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EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BETWEEN
NETLIBRARY, INC.,
AND
METATEXT, INC.
MARCH 29, 2000
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TABLE OF CONTENTS
Page
SECTION 1. Purchase and Sale of Assets..................................................................1
1.1 Purchase and Sale of Assets.............................................................1
1.2 Excluded Assets.........................................................................2
1.3 Assumption of Liabilities...............................................................3
1.4 Purchase Price..........................................................................3
1.5 Closing; Closing Date...................................................................4
1.6 Liquidation of MetaText.................................................................4
1.7 Escrow..................................................................................4
1.8 Seller Stock Options....................................................................4
1.9 Intended Tax Consequences...............................................................4
1.10 Taking of Necessary Action; Further Action..............................................5
SECTION 2. Representations and Warranties of Seller.....................................................5
2.1 Organization; Subsidiaries.............................................................5
2.2 Articles of Organization; Bylaws; Minute Books.........................................6
2.3 Capital Structure......................................................................6
2.4 Authority..............................................................................6
2.5 No Conflicts; Required Filings and Consents............................................7
2.6 Financial Statements...................................................................7
2.7 Absence of Undisclosed Liabilities.....................................................7
2.8 Absence of Certain Changes.............................................................8
2.9 Litigation.............................................................................9
2.10 Restrictions on Business Activities...................................................10
2.11 Permits and Authorizations; Compliance with Laws......................................10
2.12 Title to Property.....................................................................10
2.13 Intellectual Property.................................................................11
2.14 Environmental Matters.................................................................12
2.15 Taxes.................................................................................14
2.16 Employee Benefit Plans................................................................15
2.17 Certain Agreements Affected by the Sale...............................................17
2.18 Employee Matters......................................................................17
2.19 Material Contracts....................................................................17
2.20 Interested Party Transactions.........................................................18
2.21 Insurance.............................................................................18
2.22 Brokers' and Finders' Fees............................................................18
2.23 Accounts Receivable...................................................................18
2.24 Customers and Suppliers...............................................................18
2.25 Representations Complete..............................................................18
SECTION 3. Representations and Warranties of the Seller Shareholders...................................19
3.1 Investment Representations............................................................19
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SECTION 4. Representations and Warranties of Purchaser.................................................20
4.1 Organization, Standing and Power; Capitalization......................................21
4.2 Authority.............................................................................21
4.3 No Conflict; Required Filings and Consents............................................22
4.4 Absence of Undisclosed Liabilities....................................................22
4.5 Absence of Certain Changes............................................................22
4.6 Litigation............................................................................23
4.7 Permits and Authorizations............................................................23
4.8 Compliance With Laws..................................................................23
4.9 Broker's and Finders' Fees............................................................23
4.10 Purchaser Stock.......................................................................24
4.11 Restrictions on Business Activities...................................................24
4.12 Financial Statements..................................................................24
4.13 Title to Property.....................................................................24
4.14 Employee Matters......................................................................25
4.15 Interested Party Transactions.........................................................25
4.16 Minute Books..........................................................................25
4.17 Representations Complete..............................................................25
SECTION 5. Additional Agreements.......................................................................26
5.1 Non-Competition Agreements............................................................26
5.2 Options and Warrants..................................................................26
5.3 Lock-Up Agreements; Manner of Sale Requirements.......................................26
5.4 Employment Agreements; Restricted Stock Agreements....................................26
5.5 Shareholders' Representative..........................................................26
SECTION 6. Conditions to the Sale......................................................................26
6.1 Conditions to Obligations of Each Party to Effect the Sale............................26
6.2 Additional Conditions to Obligations of Seller........................................27
6.3 Additional Conditions to the Obligations of Purchaser.................................28
SECTION 7. Termination, Amendment and Waiver...........................................................30
7.1 Termination...........................................................................30
7.2 Effect of Termination.................................................................31
7.3 Expenses and Termination Fees.........................................................31
7.4 Amendment.............................................................................31
SECTION 8. Escrow and Indemnification..................................................................31
8.1 Survival of Covenants, Representations and Warranties.................................31
8.2 Indemnification and Damages...........................................................31
8.3 Damages Cap and Threshold.............................................................32
SECTION 9. Post Closing Covenants......................................................................32
9.1 Best Efforts and Further Assurances...................................................32
9.2 Consents; Cooperation.................................................................32
9.3 Access to Information.................................................................33
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9.4 Public Disclosure; Confidentiality....................................................33
9.5 Purchase of Purchaser Common Stock in Initial Public Offering.........................33
9.6 Taxes.................................................................................33
9.7 Liquidation of Seller.................................................................33
9.8 Use of Seller Name....................................................................34
9.9 Release of Security Interests.........................................................34
9.10 Allocation of Consideration...........................................................34
SECTION 10. General Provisions..........................................................................34
10.1 Notices...............................................................................34
10.2 Interpretation........................................................................35
10.3 Counterparts..........................................................................36
10.4 Entire Agreement; Nonassignability; Parties in Interest...............................36
10.5 Severability..........................................................................36
10.6 Remedies Cumulative...................................................................36
10.7 Governing Law.........................................................................36
10.8 Rules of Construction.................................................................36
10.9 Amendments and Waivers................................................................37
EXHIBITS
A Seller Shareholder Consideration
B Escrow Agreement
C Selling Shareholder Addresses
D Non-Competition Agreement
E Employment Agreement
F Restricted Stock Agreement
G Opinion of netLibrary Counsel
H Opinion of Seller's Counsel
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered
into as of March 29, 2000, by and among netLibrary, Inc., a Delaware corporation
("Purchaser"), and MetaText, Inc., a Florida corporation ("Seller"), and the
persons identified as shareholders on the signature pages hereof (collectively,
the "Seller Shareholders," and each a "Seller Shareholder").
RECITALS
A. Seller is engaged in the business of converting high-quality content
into the form of digital textbooks and distributing and providing access to
digital textbooks to students and professors through the Internet (the
"Business").
B. The Boards of Directors of Seller and Purchaser and the Seller
Shareholders believe it is in the best interests of their respective companies
that Seller sell, transfer and assign to Purchaser and Purchaser purchase and
acquire from Seller substantially all of the assets of Seller related to the
Business (the "Sale") and, in furtherance thereof, have approved the Sale.
C. As consideration for the Sale, Seller shall receive shares of the
$.001 par value Common Stock of Purchaser (the "Purchaser Common Stock") and
shares of the $.001 par value Series D Preferred Stock of Purchaser (the
"Purchaser Series D Stock" and, together with the Purchaser Common Stock the
"Purchaser Stock"), which upon the liquidation of Seller shall be distributed to
the Seller Shareholders in the amounts and on the terms set forth herein.
D. Seller, Purchaser and the Seller Shareholders desire to make certain
representations and warranties and other agreements in connection with the Sale.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Sale to qualify as a
reorganization under the provisions of Sections 368(a)(1)(C) of the Code. This
Agreement shall constitute a plan of reorganization under such section.
AGREEMENT
The parties hereby agree as follows:
SECTION 1
1. PURCHASE AND SALE OF ASSETS.
1.1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions
of this Agreement, at the Closing (as defined in Section 1.5(a)), Seller shall
sell, convey, assign, transfer and deliver to Purchaser, and Purchaser shall
purchase and pay for all right, title and interest of Seller in and to the
business, properties, assets and rights of any kind, whether tangible or
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intangible, and constituting, or used or useful in connection with, or related
to the Business (the "Assets") free and clear of all mortgages, liens, pledges,
charges, security interests or any other encumbrance of any nature whatsoever
("Liens"), except for Excluded Assets (as defined in Section 1.2) which Assets
shall include, without limitation, all of Seller's right, title and interest in
and to the following:
(a) All Intellectual Property (as defined in Section 2.13) used
in or useful to the conduct of the Business, including without limitation, those
items listed but not exhaustively described on Section 2.13 of Seller Disclosure
Schedule;
(b) All contracts, agreements, contract rights, license
agreements, purchase and sales orders, quotations and other executory
commitments of Seller entered into in connection with the conduct of the
Business, including without limitation, those contracts listed on Section 2.19
of the Seller Disclosure Schedule (the "Contracts");
(c) All accounts receivable, notes or other securities and
accounts of Seller;
(d) All computer programs, computer equipment and related
software and software licenses, office equipment, furniture and other personal
property, whether tangible or intangible, including without limitation, the
property listed, but not exhaustively described, on Sections 2.13 and Section
2.12(b) of Seller Disclosure Schedule;
(e) All books of account, customer and supplier lists including
addresses, drawings, files, papers and records of Seller;
(f) All deposits, advance payments, prepaid items and expenses,
deferred charges, rights of offset and credits and claims for refund relating to
Seller;
(g) All claims, rights and causes in action against third parties
and all rights to insurance proceeds relating to any damage, destruction or
impairment of the Assets;
(h) All licenses, permits, consents and certificates of any
regulatory, administrative or other governmental agency or body issued to or
held by Seller necessary or incidental to the conduct of the Business (to the
extent the same are transferable);
(i) All fixed assets, inventory and leasehold improvements; and
(j) All goodwill, if any, associated with the Assets, in
particular, or Seller, in general.
1.2. EXCLUDED ASSETS. The following assets shall be "Excluded Assets"
retained by Seller and shall not be sold or assigned to Purchaser:
(a) the corporate seal, articles of incorporation, minute books,
stock books, tax returns and other corporate and similar records of Seller;
(b) the rights that accrue or will accrue to Seller under this
Agreement;
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(c) the rights to any claims or any tax credits or tax attributes
belonging to Seller; and
(d) the cash of Seller.
