and continue until the twelve (12) month anniversary
thereof (the "Escrow Termination Date"), except for the representations and
warranties contained in Section 2 as to CSINH and Sections 3.3, 3.4, 3.13, 3.14,
3.15 and 3.16 hereof, each of which shall survive the Closing Date until the
earlier of December 31, 2006 and the expiration of the applicable statue of
limitations (the "Special Indemnity Termination Date"); provided that if any
claims for indemnification have been asserted with respect to any such
representations and warranties prior the expiration date for such
representations and warranties specified in this Section 9.1, the
representations and warranties on which any such claims are based shall continue
in effect until final resolution of any claims; provided further, that Fraud
Claims (as defined below) shall survive in accordance with the applicable
statute of limitations related to such representations and warranties or such
Fraud Claims. All covenants to be performed after the Effective Time shall
continue indefinitely. "Fraud Claim" shall mean any claim, demand, suit or cause
of action otherwise available to the
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Indemnified Persons based upon an allegation or allegations that the CSI, CSINH,
the Company and/or and Stockholder had an intent to defraud or made a willful or
intentional misrepresentation or willful omission of a material fact in
connection with this Agreement, including the Exhibits and Schedules attached
hereto, or any of the agreements referred to herein.
9.2 ESCROW FUND. At the Closing Date, ten percent (10%) of the Share
Consideration and ten percent (10%) of the Other Note Consideration shall, be
registered in the name of, and be deposited with an escrow agent mutually agreed
by the Acquiror and the Founders (the "Escrow Agent"), such deposit to
constitute the escrow fund (the "Escrow Fund"), to be governed by the terms set
forth in an escrow agreement mutually agreeable to the Acquiror and the Founders
upon terms and conditions consistent with the terms and conditions contained in
this Agreement. In the event that any Damages (as defined below) arise, the
Escrow Fund shall be available to compensate the Indemnified Persons (defined
below) pursuant to the indemnification obligations of the Founders pursuant to
Section 9.4. The costs of the Escrow Agent shall be shared equally by the
Acquiror and the Founders.
9.3 INDEMNIFICATION BY CSI, CSINH, COMPANY AND STOCKHOLDERS.
(a) INDEMNIFIED DAMAGES. Subject to the limitations set forth in
this Section 9, from and after the Closing Date, CSI and the Stockholders shall
severally protect, defend, indemnify and hold harmless the Acquiror and its
respective affiliates (including CSINH and the Company if the transactions
contemplated hereby are consummated), officers, directors, employees,
representatives and agents (the Acquiror and each of the foregoing persons or
entities is hereinafter referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons") from and against any and all losses,
costs, damages, liabilities, fees (including without limitation attorneys' fees)
and expenses (collectively, the "Damages"), that any of the Indemnified Persons
incurs by reason of or in connection with any claim, demand, action or cause of
action alleging misrepresentation, breach of, or default in connection with, any
of the representations, warranties, covenants or agreements of CSI, CSINH, the
Company or the Stockholders contained in this Agreement. For the purposes of
this Agreement, to the extent that the Acquiror suffers any Damages from a
breach of any of the representations and warranties with respect to the Company,
the amount of Damages shall be equal to the Acquiror's ownership percentage of
the Company as of the Closing.