1.3. ASSUMPTION OF LIABILITIES.
(a) Subject to the terms and conditions of this Agreement,
Purchaser hereby agrees to (i) assume and pay, perform and discharge as and when
due the Closing Liabilities of Seller reflected on the Closing Statement (as
each term is defined in Section 1.4(b)), (ii) assume the debt equal to
$1,185,000 owed by Seller to Xxx Xxxxxxxxx (the "Shareholder Debt") and within
two days of the Closing to pay, perform and discharge the Shareholder Debt, and
(iii) assume and agree to perform and discharge when due all of the liabilities
and obligations under the Contracts listed on Schedule 2.19 of the Seller
Disclosure Schedule that are to be performed on or after the Closing Date (as
defined in Section 1.5) (the "Assumed Liabilities").
(b) Except for the Assumed Liabilities and as may be expressly
provided for in this Agreement, Purchaser shall not assume and Seller shall not
assign to Purchaser and Seller shall remain liable for any liability,
obligation, guaranty, indebtedness, claim, loss, cost, expense or
responsibility, direct or indirect, absolute or contingent, of Seller including
without limitation (i) any amount of principal and interest owed by Seller to
Xxx Xxxxxxxxx exceeding $1,185,000, (ii) taxes with respect to or attributable
to the Assets for all taxable periods through the Closing Date, (iii) any
liabilities associated with the Excluded Assets, (iv) any expenses and costs
arising from this transaction, and (iv) any other liabilities of Seller not
specifically assumed by Purchaser (the "Excluded Liabilities").
1.4. PURCHASE PRICE.
(a) The total purchase price under this Agreement shall be sum of
$5,000,000 payable by (i) $2,721,510 represented by shares of Purchaser Common
Stock valued at $17.675 per share and (ii) $2,278,490 represented by shares of
Purchaser Series D Stock valued at $17.675 per share plus the amount of
$1,185,000 to be paid to discharge the Shareholder Debt.
(b) At Closing, Seller shall deliver a closing statement of
Assumed Liabilities prepared as of the Closing Date (the "Closing Statement")
which shall include (i) the Shareholder Debt, (ii) accounts payable shown on the
Financial Statements, and (iii) accounts payable incurred in the ordinary course
of business consistent with prudent business practices after the date of the
Financial Statements (collectively (b)(ii) and (iii) are referred to as the
"Closing Liabilities"). Within 90 days after the Closing, Purchaser shall audit
the Closing Statement. The Purchase Price shall be decreased for each dollar
that the actual Closing Liabilities of Seller at Closing, after a reduction for
the accounts receivable of Seller at Closing, exceed the Closing Liabilities set
forth on the Closing Statement (the "Consideration Adjustment"). Purchaser shall
make a claim against the escrow, as provided for in Section 1.7, for any such
Consideration Adjustment.
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1.5. CLOSING; CLOSING DATE.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place as soon as practicable after the
satisfaction or waiver of each of the conditions set forth in Section 6 below or
at such other time as the parties agree (the "Closing Date"). The Closing shall
take place at the offices of Purchaser, or at such other location as the parties
agree.
(b) The Sale will be effected by delivery by the Seller to
Purchaser of (i) the Instruments of Transfer (as defined in Section 6.2(p)),
(ii) executed copies of the filings, consents, approvals, notices or waivers,
and copies of the instruments transferring, registering or issuing the consents,
approvals, permits, licenses, permissions, registration or other authorizations
referred to in Section 2.11 hereof, and (iii) such other good and sufficient
instruments of conveyance, transfer and assignment as shall be necessary to vest
in Purchaser fill rights, title and interest in and to the Assets, free and
clear of all Liens.
(c) The assumption of the Assumed Liabilities by Purchaser will
be effected by delivery by Purchaser to the Seller of the duly executed
Instruments of Transfer.
1.6. LIQUIDATION OF METATEXT. Promptly after the Closing, Seller shall
be liquidated and a pro rata share of Purchase Price paid to Seller shall be
distributed to the Seller Shareholders. EXHIBIT A identifies each of the Seller
Shareholders as of the Closing and the number of shares of Purchaser Common
Stock or Purchaser Series D Stock that will be issued to each such shareholder
upon the liquidation of Seller, without regard to any adjustment under Sections
1.4(b) or 8.
1.7. ESCROW. At Closing, 19,093 shares of the Purchaser Common Stock
and 15,985 shares of the Purchaser Series D Stock shall be deposited into an
escrow account pursuant to the Escrow Agreement attached as EXHIBIT B (the
"Escrow Agreement") on a pro rata basis among the Seller Shareholders. The
shares represent approximately $618,501 of the Purchase Price and such shares
are included in the aggregate numbers of shares described on EXHIBIT B. As
provided in the Escrow Agreement, a portion of the Purchaser Stock held pursuant
to the Escrow Agreement shall be cancelled and returned to Purchaser, as
appropriate to account for amounts covered by the indemnity provisions of
Section 8 below and for any Consideration Adjustment as set forth in Section
1.4(b).
1.8. SELLER STOCK OPTIONS. All options or warrants to purchase stock or
securities of Seller shall be exercised, or shall be extinguished and expire, on
or prior to the Closing.
1.9. INTENDED TAX CONSEQUENCES. The parties intend that the Sale shall
constitute a reorganization within the meaning of Section 368 of the Code.
Seller and its shareholders shall be solely responsible for all tax planning,
and for obtaining advice with respect to the federal and state income tax
consequences to Seller and its shareholders of the Sale and all related
transactions. Seller and its shareholders are not relying on Purchaser or any
advisors to Purchaser for any tax advice with respect to the Sale or related
transactions, and shall have no claim against Purchaser or any officers,
directors, employees or advisors of Purchaser with
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respect to any tax consequences of the Sale or any related transactions.
Purchaser shall be solely responsible for all tax planning, and for obtaining
advice with respect to the federal and state income tax consequences to
Purchaser of the Sale and all related transactions. Purchaser is not relying on
Seller, its shareholders or any of the advisors of Seller or its shareholders
for any tax advice with respect to the Sale or related transactions, and shall
have no claim against Seller, its shareholders or any officers, directors,
employees or advisors of Seller with respect to any tax consequences of the Sale
or any related transactions.
1.10. TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time after
the Closing Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest (a) Purchaser's full right, title and
possession to the Assets purchased from Seller, or (b) the Seller Shareholders
with the Purchase Price, the officers and directors of Seller and Purchaser are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
SECTION 2
2. REPRESENTATIONS AND WARRANTIES OF SELLER. For purposes of this Section 2, any
reference to a "Material Adverse Effect" with respect to Seller means any event,
change or effect that, when taken individually or together with all other
changes and effects, is or is reasonably likely to (a) be materially adverse to
the condition (financial or otherwise), properties, assets, liabilities,
business, operations or results of operations of Seller, taken as a whole, (b)
prevent or materially delay consummation of the Sale or otherwise to prevent
Seller from performing its obligations under this Agreement or (c) cause this
Agreement not to be legal or enforceable against Seller. For purposes of clause
(a) of this definition and without limiting the generality of the foregoing, any
event, effect or change that individually or in the aggregate with respect to
which Seller would reasonably be expected to have damages being asserted
against, imposed upon or sustained by it of $20,000 or more shall constitute a
"material adverse" effect or change.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after due and diligent inquiry of officers, directors,
employees and consultants of such party reasonably believed to have knowledge of
or responsibility for the matter in question.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Seller to Purchaser prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Seller Disclosure Schedule"), Seller and the Seller
Shareholders jointly and severally represent and warrant to Purchaser as
follows:
2.1. ORGANIZATION; SUBSIDIARIES. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Seller 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, 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 Seller.
Except as set forth in Section 2.1 of the Seller Disclosure Schedule, Seller
does not directly or indirectly own any equity or similar
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interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, limited
liability company, joint venture or other business association or entity.
2.2. ARTICLES OF INCORPORATION; BYLAWS; MINUTE BOOKS. Seller has
delivered a true and correct copy of its Articles of Incorporation and Bylaws or
other charter documents, each as amended to date, to Purchaser. Seller is not in
violation of any material provisions of its Articles of Incorporation or Bylaws
or equivalent organizational documents. The minute books of Seller have been
made available to Purchaser, and such minute books contain a true and complete
summary of all meetings of directors and stockholders or actions by written
consent since the time of incorporation of Seller through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects. Neither the minutes nor any of the written consents
have been amended, rescinded or revoked.
2.3. CAPITAL STRUCTURE. The authorized capital stock of Seller consists
solely of 10,000 shares of Seller Common Stock, $1.00 par value per share, of
which 768.0527 shares are issued and outstanding and owned by the Seller
Shareholders at the Closing in accordance with Section 2.3 of the Seller
Disclosure Schedule. Other than the Seller Common Stock, there is no other class
or series of Seller capital stock. There will be at the Closing no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other contracts, commitments, understandings,
restrictions, arrangements or agreements of any character relating to the
issuance, sale, transfer or voting of any issued or unissued Seller Common Stock
or other securities of Seller, including any rights of conversion or exchange
under any outstanding securities or other instruments or otherwise obligating
Seller to issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities. All outstanding shares of Seller Common Stock have been validly
issued and are fully paid, nonassessable and free of preemptive or similar
rights. Seller is not party to any phantom stock plans, stock appreciation
rights plans, phantom stock agreements or stock appreciation rights agreements.
2.4. AUTHORITY. Each of Seller and the Seller Shareholders have all
requisite corporate power and authority to enter into this Agreement, the
Transaction Agreements (as defined in Section 6.1) and to consummate the
transactions contemplated hereby and thereby. 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 Seller.
Seller's Board of Directors and shareholders has unanimously approved the Sale
and this Agreement. Each of the Agreement and the Transaction Agreements has
been duly executed and delivered by Seller and the Seller Shareholders and,
assuming due authorization, execution and delivery by Purchaser, constitute
valid and binding obligations of Seller and the Seller Shareholders enforceable
against Seller and the Seller Shareholders, respectively, in accordance with its
terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights and (b) general principles of equity that
restrict the availability of equitable remedies.
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2.5. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller and
the Transaction Agreements by the Seller Shareholders do not, and the
consummation of the transactions contemplated hereby and thereby 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 Articles of Incorporation or Bylaws of Seller or (ii)
except as set forth in Section 2.5 of the Seller Disclosure Schedule, 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 Seller Shareholders, Seller or
any of its properties or assets where such conflict, violation or default would
have a Material Adverse Effect on Seller or any of its properties or assets.
Seller is not in conflict with or in default or violation of any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Seller is a party or by which Seller or
any property or asset of Seller 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 Seller.
(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 Seller or the Seller Shareholders in
connection with the execution and delivery of this Agreement by Seller or of the
Transaction Agreements by the Seller Shareholders or the consummation by Seller
and the Seller Shareholders 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 Seller and would not prevent,
materially alter or delay any the transactions contemplated by this Agreement.
2.6. FINANCIAL STATEMENTS. Section 2.6 of the Seller Disclosure
Schedule includes a true, correct and complete copy of Seller's unaudited
financial statements (balance sheet and statement of operations) for the fiscal
year ended December 1999, respectively and for the two (2) month period ended
February 29, 2000 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements accurately set out and
describe the financial condition and operating results of Seller as of the
dates, and for the periods, indicated therein, subject to normal year-end audit
adjustments. Seller maintains a standard system of accounting established and
administered in accordance with GAAP applied on a consistent basis.
2.7. ABSENCE OF UNDISCLOSED LIABILITIES. Seller has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (a) those set forth or adequately provided for in the
balance sheet for the period ended February 29, 2000 (the "Seller Balance
Sheet"), (b) those incurred in the ordinary course of business consistent with
prudent business practices and not required to be set forth in the Seller
Balance Sheet under GAAP, (c) those incurred in the ordinary course of business
since December 31, 1999 (the
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"Seller Balance Sheet Date") and consistent with prudent business practices and
that, if any obligations or liabilities had occurred prior to the Seller Balance
Sheet Date, would not be required to be set forth in the Seller Balance Sheet
under GAAP and (d) those incurred in connection with the execution of this
Agreement. None of the liabilities set forth on the Seller Balance Sheet is
subject to any prepayment penalty or similar charge.
2.8. ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 2.8 of
the Seller Disclosure Schedule, since the Seller Balance Sheet Date there has
not been, occurred or arisen any:
(a) transaction by Seller except in the ordinary course of
business as conducted on that date and consistent with prudent business
practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of Seller;
(c) except as otherwise expressly provided in this Agreement,
capital expenditure or commitment by Seller, in any individual amount exceeding
$10,000, or in the aggregate, exceeding $25,000;
(d) destruction of, damage to, or loss of any of the Assets
(including, without limitation, intangible assets), business or customer of
Seller (whether or not covered by insurance) which would constitute a Material
Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor or employment practice or action;
(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 Seller or any revaluation by Seller of any of its assets;
(g) declaration, setting aside, or payment of a dividend or other
distribution in respect to the Seller Common Stock, or any direct or indirect
redemption, purchase or other acquisition by Seller of any Seller Common Stock;
(h) except as otherwise expressly provided in this Agreement,
increase in the salary or other compensation payable or to become payable by
Seller to any officers, directors, employees, consultants or advisors of Seller,
except in the ordinary course of business consistent with prudent business
practice, or the declaration, payment, or commitment or obligation of any kind
for the payment by Seller of a bonus or other additional salary or compensation
to any such person or any former employee, 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;
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(i) sale, lease, license of other disposition of any of the
assets or properties of Seller, except in the ordinary course of business and
not in excess of $5,000 in the aggregate;
(j) termination or material amendment of any material contract,
agreement or license (including any distribution agreement) to which Seller is a
party or by which it is bound;
(k) loan by Seller to any person or entity, or guaranty by Seller
of any loan, except for (i) travel or similar advances made to employees in
connection with their employment duties in the ordinary course of business,
consistent with prudent business practices and (ii) trade payables not in excess
of $5,000 in the aggregate and in the ordinary course of business, consistent
with prudent business practices;
(l) waiver or release of any right or claim of Seller, including
any write-off or other compromise of any account receivable of Seller, in excess
of $5,000 in the aggregate;
(m) commencement or notice or, to the best of Seller's knowledge,
threat of commencement of any lawsuit or proceeding against Seller or, to the
best of Seller's knowledge, commencement or notice or threat of commencement of
any investigation of Seller's affairs;
(n) notice to Seller or any of its officers, employees or
consultants of any claim of ownership by a third party of Seller's Intellectual
Property (as defined in Section 2.13 below) or of infringement by Seller of any
third party's intellectual property rights;
(o) issuance or sale by Seller of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities (other than pursuant to the exercise of the
outstanding options);
(p) change in pricing or royalties set or charged by Seller to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to Seller; or
(q) agreement by Seller or any officer or employee on behalf of
Seller to do any of the things described in the preceding clauses (a) through
(p) (other than negotiations with Purchaser and its representatives regarding
the transactions contemplated by this Agreement).
2.9. LITIGATION. Except as set forth on Section 2.9 of the Seller
Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim, arbitration or, to the knowledge of Seller, investigation
pending before any agency, court or tribunal, foreign or domestic, or, to the
knowledge of Seller, threatened against Seller 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 Seller. There is no judgment, decree or order against Seller or, to the
knowledge of Seller, 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 Seller. All litigation to which
Seller is a party (or, to the knowledge of Seller Shareholders or Seller,
threatened to become a party) is disclosed in Section 2.9 of the Seller
Disclosure Schedule.
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2.10. RESTRICTIONS ON BUSINESS ACTIVITIES. To the knowledge of Seller,
there is no agreement, judgment, injunction, order or decree binding upon Seller
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing or limiting any current or presently planned future
business practice of Seller, any acquisition of property by Seller or the
overall conduct of business by Seller as currently conducted or currently
planned to be conducted by Seller that could reasonably be expected to have a
Material Adverse Effect on Seller. To the knowledge of Seller, Seller has not
entered into any agreement under which Seller 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.
2.11. PERMITS AND AUTHORIZATIONS; COMPLIANCE WITH LAWS.
(a) Seller is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals, registrations and orders necessary for Seller, to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "Seller Authorizations") and no suspension or cancellation of any
Seller Authorization is pending or, to the best of Seller's knowledge,
threatened, except where the failure to have, or the suspension or cancellation
of, any Seller Authorization would not have a Material Adverse Effect on Seller.
Seller is not in violation of any Seller Authorizations. The execution and
delivery of this Agreement by Seller and the consummation of the transactions
contemplated hereby, will neither cause Seller to be in violation or default
under any such Seller Authorization, nor entitle any other party to any such
Seller Authorization to terminate or modify such Seller Authorization. Seller is
not in conflict with, or in default of any Seller Authorization.
(b) Seller has complied with, is not in violation of, 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 be expected to have a Material
Adverse Effect on Seller.
(c) Seller does not market and has not previously marketed its
products and services in countries other than the United States.
2.12. TITLE TO PROPERTY.
(a) Seller has good and marketable title to all of its respective
properties, interests in properties and assets, real and personal, reflected in
the Seller Balance Sheet or acquired after the Seller Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Seller Balance Sheet Date in the ordinary course of business
consistent with prudent business practices), or with respect to leased
properties and assets, valid leasehold interests in, free and clear of all
Liens. The property and equipment of Seller that are used in the operations of
its business are in good operating condition and repair. All properties used in
the operations of Seller are reflected in the Seller Balance Sheet to the extent
GAAP requires the same to be reflected. Seller does not own or lease any real
property.
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(b) Section 2.12(b) of the Seller Disclosure Schedule also sets
forth a true, correct and complete list of all equipment and tangible personal
property (the "Equipment") owned, leased or used by Seller in connection with
the Business by Seller and the location of the Equipment. The Equipment is,
taken as a whole, (i) adequate for the conduct of Seller's Business, consistent
with its past practice, (ii) in good operating condition (ordinary wear and tear
excepted) and (iii) not subject to any Liens.
2.13. INTELLECTUAL PROPERTY.
(a) Except as set forth on Section 2.13(a) of the Seller
Disclosure Schedule, Seller owns, or is licensed or otherwise possesses 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 Seller as currently conducted or as proposed to be
conducted by Seller, except to the extent that the failure to have such rights
have not had and could not reasonably be expected to have a Material Adverse
Effect on Seller.
(b) Section 2.13(b) of the Seller 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, 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
Seller is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which Seller is a party and pursuant to which Seller is authorized to 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 Seller product that is material to the Business. To Seller's
knowledge, Seller is not in violation of any license, sublicense or agreement
described in Section 2.13(b) of the Seller Disclosure Schedule. The execution
and delivery of this Agreement by Seller and of the Transaction Agreements by
the Seller Shareholders and the consummation of the transactions contemplated
hereby and thereby, will neither cause Seller 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 2.13(b) of the Seller
Disclosure Schedule, Seller 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 Intellectual Property is being
used.