(b) LIMITATIONS. Except as otherwise provided herein, (i) only CSI
shall be liable for Damages resulting from any misrepresentation of any of the
representations or warranties made in Section 2, (ii) CSI and each Stockholder,
in proportion to the Company Common Stock sold by each, shall be liable for
Damages resulting from any misrepresentation of any of the representations or
warranties made by the Company and (iii) CSI and each Stockholder shall be fully
liable for Damages resulting from any misrepresentation of any of the
representations or warranties made by such party with respect to the Company
Common Stock sold by such party. The maximum liability for any breach of a
representation, warranty or covenant of CSI, CSINH, the Company or the
Stockholders contained in this Agreement, including all Exhibits and Schedules
attached hereto, is limited (1) in the case of CSI, to the Note Consideration
(or, if the claim for Damages is less than the Purchase Price, its proportional
share of such liability where its proportional share is calculated as the Note
Consideration divided by the Purchase Price), (2) in the case of the Founders,
to the Share Consideration (or, if the claim
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for Damages is less than the Purchase Price, its proportional share of such
liability where its proportional share is calculated as the Share Consideration
divided by the Purchase Price), and (3) in the case of the Other Stockholders,
to that portion of the Other Note Consideration deposited into the Escrow Fund
which amount in the Escrow Fund shall be the exclusive contractual remedy of the
Acquiror against the Other Stockholders for any Damages; provided, however, that
nothing herein shall limit the liability: (i) of any Stockholder in connection
with any breach by such stockholder of its Securities Holder Representation
Agreement, (ii) CSI in connection with any breach of any of the representations
or warranties contained in Section 2 as to CSINH, (iii) of any party in
connection with any breach of any of the representations and warranties
contained in Section 3.3 or 3.4, and (iv) of any party in connection with a
Fraud Claim; and provided further, however, that the indemnities shall not apply
until the aggregate of all claims for Damages exceeds $250,000 (except that the
foregoing monetary limitation of this proviso shall not apply to Damages
attributable to breaches of representations or warranties contained in Section 2
as to CSINH or contained Section 3.3 or 3.4 as to any party). Subject to
compliance with applicable securities laws, any of the Founders may, at his
option, satisfy any Damages for which he is liable by payment of Acquiror
Company Stock, valued at the greater of (i) the price per share at which such
stock was issued pursuant hereto and (ii) if such stock is then publicly-traded,
the fair market value thereof, calculated by the average of the bid price and
ask price as of the business day immediately preceding the date such payment is
to be made. Notwithstanding the foregoing, in no event shall the Founders be
permitted or required to satisfy any Damages by delivering shares of Acquiror
Common Stock in excess of the number of shares received by the Founders pursuant
to this Agreement.
9.4 DAMAGES THRESHOLD. Notwithstanding the foregoing, the Acquiror may
not receive any amount from the Escrow Fund unless and until a certificate
signed by an officer of the Acquiror (an "Officer's Certificate") identifying
Damages has been delivered to the Escrow Agent and such amount is determined
pursuant to this Section 9 to be payable, in which case the Acquiror shall
receive a proportional amount of the escrowed notes and shares from the Escrow
Fund equal in value to the full amount of such Damages without deduction. In
determining the amount of any Damages attributable to a breach, any materiality
standard contained in any representation, warranty or covenant of CSI, CSINH,
the Company, the Stockholders or the Acquiror shall be disregarded.
9.5 ESCROW PERIOD. Subject to the following requirements, the Escrow
Fund shall remain in existence until the Escrow Termination Date (the "Escrow
Period"). Upon the expiration of the Escrow Period, the Escrow Fund shall
terminate; provided, however, that the amount of escrowed shares, notes and cash
in the Escrow Fund, which, in the reasonable judgment of the Acquiror, are
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate delivered to the Escrow Agent prior to the expiration of such Escrow
Period with respect to facts and circumstances existing on or prior to the
Escrow Termination Date shall remain in the Escrow Fund (and the Escrow Fund
shall remain in existence) until such claims have been resolved. As soon as all
such claims have been resolved, the Escrow Agent shall deliver to CSI, the
Founders and the Stockholder Representative, as the case may be, the balance of
the escrowed Share Consideration, Other Note Consideration and other property
remaining in the Escrow Fund and not required to satisfy such claims.
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9.6 DISTRIBUTIONS; VOTING.
(a) Any shares of Acquiror Common Stock or other equity securities
issued or distributed by Acquiror (including shares issued upon a stock split)
("New Shares") in respect of the shares of the Acquiror's Common Stock initially
deposited into the Escrow Fund (the "Escrow Shares") that have not been released
from the Escrow Fund shall be added to the Escrow Fund and become a part
thereof. When and if cash dividends on Escrow Shares in the Escrow Fund shall be
declared and paid, they shall be retained in escrow pending final distribution
of the Escrow Fund and will not be immediately distributed to the beneficial
owners of the Escrow Shares. Such dividends will become part of the Escrow Fund
and will be available to satisfy Damages. The beneficial owners of the Escrow
Shares shall pay any taxes on such dividends.)
(b) Each holder of Acquiror Common Stock shall have voting rights
with respect to that number of Escrow Shares contributed to the Escrow Fund on
behalf of such stockholder (and on any voting securities added to the Escrow
Fund in respect of such Escrow Shares) so long as such Escrow Shares or other
voting securities are held in the Escrow Fund. As the record holder of such
shares, the Escrow Agent shall vote such shares in accordance with the
instructions of the stockholders having the beneficial interest therein and
shall promptly deliver copies of all proxy solicitation materials to such
stockholders. The Acquiror shall show the Acquiror Common Stock contributed to
the Escrow Fund as issued and outstanding on its balance sheet.