(c) Except as set forth on Section 2.13(c) of the Seller
Disclosure Schedule, all Intellectual Property developed by or for Seller was
developed by employees, contractors or consultants of Seller who have assigned
to Seller all rights, title and interest in any intellectual
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property created by the employees, former employees, consultants or contractors.
To Seller's knowledge, there is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Seller,
any trade secret material to Seller or any Intellectual Property right of any
third party to the extent licensed by or through Seller, by any third party,
including any employee or former employee of Seller. Seller has not entered into
any agreement to indemnify any other person against any charge of infringement
of any Intellectual Property, other than indemnification provisions contained in
purchase orders or advertising agreements and supplier agreements arising in the
ordinary course of business consistent with prudent business practices.
(d) Seller is not, nor will be as a result of the execution and
delivery of this Agreement or the performance of its 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 Seller.
(e) All patents, registered trademarks, service marks and
copyrights held by Seller are valid and existing and there is no assertion or
claim (or basis therefor) challenging the validity of any Intellectual Property
of Seller. Seller has not 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. To Seller's knowledge, neither the conduct of the Business
currently conducted or proposed to be conducted nor the manufacture, sale,
licensing or use of any of the products of Seller 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 Seller 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 Seller. All registered trademarks, service marks
and copyrights held by Seller are valid and existing. To Seller's knowledge, no
third party is challenging the ownership by Seller, or the validity or
effectiveness of, any of the Intellectual Property. Seller 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 best of Seller's knowledge, threatened
interference, re-examinations, oppositions or nullities involving any patents,
patent rights or applications therefor of Seller, except such as may have been
commenced by Seller. There is no breach or violation of or threatened or actual
loss of rights under any license agreement to which Seller is a party.
2.14. 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, common law and orders, as each may be amended
from time to time, that are intended to assure the protection of
the environment, or that classify, regulate, address the
remediation of, require reporting with respect to, or list or
define solid waste, hazardous or
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toxic substances, materials, wastes, pollutants or contaminants;
which regulate the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Materials or
materials containing Hazardous Materials; or which are intended
to assure the protection, safety and good health of employees,
workers or other persons, including the public, including but not
limited to the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), or any state analog
thereof.
(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, synthetic gas, and any
mixtures thereof; radon; asbestos.
(iii) "Property" shall mean all real property
leased or owned by Seller either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property.
(v) "Release" shall have the meaning set forth in
CERCLA.
(b) Seller represents and warrants as follows:
(i) no methylene chloride, polychlorinated
biphenyls, formaldehyde, urea formaldeyhde, or asbestos is or has
been contained in, stored, used, or otherwise located at, in, on,
or under the Property or the Facilities;
(ii) Seller has complied and is in compliance with
all Environmental and Safety Laws;
(iii) there are no pending or, to the best of
knowledge of Seller, threatened actions, suits, orders, claims,
legal proceedings or other proceedings based on, and neither
Seller, nor any officer, director, consultant or shareholder
thereof has received any notice of any complaint, order,
directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any
governmental authority or any other person or entity or knows or
suspects any fact(s) which might reasonably form the basis for
any such actions or notices relating to Hazardous Materials or
any actual, alleged, or potential violations of or liabilities
under any Environmental and Safety Laws;
(iv) no authorization, notification, recording,
filing, consent, waiting period, remediation, investigation, or
approval is required under any Environmental and Safety Law in
order to consummate the transaction contemplated hereby;
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(v) Seller has all Seller Authorizations required
under Environmental and Safety Laws and is and has been in full
compliance with the terms and conditions of the same, all of
which are in full force and effect, and none of which require the
consent, notification, or other action of any person in order to
remain in full force and effect following consummation of the
transaction contemplated hereby;
(vi) Seller has no liability, known or unknown,
contingent or non-contingent, under any Environmental and Safety
Laws, and is not responsible for the liabilities under
Environmental and Safety Laws of any other person, by contract,
by operation of law, or otherwise; and
(vii) Seller has furnished to Purchaser true and
complete copies of all environmental assessments, reports, audits
and other documents in its possession or under its control that
relate to Seller's compliance with Environmental and Safety Laws.
Any information Seller has furnished to Purchaser concerning the
environmental history relating to compliance with Environmental
and Safety Laws is accurate and complete.
2.15. TAXES.
(a) Seller (and any predecessor of Seller) is and at all times
during its existence has been, a validly electing S Corporation within the
meaning of Section 1361 and 1362 of the Code for federal income tax purposes.
(b) Seller has timely filed or caused to be filed with the
appropriate federal, state and local governmental authority all tax returns,
declarations, reports, forms, estimates and any other related information
("Returns") required to be filed with respect to or attributable to Seller and
each such Return is true, complete and correct in all respects, and has made
available to representatives of Purchaser copies of all Returns filed by or on
behalf of Seller since its inception. All taxes and charges of any kind,
including interest and penalties ("Taxes"), shown to be due on such Returns, all
Taxes required to be paid by or on behalf of Seller, and all Taxes required to
be withheld by or with respect to Seller and with respect to transactions
involving shareholders for any period prior to the Closing Date have been timely
paid or, if applicable, withheld and paid to the appropriate governmental
authority. There are (i) no deficiencies or assessment of Taxes from any taxing
authority with respect to or attributable to Seller, and (ii) no ongoing audits
or examinations of any of the Returns relating to or attributable to Seller.
Seller has not granted any requests, agreements, consents or waivers to extend
the statutory period of limitations applicable to the assessment of any Taxes
with respect to or attributable to Seller.
(c) Seller has not made any payments, is not obligated to make
any payments, nor is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
section 280G. Seller has not been a United States real property holding
corporation within the meaning of Code section 897(c)(2) during the applicable
period specified in Code section 897(c)(1)(A)(ii).
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(d) Seller is not a party to any tax allocation or sharing
agreement. Seller (i) has not been a member of an affiliated group filing a
consolidated federal income Return or (ii) has no liability for the Taxes of any
person (other than Seller) under Regulations section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
2.16. EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 2.16 of the Seller Disclosure
Schedule, Seller (i) does not maintain or ever has maintained any Plan or Other
Arrangement as defined below, (ii) is or ever has been a party to any Plan or
Other Arrangement or (iii) has obligations under any Plan or Other Arrangement.
(b) Seller has furnished to Purchaser true and complete copies of
each of the following documents: (i) documents setting forth the terms of each
Plan; (ii) all related trust agreements or annuity agreements (and any other
funding document) for each Plan; (iii) for the most recent plan year, the annual
report (Form 5500 series) on each Plan that has been filed with any governmental
agency; (iv) the current summary plan description and subsequent summaries of
material modifications for each Title IV Plan; and (v) all IRS rulings, opinions
or technical advice relating to any Plan and all correspondence relating to the
request for and receipt of each ruling, opinion or technical advice.
(c) No Plan is a Multiemployer Plan.
(d) No Plan is an ESOP.
(e) No Plan is a Defined Benefit Plan.
(f) Seller has made all contributions and other payments required
by and due under the terms of each Plan and Other Arrangement and has taken no
action (including, without limitation, actions required by any law) relating to
any Plan or Other Arrangement that will increase Seller's or Purchaser's
obligation under any Plan or Other Arrangement.
(g) Seller has complied with all applicable provisions of the
Code, ERISA, the National Labor Relations Act, Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act,
the Securities Act, the Securities Exchange Act of 1934, and all other laws
pertaining to the Plans, Other Arrangements and other employee or employment
related benefits, and all premiums and assessments relating to all Plans or
Other Arrangements. Seller has no liability for any delinquent contributions
within the meaning of Section 515 of ERISA (including, without limitation,
related attorneys' fees, costs, liquidated damages and interest) or for any
arrearages of wages. Seller has no pending unfair labor practice charges,
contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any court,
governmental agency, regulatory body, or arbiter arising under any law governing
any Plan, and, to the knowledge of Seller, no facts exist that could give rise
to such a claim.
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(h) With respect to each Plan, Seller 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 and Medical Leave
Act of 1993, as amended, and the regulations thereunder.
(i) Definitions:
"Defined Benefit Plan" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 3(35) of
ERISA.
"DOL" means the United States Department of Labor or its
successors.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and all laws promulgated
pursuant thereto or in connection therewith.
"ESOP" means employee stock option plan.
"Multiemployer Plan" means a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay,
severance pay, insurance, restricted stock, stock
options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit
(including, without limitation, any fringe benefit
under Section 132 of the Code) to employees,
officers or independent contractors that is not a
Plan.
"Pension Plan" means an "employee pension benefit plan" as such
term is defined in Section 3(2) of ERISA.
"Plan" means any plan, program or arrangement, whether or
not written, that is or was an "employee benefit
plan" as such term is defined in Section 3(3) of
ERISA and (i) which was or is established or
maintained by Seller; (ii) to which Seller
contributed or was obligated to contribute or to
fund or provide benefits; or (iii) which provides
or promises benefits to any person who performs or
who has performed services for Seller and because
of those services is or has been (A) a participant
therein or (B) entitled to benefits thereunder.
"Qualified Plan" means a Pension Plan that satisfies, or is
intended by Seller to satisfy, the requirements
for tax qualification described in Section 401 of
the Code.
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2.17. CERTAIN AGREEMENTS AFFECTED BY THE SALE. Neither the execution
and delivery of this Agreement, the Transaction Agreements, nor the consummation
of the transactions contemplated hereby will (a) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director, employee, former
employee or consultant of Seller, (b) materially increase any benefits otherwise
payable by Seller or (c) result in the acceleration of the time of payment or
vesting of any such benefits.
2.18. EMPLOYEE MATTERS. Seller is in compliance in all respects with
all currently applicable federal, state, local and foreign laws and regulations
respecting employment, termination of 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 Seller under any workers compensation plan
or policy or for long term disability. Seller has no material obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder. There are no controversies pending or, to the best of knowledge of
Seller, threatened, between Seller and any of its employees or former employees,
including but not limited to any claims of wrongful discharge or sexual
harassment, which controversies have or could reasonably be expected to have a
Material Adverse Effect on Seller. Seller is not party to any collective
bargaining agreement or other labor unions contract nor does Seller know of any
activities or proceedings of any labor union or other group to organize any such
employees.
2.19. MATERIAL CONTRACTS.
(a) Section 2.19(a) of the Seller Disclosure Schedule contains a
list of all contracts, arrangements, licenses and agreements to which Seller is
a party and that are material to the Business, results of operations, or
condition (financial or otherwise), of Seller (such contracts, agreements and
arrangements as are required to be set forth in Section 2.19(a) of the Seller
Disclosure Schedule being referred to herein collectively as the "Material
Contracts"). Without limiting the generality of the foregoing, the Material
Contracts include (i) all agreements for the development of Intellectual
Property; (ii) all agreements with publishers or proprietors of books or other
materials authorizing Seller to distribute, license or otherwise make available
to Seller's customers access to such books or other information and (iii) all
agreements with customers of Seller granting rights to read or otherwise have
access to books or other materials over the Internet.
(b) Each Material Contract is a legal, valid and binding
agreement, and to Seller's knowledge of the other parties thereto, and none of
the Material Contracts is in default by its terms or has been canceled by the
other party; Seller is not in receipt of any claim of default under any such
agreement and Seller does not anticipate any termination or change to, or
receipt of a proposal with respect to, any such agreement as a result of the
Sale or otherwise. Seller has furnished Purchaser with true and complete copies
of all Material Contracts together with all amendments, waivers or other changes
thereto.
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2.20. INTERESTED PARTY TRANSACTIONS. Except as otherwise disclosed on
the Financial Statements or on Section 2.20 of the Seller Disclosure Schedule,
Seller is not indebted to any director, officer, employee, former employee,
consultant or agent of Seller (except for amounts due as normal salaries and
bonuses), and no such person is indebted to Seller.
2.21. INSURANCE. Seller has policies of insurance and bonds of the type
and in amounts customarily carried by persons conducting businesses or owning
assets similar to those of Seller and has made available to representatives of
Seller copies or summaries of all such policies. 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 Seller is otherwise in compliance with the terms of such policies and bonds.
Seller has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
2.22. BROKERS' AND FINDERS' FEES. Except as set forth on Section 2.22
of the Seller Disclosure Schedule, Seller 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.
2.23. ACCOUNTS RECEIVABLE. Seller has made available to Purchaser a
list of all accounts receivable of Seller reflected on the Financial Statements
("Accounts Receivable") along with a range of days elapsed since invoice. All
Accounts Receivable of Seller arose in the ordinary course of business, are
carried at values determined in accordance with GAAP consistently applied. 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.
2.24. CUSTOMERS AND SUPPLIERS. To the knowledge of Seller, as of the
date hereof and except as set forth on Section 2.24 of the Seller Disclosure
Schedule, no customer which individually accounted for more than ten percent
(10%) of Seller's gross revenues during the 12-month period preceding the date
hereof, and no supplier of Seller has canceled or otherwise terminated, or made
any written threat to Seller to cancel or otherwise terminate its relationship
with Seller, or has decreased materially its services or supplies to Seller in
the case of any such supplier, or its usage of the services or products of
Seller in the case of such customer, and no such supplier or customer intends to
cancel or otherwise terminate its relationship with Seller or to decrease
materially its services or supplies to Seller or its usage of the services or
products of Seller, as the case may be. Without limiting the generality of this
Section 2.24, no supplier of books or other information to Seller for delivery
to Seller's customers over the internet, and no customer of Seller acquiring
rights to read or have access to books or other information provided by Seller
over the Internet, has terminated its relationship with Seller, or materially
decreased the business conducted with Seller, and no such supplier or customer
has given notice to Seller of any intent to terminate or reduce such business
activity.
2.25. REPRESENTATIONS COMPLETE. Seller has delivered or made available
true and complete copies of each document, which has been requested by Purchaser
or its counsel in connection with their legal and accounting review of Seller.
To the knowledge of Seller, none of
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the representations or warranties made by Seller and the Seller Shareholders
herein or in any Schedule hereto, including the Seller Disclosure Schedule, or
certificate furnished by Seller 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
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER SHAREHOLDERS. Each of the Seller
Shareholders severally and not jointly represents and warrants to Purchaser as
follows:
3.1. INVESTMENT REPRESENTATIONS. The Seller Shareholder receiving
Purchaser Stock understands that the Purchaser Stock and the Conversion Shares
(as defined in Section 4.10) have not been registered under the Securities Act
of 1933 (the "Securities Act"). The Seller Shareholder also understands that the
Purchaser Stock is being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon the Seller
Shareholder's representations contained in this Agreement.
(a) SELLER SHAREHOLDER BEARS ECONOMIC RISK. The Seller
Shareholder either alone, or together with advisors and representatives, has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to Purchaser so that the Seller
Shareholder is capable of evaluating the merits and risks of the Seller
Shareholder's investment in Purchaser and has the capacity to protect the Seller
Shareholder's own interests. The Seller Shareholder must bear the economic risk
of this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. The Seller Shareholder understands that Purchaser has no present
intention of registering the Shares or the Conversion Shares. The Seller
Shareholder also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow the Seller Shareholder to transfer all
or any portion of the Shares or the Conversion Shares under the circumstances,
in the amounts or at the times the Seller Shareholder might propose.
(b) ACQUISITION FOR OWN ACCOUNT. The Seller Shareholder is
acquiring the Shares and the Conversion Shares for the Seller Shareholder's own
account solely for the purpose of investment, and not with a view towards their
distribution.
(c) SELLER SHAREHOLDER CAN PROTECT HIS INTEREST. The Seller
Shareholder represents that by reason of his or her business or financial
experience, or by reason of discussing the proposed investment with advisors and
representatives who have such experience, the Seller Shareholder has the
capacity to protect his or her own interests in connection with the transactions
contemplated in this Agreement and the Transaction Agreements. Further, the
Seller Shareholder is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
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(d) ACCREDITED INVESTOR. Each Seller Shareholder (other than
Xxxxx Xxxxxxx) represents that he is an accredited investor within the meaning
of Regulation D of the Securities Act.
(e) PURCHASER INFORMATION. The Seller Shareholder has received
and read the Financial Statements and has had an opportunity to discuss
Purchaser's business, management and financial affairs with directors, officers
and management of Purchaser and has had the opportunity to review the
Purchaser's operations and facilities. The Seller Shareholder has also had the
opportunity to ask questions of and receive answers from, Purchaser and its
management regarding the terms and conditions of this investment and the Seller
Shareholder desires no additional information with respect to Purchaser and this
investment.
(f) RULE 144. The Seller Shareholder acknowledges and agrees that
the Purchaser Stock, and, if issued, the Conversion Shares must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. The Seller Shareholder has
been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about
Purchaser, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being through an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) RESIDENCE. The address of the Seller Shareholders are set
forth on EXHIBIT C.
SECTION 4
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
For purposes of this Section 4, any reference to a "Material Adverse
Effect" with respect to Purchaser means any event, change or effect that, when
taken individually or together with all other changes and effects, is or is
reasonably likely to (a) be materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, business, operations or results of
operations of Purchaser, taken as a whole, (b) prevent or materially delay
consummation of the Sale or otherwise to prevent Purchaser from performing their
respective obligations under this Agreement or (c) cause this Agreement not to
be legal or enforceable against Purchaser. For purposes of clause (a) of this
definition and without limiting the generality of the foregoing, any event,
effect or change that individually or in the aggregate with respect to which
Purchaser would reasonably be expected to have damages being asserted against,
imposed upon or sustained by it of $250,000 or more shall constitute a "material
adverse" effect or change.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Purchaser to Seller prior to the execution and
delivery of this Agreement and referring to the
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representations and warranties in this Agreement (the "Purchaser Disclosure
Schedule"), Purchaser hereby represents and warrants to Seller as follows:
4.1. ORGANIZATION, STANDING AND POWER; CAPITALIZATION.
(a) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. Purchaser has the corporate
power to own its properties and to carry on its business as now being conducted
and as presently 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
Purchaser. Purchaser has delivered to Seller a true and correct copy of the
Certificate of Incorporation and Bylaws or other charter documents, as
applicable, of Purchaser, each as amended to date. Purchaser is not in violation
of any material provisions of its Certificate of Incorporation or Bylaws.