9.7 ARBITRATION. Any controversy or claim arising out of or relating to
Damages shall be settled by arbitration in accordance with commercial rules of
the American Arbitration Association ("AAA"). Arbitration proceedings shall be
held in New York, New York. Arbitrations shall be conducted by three arbitrators
(the "Arbitrators") consisting of three independent and impartial arbitrators
appointed by the AAA from a list of arbitrators maintained in the office of the
AAA in New York, New York. No Arbitrator shall be a person who ever has been an
affiliate of or attorney for any party or for any of their respective
affiliates. Any provisional remedy that would be available to a court of law
shall be available from the Arbitrators to the parties pending arbitration. Any
party may, without inconsistency with the Agreement, apply to any court of
proper jurisdiction and seek injunctive relief until the arbitration award is
rendered or the controversy is otherwise resolved. The Arbitrator?s award shall
be made in writing. The Arbitrators shall not modify or amend any of the terms
and conditions contained in this Agreement. The award of the majority of the
arbitrators shall be binding and final and not subject to appeal and may be
entered as a judgment in any court of competent jurisdiction. The parties hereby
irrevocably consent and submit to the jurisdiction of the State of New York for
all purposes relative to any arbitration and to any subsequent entry of judgment
on any award rendered pursuant thereto. Each party hereby waives the benefit of
any applicable law which would permit it to appeal the decision of the
Arbitrator to any court or other authority. All fees and expenses of the
arbitration proceedings shall be borne equally among the parties to the
arbitrations. However, each party shall bear the expense of its own counsel,
experts, witnesses, and preparation and presentation of proofs.
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SECTION 10. GENERAL PROVISIONS.
10.1 NOTICES. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice.
(a) if to the Acquiror, to:
printCafe, Inc.
Forty 00xx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to XXX, XXXXX, xx the Company to:
Constellation Software Inc.
0000-000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
XxXxxxxx Xxxxxxxx
Xxxxx 0000
Xxxxxxx Xxxxxxxx Bank Tower
Toronto, Ontario
Attention: Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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(c) if to if to the Founders to:
Logic Associates, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxx Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(d) if to the Other Stockholders:
at their respective addresses as set forth on the
signature pages.
10.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement," "the date hereof," and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to the date first set
forth above. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
10.4 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Disclosure Schedule and the Acquiror Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.
10.5 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
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10.6 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
10.7 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
New York, without giving effect to principles of conflicts of law.
10.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
10.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
or waived only with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with this
Section 10.9 shall be binding upon the parties and their respective successors
and assigns.
[Signature Page Follows]
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The parties hereto have executed this Stock Purchase Agreement as of the
date first written above.
PRINTCAFE, INC.
By:
------------------------------------
Name:
----------------------------------
(Print)
--------------------------------
Title:
---------------------------------
Address:
-------------------------------
CONSTELLATION SOFTWARE INC.
By:
------------------------------------
Name:
----------------------------------
(Print)
--------------------------------
Title:
---------------------------------
Address:
-------------------------------
CONSTELLATION SOFTWARE OF NEW HAMPSHIRE, INC.
By:
------------------------------------
Name:
----------------------------------
(Print)
--------------------------------
Title:
---------------------------------
Address:
-------------------------------
LOGIC ASSOCIATES, INC.
By:
------------------------------------
Name:
----------------------------------
(Print)
--------------------------------
Title:
---------------------------------
Address:
-------------------------------
---------------------------------------
Xxxxxxxx Xxxx
Address:
-------------------------------
57
---------------------------------------
Xxxxxx Xxxxxx
Address:
-------------------------------
---------------------------------------
Xxxx Xxxxxxxx-Poor
Address:
-------------------------------
OTHER STOCK HOLDERS
[signature page for each attached on following pages]
58
The parties hereto have executed this Stock Purchase Agreement as of the date
first written above.
---------------------------------------
[Security Holder]
Address:
-------------------------------
59
SCHEDULE 1
CSI, CSINH, COMPANY AND STOCKHOLDERS
DISCLOSURE SCHEDULE
60
SCHEDULE 2
ACQUIROR DISCLOSURE SCHEDULE