(b) The authorized, issued and outstanding capital stock of
Purchaser as of the date of this Agreement, consists of (a) thirty-five million
(35,000,000) shares of Purchaser Common Stock, par value $.001 per share, five
million one hundred forty-nine thousand five hundred ninety-eight (5,149,598)
shares of which are issued and outstanding and five million twenty-one thousand
six hundred sixty-six (5,021,666) shares of which are reserved for issuance to
employees pursuant to the Purchaser's Stock Option Plan, (b) five million two
hundred fifty thousand (5,250,000) shares of Purchaser's Series A Preferred
Stock, par value $.001 per share (the "Series A Stock"), five million two
hundred twenty-five thousand (5,225,000) of which are issued and outstanding,
(c) six million eight hundred twenty-eight thousand one hundred seventy-six
(6,828,176) shares of Purchaser's Series B Preferred Stock, par value $.001 per
share (the "Series B Stock"), six million eight hundred twenty-eight thousand
one hundred seventy-six (6,828,176) shares of which are issued and outstanding,
(d) five million seven hundred twenty-six thousand five hundred seventy-four
(5,726,574) shares of Purchaser's Series C Preferred Stock, par value $.001 per
share (the "Series C Stock"), five million seven hundred twenty-six thousand
five hundred seventy-four (5,726,574) of which are issued and outstanding and
(e) two million twenty-five thousand (2,025,000) shares of Purchaser Series D
Stock, par value $.001 per share ("Series D Stock"), eight hundred fifty-six
thousand seven hundred ninety-seven (856,797) of which are issued and
outstanding. (Series A Stock, Series B Stock, Series C Stock and Purchaser
Series D Stock is collectively referred to as "Purchaser Preferred Stock.") All
issued and outstanding shares of Purchaser Common Stock and Purchaser Preferred
Stock (a) have been duly authorized and validly issued, (b) are fully paid and
nonassessable and (c) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. Except as set forth in
Section 4.1 of the Purchaser Disclosure Schedule, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or agreements of any kind,
written or oral, for the purchase or acquisition from Purchaser of any of its
securities.
4.2. AUTHORITY. Purchaser has all requisite corporate power and
authority to enter into this Agreement, the Transaction Agreements and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Transaction Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly
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authorized by all necessary corporate action on the part of Purchaser. Each of
this Agreement and the Transaction Agreements has been duly executed and
delivered by Purchaser and assuming the due authorization, execution and
delivery by Seller and Seller Shareholders, constitutes the valid and binding
obligation of Purchaser enforceable against Purchaser in accordance with its
terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights and (b) general principles of equity that
restrict the availability of equitable remedies.
4.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the
Transaction Agreements by Purchaser do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any material 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 Certificate of Incorporation or Bylaws of Purchaser, 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 Purchaser or its properties or
assets, where such conflict, violation or default would have a Material Adverse
Effect on Purchaser 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 Purchaser in connection with the execution and delivery of
this Agreement or the Transaction Agreements by Purchaser or the consummation by
Purchaser of the transactions contemplated hereby or thereby, except for (i) any
filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (ii) such consents previously obtained,
and (iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Purchaser and would not prevent, materially alter or delay any the
transactions contemplated by this Agreement.
4.4. ABSENCE OF UNDISCLOSED LIABILITIES. Purchaser has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (a) those set forth or adequately provided for in the
balance sheet for the period ended December 31, 1999 (the "Purchaser Balance
Sheet"), (b) those incurred in the ordinary course of business consistent with
past practice and not required to be set forth in the Purchaser Balance Sheet
under GAAP and (c) those incurred in the ordinary course of business since the
December 31, 1999 (the "Purchaser Balance Sheet Date") and consistent with past
practice and that, if any obligations or liabilities (other than trade payables)
had occurred prior to the Purchaser Balance Sheet Date, would not be required to
be set forth in the Purchaser Balance Sheet under GAAP and (d) those incurred in
connection with the execution of this Agreement. None of the liabilities set
forth on the Purchaser Balance Sheet is subject to any prepayment penalty or
similar charge.
4.5. ABSENCE OF CERTAIN CHANGES. Since the Purchaser Balance Sheet
Date, there has not occurred: (a) any change, event or condition (whether or not
covered by insurance) that has
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resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Purchaser; (b) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Purchaser, or any
direct or indirect redemption, purchase or other acquisition by Purchaser of any
of its shares of capital stock; (c) any material amendment or change to
Purchaser's Certificate of Incorporation or Bylaws; or (d) any negotiation or
agreement by Purchaser to do any of the things described in the preceding
clauses (a) through (c) (other than negotiations with Seller and its
representatives regarding the transactions contemplated by this Agreement).
4.6. LITIGATION. Except as set forth in Section 4.6 of the Purchaser
Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim or arbitration, or to the knowledge of Purchaser
investigation, pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of Purchaser, threatened against Purchaser or any
of its respective properties or any of its 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 Purchaser. There is
no judgment, decree or order against Purchaser or, to the knowledge of
Purchaser, any of its respective 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 Purchaser. All litigation to which
Purchaser is a party (or, to the knowledge of Purchaser, threatened to become a
party) is disclosed in Section 3.6 of the Purchaser Disclosure Schedule.
4.7. PERMITS AND AUTHORIZATIONS. Purchaser is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for Purchaser
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Purchaser Authorizations") and no suspension or
cancellation of any Purchaser Authorization is pending or, to the best of
Purchaser's knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any Purchaser Authorization would not have a
Material Adverse Effect on Purchaser. Purchaser is not in material violation of
any Purchaser Authorizations. The execution and delivery of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby, will
neither cause Purchaser to be in material violation or default under any such
Purchaser Authorization, nor entitle any other party to any such Purchaser
Authorization to terminate or modify such Purchaser Authorization.
4.8. COMPLIANCE WITH LAWS. Purchaser has complied with, is not in
violation of, 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 be expected to
have a Material Adverse Effect on Purchaser.
4.9. BROKER'S AND FINDERS' FEES. Purchaser 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.
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4.10. PURCHASER STOCK. The Purchaser Stock, which will be delivered
under Section 1.4, when issued on the Closing Date in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable.
Purchaser Common Stock issuable upon the conversion of the Purchaser Series D
Stock ("Conversion Stock") has been reserved for issuance. When issued in
compliance with the provisions of this Agreement, the Certificate of
Incorporation, as amended, and the Delaware General Corporation Law, the
Conversion Stock will be validly issued, fully paid and nonassessable, and will
be free of any liens; provided, however, that the Purchaser Stock and the
Conversion Stock may be subject to restrictions on transfer under state and/or
federal securities laws, lock-up agreements or as otherwise required by such
laws at the time a transfer is proposed.
4.11. RESTRICTIONS ON BUSINESS ACTIVITIES. To the knowledge of
Purchaser, there is no agreement, judgment, injunction, order or decree binding
upon Purchaser which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or presently planned future
business practice of Purchaser, any acquisition of property by Purchaser or the
overall conduct of business by Purchaser as currently conducted or as presently
proposed to be conducted by Purchaser that could reasonably be expected to have
a Material Adverse Effect on Purchaser. To the knowledge of Purchaser, Purchaser
has not entered into any agreement under which Purchaser 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.
4.12. FINANCIAL STATEMENTS. Purchaser has provided to Seller a true,
correct and complete copy of Purchaser's audited financial statements for each
of the fiscal year ended March 31, 1999, and its unaudited financial statements
(balance sheet, statement of operations and statement of cash flows) on a
consolidated basis as at, and for the nine (9) month period ended December 31,
1999 (collectively, the "Purchaser Financial Statements"). The Purchaser
Financial Statements have been prepared in accordance with GAAP (except that the
unaudited financial statements do not have notes thereto) applied on a
consistent basis throughout the periods indicated and with each other. The
Purchaser Financial Statements accurately set out and describe the financial
condition and operating results of Purchaser as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments.
Purchaser maintains and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP.
4.13. TITLE TO PROPERTY. Except as set forth in Section 4.13 of the
Purchaser Disclosure Schedules, Purchaser has good and marketable title to all
of its respective properties, interests in properties and assets, real and
personal, necessary to Purchaser's business as presently conducted, or with
respect to leased properties and assets, valid leasehold interests in, free and
clear of all Liens, except for such Liens which could not reasonably be expected
to result in a Material Adverse Effect to Purchaser. The plants, property and
equipment of Purchaser that are used in the operations of its business are in
good operating condition and repair. All properties used in the operations of
Purchaser are reflected in the Purchaser Balance Sheet to the extent that GAAP
requires the same to be reflected. All real property leased by Purchaser is
subject to leases which 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
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which with notice or lapse of time, or both, would constitute a default), except
for such events of default which could not reasonably be expected to result in a
Material Adverse Effect on Purchaser. All equipment owned or leased by Purchaser
is, taken as a whole, (a) adequate for the conduct of Purchaser's business,
consistent with its past practice, and (b) in good operating condition (ordinary
wear and tear excepted).
4.14. EMPLOYEE MATTERS. Purchaser 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 Purchaser under any workers compensation plan or
policy or for long term disability. Purchaser has no material obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder. There are no controversies pending or, to the knowledge of
Purchaser, threatened, between Purchaser and any of its employees, including but
not limited to any claims of sexual harassment, which controversies have or
could reasonably be expected to have a Material Adverse Effect on Purchaser.
Purchaser is not party to any collective bargaining agreement or other labor
unions contract nor does Purchaser know of any activities or proceedings of any
labor union or other group to organize any such employees.
4.15. INTERESTED PARTY TRANSACTIONS. Except as otherwise disclosed on
the Purchaser Financial Statements or on Section 4.15 of the Purchaser
Disclosure Schedule, Purchaser is not indebted to any director, officer,
employee or agent of Purchaser (except for amounts due as normal salaries and
bonuses), and no such person is indebted to Purchaser.
4.16. MINUTE BOOKS. The minute books of Purchaser have been made
available to Seller, and such minute books contain a true and complete summary
of all actions of directors and stockholders at meetings thereof or actions by
written consent since the time of incorporation of Purchaser through the date of
this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
4.17. REPRESENTATIONS COMPLETE. Purchaser has delivered or made
available to Seller true and complete copies of each document that exists and is
the possession or control of Purchaser and has been requested in writing by
Seller or its counsel in conjunction with their legal and accounting review of
Purchaser. To the knowledge of Purchaser, none of the representations or
warranties made by Purchaser herein or in any Schedule hereto including the
Purchaser Disclosure Schedule, or certificate furnished by Purchaser 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.
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SECTION 5
5. ADDITIONAL AGREEMENTS.
5.1. NON-COMPETITION AGREEMENTS. Prior to the Closing, Seller will use
best efforts to cause Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx to execute and deliver
to Purchaser Non-Competition Agreements substantially in the form of EXHIBIT D
attached hereto (the "Non-Competition Agreements").
5.2. OPTIONS AND WARRANTS. Prior to the Closing, Seller will use its
best efforts and take all actions necessary to cause the exercise or
cancellation of all options and warrants to purchase stock or securities of
Seller.
5.3. LOCK-UP AGREEMENTS; MANNER OF SALE REQUIREMENTS. If requested by
the managing underwriter in connection with any public offering of Purchaser
Stock or any other securities of Purchaser, the Seller Shareholders shall agree
not to offer, sell, contract to sell, or otherwise dispose of any of the
Purchaser Stock during the period beginning on the date that Purchaser executes
an underwriting agreement with respect to such public offering and continuing to
and including 180 days following the completion of the public offering, provided
that the terms of such agreements shall be no less favorable than the terms of
corresponding agreements signed by Purchaser's management or substantially all
holders of Purchaser Preferred Stock.
5.4. EMPLOYMENT AGREEMENTS; RESTRICTED STOCK AGREEMENTS. At the request
of Purchaser, Seller will use its best efforts to ensure that certain key
personnel of Seller, including Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx enter into
mutually agreeable employment agreement, the form of which is attached hereto as
EXHIBIT E (each an "Employment Agreement"). At the request of Purchaser, Xxxxx
Xxxxxxx and Xxxx Xxxxxxxxx will enter into restricted stock agreements, the form
of which is attached hereto as EXHIBIT F (each a "Restricted Stock Agreement")
under which, if such employee ceases to be employed by Purchaser during a
specified period of time following the Effective Date, a portion of the
Purchaser Common Stock held by employee shall be forfeited as to non-vested
shares of Purchaser Common Stock or repurchased as to vested shares of Purchaser
Common Stock.
5.5. SHAREHOLDERS' REPRESENTATIVE. The Seller Shareholders hereby
appoint Xxxxx Xxxxx to act as the Shareholders' Representative in connection
with this Agreement and all other agreements entered into in connection with the
Sale. The holders of a majority of the Purchaser Stock may appoint a successor
Shareholder's Representative upon delivery of a notice in accordance with
Section 10.1 of this Agreement.
SECTION 6
6. CONDITIONS TO THE SALE.
6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE SALE. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement, the
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"Transaction Agreements" (which includes the Escrow Agreement, the
Non-Competition Agreements, the Employment Agreements, and the Restricted Stock
Agreements), and the transactions contemplated hereby shall be 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) APPROVAL. This Agreement and the Sale shall have been duly
approved and adopted by the Board of Directors of Purchaser and Seller. This
Agreement and the Sale shall have been duly approved and adopted by holders of a
majority of the shares of the capital stock of Seller. This Agreement and the
Sale shall have been duly approved and adopted by holders of the required number
of shares of capital stock of Purchaser.
(b) 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 Sale shall be in effect, 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 to the
Sale, which makes the consummation of the Sale 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.
(c) GOVERNMENTAL APPROVAL. Purchaser and Seller shall have timely
obtained from each Governmental Entity all approvals, waivers and consents, if
any, necessary for consummation of or in connection with the Sale and the
several transactions contemplated hereby, including, without limitation, such
approvals, waivers and consents as may be required under applicable federal and
states securities laws.
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller and the Seller Shareholders to consummate and effect this Agreement, the
Transaction Agreements and the transactions contemplated hereby and thereby,
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 Seller:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The
representations and warranties of Purchaser 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 Purchaser 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) Purchaser 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.
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(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 or results of operations of Purchaser, taken as a whole.
(c) GOOD STANDING. Seller shall have 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 Purchaser 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.
(d) OFFICER'S CERTIFICATE. Purchaser shall have delivered to
Seller a certificate, executed by a senior officer of Purchaser on behalf of
Purchaser, certifying that the statements in 6.2(a) and (b) are true and correct
as of the Closing Date.
(e) PURCHASE PRICE. At Closing, Purchaser shall transfer to the
Seller (i) shares of Purchaser Common Stock and (ii) shares of Purchaser Series
D Stock as described in Section 1.4(a) above, and subject to the Escrow
Agreement described in Section 1.7 above.
(f) OPINION OF COUNSEL. At Closing, Seller shall receive an
opinion of in-house counsel of Purchaser substantially in the form attached as
EXHIBIT G.
(g) AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT AND
STOCKHOLDER AGREEMENT. At Closing, the Seller Shareholders who shall become
holders of Purchaser Series D Stock as a result of the liquidation of Seller
shall become party to those agreements as applicable.
6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The
obligations of Purchaser 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 Purchaser:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
representations and warranties of Seller and the Seller's Shareholders 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 Seller and the Seller's Shareholders 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) Seller and the Seller Shareholders 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 it as of the
Closing Date.
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(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 Seller.
(c) NON-COMPETITION AGREEMENTS. Each of the persons set forth in
Section 5.1 above shall have executed a Non-Competition Agreement.
(d) SECRETARY OF STATE CERTIFICATE. Purchaser shall have received
a certificate or certificates of the Secretary of State of the State of Florida
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 Seller has
filed all required reports, paid all required fees due to Florida Secretary of
State, and taxes, and is, as of such date, active and authorized to transact
business as a domestic corporation.
(e) PRESIDENT'S CERTIFICATE. Seller shall have delivered to
Purchaser a certificate, executed by the President of Seller, certifying that
the statements in 6.3(a) and (b) are true and correct as of the Closing Date.
(f) ASSIGNMENT OF INVENTIONS BY EMPLOYEES & CONSULTANTS. Except
as set forth on Section 6.3(f) of the Seller Disclosure Schedule, Seller shall
have secured valid written assignments from all employees, former employees,
consultants and independent contractors who contributed in any way to the
creation or development of Intellectual Property of the rights to such
contributions that Seller does not already own by operation of law.
(g) PROTECTION OF INTELLECTUAL PROPERTY. Seller shall have taken
all necessary and appropriate steps to protect and preserve the confidentiality
of all Intellectual Property not otherwise protected by patents, patent
applications or copyright ("Confidential Information"). Seller shall require
each employee, former employee, consultant and independent contractor to execute
an agreement concerning proprietary information and investors substantially in
Purchaser's standard forms and all current and former employees, consultants and
independent contractors of Seller shall have executed such an agreement. All
use, disclosure or appropriation of Confidential Information owned by Seller by
or to a third party shall be governed by the terms of a written agreement
between Seller and such third party. All use, disclosure or appropriation of
Confidential Information not owned by Seller shall be governed by the terms of a
written agreement between Seller and the owner of such Confidential Information
or, if no written agreement exists, Seller shall certify to Purchaser that such
use, disclosure or appropriation shall be by otherwise lawful means.
(h) OPINION OF COUNSEL. Purchaser shall have received an opinion
of counsel to Seller (which counsel shall be reasonably acceptable to Purchaser)
in the form attached as EXHIBIT H.
(i) OPTIONS AND WARRANTS. All options and warrants to acquire any
capital stock or securities of Seller issued and outstanding as of the date of
this Agreement shall have been cancelled, exercised or shall have expired and to
the extent necessary Seller shall have
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withheld any necessary taxes as required under the Code or any provision of
applicable state, local or foreign tax laws.
(j) ESCROW AGREEMENT. The Seller Shareholders shall have executed
the Escrow Agreement attached as EXHIBIT B.
(k) EMPLOYMENT AGREEMENT. Each of the persons set forth in
Section 5.4 above shall have executed an Employment Agreement.
(l) RESTRICTED STOCK AGREEMENT. Each of the persons set forth in
Section 5.4 above shall have executed a Restricted Stock Agreement.
(m) AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT AND
STOCKHOLDER AGREEMENT. At Closing, each Seller Shareholder receiving Purchaser
Series D Stock upon the liquidation of Seller shall execute the amended and
restated investors' rights agreement and stockholder agreement, as applicable.
(n) CLOSING STATEMENT. At Closing, Seller shall deliver the
Closing Statement.
(o) POSSESSION OF THE ASSETS. At Closing, Seller shall deliver
the Assets to Purchaser as provided in Section 1.5(b).
(p) INSTRUMENTS OF TRANSFER. At Closing, Seller shall deliver a
duly executed xxxx of sale, assignment and assumption agreement and such other
assignments or transfers necessary to transfer the Assets to Purchaser,
including without limitation, an assignment of all domain names of Seller
(collectively, the "Instruments of Transfer").
SECTION 7
7. TERMINATION, AMENDMENT AND WAIVER.
7.1. TERMINATION. At any time prior to the Closing Date, whether before
or after approval of the matters presented in connection with the Sale by the
Seller Shareholders, this Agreement may be terminated and the Sale may be
abandoned:
(a) by mutual consent duly authorized by the Boards of Directors
of each of Purchaser and Seller;
(b) by either Purchaser or Seller, if, without fault of the
terminating party the Closing Date shall not have occurred on or before March
31, 2000 (or such later date as may be agreed upon in writing by the parties);
(c) by Purchaser, if Seller shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten (10) business days of receipt by Seller of written
notice of such breach, provided that Purchaser is not
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in material breach of any of its representations, warranties or obligations
hereunder, and provided further, that no cure period shall be required for a
breach which by its nature cannot be cured;
(d) by Seller, if Purchaser shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten (10) business days following receipt by Purchaser of
written notice of such breach, provided that Seller is not in material breach of
any of its representations, warranties or obligations hereunder, and provided
further, that no cure period shall be required for a breach which by its nature
cannot be cured.
7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 6.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Purchaser or Seller
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 9.4 (Public Disclosure;
Confidentiality), Section 7.3 (Expenses and Termination Fees) and this Section
7.2 shall remain in full force and effect and survive any termination of this
Agreement.
7.3. EXPENSES AND TERMINATION FEES. 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
incurring such expense.
7.4. AMENDMENT. The boards of directors of the parties 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.
SECTION 8
8. ESCROW AND INDEMNIFICATION.
8.1. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. All
covenants to be performed prior to the Closing Date shall survive the
consummation of the Sale and continue until the first anniversary of the Closing
Date. All other covenants shall continue without expiration. All representations
and warranties in this Agreement, or in any instrument delivered pursuant to
this Agreement shall survive the consummation of the Sale and continue until the
first anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 2.14, 2.15, 2.16 and 2.18
shall survive until the expiration of the applicable statutes of limitation and
the representations and warranties contained in Sections 2.1, 2.2 and 2.4 shall
survive without expiration.
8.2. INDEMNIFICATION AND DAMAGES.
(a) Subject to the limitations set forth in this Section 8, from
and after the Closing Date, the Seller Shareholders shall protect, defend,
indemnify and hold harmless
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Purchaser and its respective affiliates, officers, directors, employees,
representatives and agents (Purchaser 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 Seller or Seller
Shareholders contained in this Agreement, including any exhibits or schedules
attached hereto, which becomes known to Purchaser. Damages in each case shall be
net of the amount of any insurance proceeds and indemnity and contribution
actually recovered by the Indemnified Person. Any liability of the Seller
Shareholders pursuant to Section 8 shall be on a proportionate basis.
(b) All Damages recoverable under this Section 8.2 shall be
recoverable from shares of Purchaser Series D Stock and Purchaser Common Stock
deposited into escrow pursuant to Section 1.7 in addition to any other available
remedies. Claims for Damages, and release of shares from escrow, shall be
governed by the terms of the Escrow Agreement attached as EXHIBIT B.
8.3. DAMAGES CAP AND THRESHOLD.
(a) Notwithstanding the foregoing, the maximum liability of the
Seller Shareholders under this Agreement shall be no greater than the lesser of
$6,185,000 or the value of 282,884 shares of Purchaser Stock (valued at the time
of the resolution of the Claim).
(b) Notwithstanding the foregoing, Purchaser may not seek
indemnification under this Section 8 until Damages in the aggregate amount in
excess of $30,000 are payable.
SECTION 9
9. POST CLOSING COVENANTS.
9.1. 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 and agreements
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.
9.2. CONSENTS; COOPERATION. Each of Purchaser and Seller 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 by Purchaser or Seller 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
and the Sale required under any applicable federal, state, local or foreign
laws.
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9.3. ACCESS TO INFORMATION. Seller shall afford Purchaser and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period of five years after the Closing Date to (a) all
of Seller's properties, books, contracts, commitments and records and (b) all
other information concerning the business, properties and personnel of Seller as
Purchaser may reasonably request. Seller agrees to provide to Purchaser and its
accountants, counsel and other representatives, copies of internal financial
statements promptly upon request.
9.4. PUBLIC DISCLOSURE; CONFIDENTIALITY.
(a) Unless otherwise permitted by this Agreement, Purchaser and
Seller 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, except as may be required by
law including, without limitation, federal securities laws.
(b) Neither Purchaser, Seller nor the Seller Stockholders or the
directors, officers, employees and representatives of such parties will disclose
to any person (other than investors, attorneys, accountants or other advisors in
connection with the Sale) the terms, conditions or other facts with respect to
this Agreement or any discussions among the parties, except as may be required
in connection with compliance with applicable laws, including any required
disclosure under the federal or state securities laws. Each party acknowledges
that it is aware, and will advise its directors, officers, employees and
representatives who are informed of the matters which are the subject of this
Agreement, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information of the type which is
the subject of this Agreement from purchasing or selling securities of such
issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person will
purchase or sell such securities.
9.5. PURCHASE OF PURCHASER COMMON STOCK IN INITIAL PUBLIC OFFERING. The
parties agree to negotiate in good faith, subject to approval by Purchaser's
managing underwriter, an arrangement under which the Selling Shareholders
receiving Purchaser Common Stock or Purchaser Series D Stock will be entitled to
purchase their pro rata share of up to $500,000 of Purchaser Common Stock in
connection with the initial public offering of Purchaser Common Stock.
9.6. TAXES. Seller shall pay all Taxes arising out of the transfer of
the Assets and shall pay all Taxes in connection with Seller's operations of the
Business. In addition, Seller shall pay any and all Taxes in connection with
Seller's misfiling, non-filing or late filing of any Tax Return. Purchaser shall
not be responsible for any Taxes of any kind related to any period ending on or
prior to the Closing.
9.7. LIQUIDATION OF SELLER. As promptly as practical after Closing, the
officers of Seller shall take all necessary steps to liquidate Seller. Upon the
liquidation of Seller, the
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officers of Seller shall distribute the Purchaser Stock to the Seller
Shareholders as set forth on EXHIBIT A. To effectuate the distribution, the
officers of Seller shall deliver the certificates of Purchaser Stock,
accompanied with stock powers executed in blank, to Purchaser, and instruct
Purchaser to reissue certificates to the Seller Shareholders in the amounts set
forth on EXHIBIT A. Purchaser shall then deliver the reissued certificates to
the Seller Stockholders except for those shares of Purchaser Stock to be placed
in escrow pursuant to Section 1.7.
9.8. USE OF SELLER NAME. As of the Closing and thereafter, Seller and
the Seller Shareholders shall not use the name "MetaText" or any of the
trademarks, trademark rights, tradenames, tradename rights or service marks of
Seller (collectively, the "Marks"), nor any expansions, contractions or
derivations thereof, nor any other name; or trade dress confusingly similar
thereto; provided, however, that Seller may continue to use the Marks after the
date hereof solely for the purpose of conducting such administrative functions
generally as are necessary to wind up and terminate its business. Upon the
request of Purchaser, Seller shall remove all signs and advertising, and shall
destroy all stationery, brochures, advertising pieces, binders, notebooks,
manuals, forms, business cards, audio and video media and other materials that
refer to or include the Marks. Notwithstanding the foregoing, if not otherwise
transferable, Seller hereby grants to Purchaser the sole and exclusive right to
use its name and the Marks in perpetuity.
9.9. RELEASE OF SECURITY INTERESTS. Upon the repayment of the
Shareholder Debt, Xxx Xxxxxxxxx agrees to release any and all Liens on any of
the Assets as promptly as practical and to prepare and file any necessary
termination statements with any Governmental Entity.
9.10. ALLOCATION OF CONSIDERATION. The parties agree that as promptly
as practical after Closing, the parties shall negotiate an allocation of the
Purchase Price to the Assets and each party shall file all Returns including
Form 8594 in a manner consistent with the allocation. Purchaser will propose a
preliminary Form 8594 once the Closing Statement becomes available and submit
such Form 8594 to the President of Seller for his review and concurrence.
SECTION 10
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 Purchaser, to:
netLibrary, Inc.
0000 Xxxxxx Xxxxx Xxxxx
00
00
Xxxxxxx, Xxxxxxxx 00000
Attn: President and CEO
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
with copies to:
netLibrary, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
(b) if to Seller and/or Shareholders' Representative, to:
MetaText, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile No.: _____________
Telephone No.: (000) 000-0000
with copies to:
Smith, Mackinnon, Greeley, Bowdoin
Xxxxxxx, Xxxxxxxx & Marks, P.A.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxxx
Facsimile No.: 407-843-7300
Telephone No.: 000-000-0000
Capital Strategies Group, Inc.
00 Xxxxx Xxxxxx Xxxxxx, xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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" even if not actually followed by such phrase unless
the context expressly provides otherwise. The phrase "made available" in this
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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
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, the Transaction Agreements and the documents and instruments and
other agreements specifically referred to herein or delivered pursuant hereto,
including Attachments, Exhibits, Schedules (including the Seller Disclosure
Schedule and the Purchaser 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 (a) such provision shall be
excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of the
Agreement shall be enforceable in accordance with its terms.
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
Colorado, without giving effect to principles of conflicts of law. Each of the
parties to this Agreement consents to the exclusive jurisdiction and venue of
the courts of the state and federal courts of Boulder County, Colorado.
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.
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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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Seller and Purchaser have executed this Asset Purchase Agreement as of
the date first written above.
SELLER: METATEXT, INC.
By: /s/ XXXXX XXXXXXX
--------------------------------
Name: Xxxxx Xxxxxxx
Title: President
PURCHASER: NETLIBRARY, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and CEO
SELLER SHAREHOLDERS:
/s/ XXX XXXXXXXXX
--------------------------------
Xxx Xxxxxxxxx
/s/ XXXXX XXXXXXX
--------------------------------
Xxxxx Xxxxxxx
/s/ XXXXXXX XXXXXXXXX
--------------------------------
Xxxxxxx Xxxxxxxxx
/s/ XXXXX XXXXXXX
--------------------------------
Xxxxx Xxxxxxx
/s/ XXXXX XXXXX
--------------------------------
Xxxxx Xxxxx
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