EXECUTION COPY
EXHIBIT 2.1
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is made as of this 1st
day of November 2005, by and among Internet Commerce Corporation, a Delaware
corporation ("Buyer"), Connective Commerce Associates ("Seller"), a
Massachusetts business trust created by Declaration of Trust dated as of
December 14, 2001 and of which Xxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxxxx are
the Trustees (the "Trustees"), the shareholders of Seller listed on the
signature page hereto as Operating Shareholders (the "Operating Shareholders"),
and The Kodiak Group, Inc., a Massachusetts corporation ("Kodiak").
WHEREAS, Seller owns one share of the common stock, no par value, of
Kodiak, which constitutes all of the outstanding capital stock of Kodiak (the
"Share");
WHEREAS, Kodiak is a qualified subchapter S subsidiary of Seller and a
disregarded entity for federal and state tax purposes;
WHEREAS, Kodiak is engaged in, among other things, providing supply chain
productivity and optimization software applications and solutions, eCommerce
system integration and related services (the "Business");
WHEREAS, pursuant to the terms and conditions set forth hereinafter, Buyer
wishes to purchase from Seller, and Seller wishes to sell to Buyer, the Share
free and clear of all liens, claims, pledges, restrictions, rights of others,
voting agreements, charges or other encumbrances of any kind or nature
whatsoever ("Liens"); and
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements stated herein, and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged
conclusively, the parties hereto (collectively, the "Parties," and individually,
a "Party"), each intending to be legally bound, agree as follows:
ARTICLE I
CLOSING
1.1 Closing. The closing of the purchase and sale contemplated hereby (the
"Closing") will take place via overnight mail, email and/or fax at the offices
of Xxxxxx, Xxxxxxx & Xxxxxx, LLP in Atlanta, Georgia, with an effective time for
purposes hereunder of 5:00 p.m. (Atlanta Time) on November 1, 2005 (the "Closing
Date"), provided that the fulfillment or waiver (if permissible) by Seller and
Buyer of the conditions to Closing set forth in Article VI hereof shall have
occurred, or on such other date or at such other time as may be mutually agreed
upon by Buyer and Seller. At the Closing, the Parties will deliver or cause to
be delivered the funds, documents and certificates described in Article VI.
ARTICLE II
PURCHASE AND SALE
2.1 Share Purchase. Seller agrees to sell, assign and convey, and Buyer
agrees to purchase, as of the Closing Date, the Share.
2.2 Purchase Price. In full consideration for the sale to Buyer of the
Share, Buyer shall pay to Seller the Cash Consideration and Earn Out as provided
in this Section 2.2 (collectively, the "Purchase Price"). All payments of the
Purchase Price shall be made by certified bank check or wire transfer of
immediately available funds to an account designated by Seller.
(a) Cash Consideration. Buyer shall make a payment at Closing ("Cash
Consideration") in the aggregate amount of $1,000,000.
(b) Earn Out. Payment of the Earn Out shall be made as provided in
Section 2.3 below.
2.3 Earn Out.
2.3.1. If Kodiak Revenue (as defined in Section 2.3.1(c)) is
$3,000,000 or more, Buyer shall pay Seller, within 90 days following the first
anniversary of the Closing Date ("First Anniversary") in cash, the following
additional consideration (the "Earn Out"):
(a) First Level Earn Out. If Kodiak Revenue is at least $3,000,000,
Buyer shall pay Seller $1,000,000 (the "First Level Earn Out").
(b) Second Level Earn Out. If Kodiak Revenue is at least $3,250,000,
Buyer shall pay Seller, in addition to the First Level Earn Out, an additional
amount (the "Second Level Earn Out") that shall be determined as follows:
(i) If Kodiak Revenue is at least $4,000,000, the Second
Level Earn Out shall be $500,000.
(ii) If Kodiak Revenue is at least $3,250,000 but less
than $4,000,000, the Second Level Earn Out shall be the amount
determined by multiplying $500,000 by a percentage calculated by
dividing (x) the amount of Kodiak Revenue in excess of $3,000,000 by
(y) $1,000,000.
(c) For purposes of this Section 2.3, "Kodiak Revenue" shall mean
the gross revenue earned by Kodiak for the one-year period between the Closing
Date and the First Anniversary (the "Earn Out Period"), as accounted in
accordance with generally accepted accounting principles in the United States
applied in a manner consistent with past practice ("GAAP"). If a Kodiak employee
shall be reassigned to another subsidiary or operating division of Buyer in
violation of Section 2.3.2, the gross revenue generated by that employee for
such other subsidiary or operating division during the Earn Out Period shall be
included in Kodiak Revenue.
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(d) Buyer shall prepare and deliver to Seller within 45 days after
the First Anniversary a detailed statement of earnings for the Earn Out Period
setting forth Buyer's determination of Kodiak Revenue (the "Kodiak Revenue
Statement"). If Seller disputes Buyer's determination of Kodiak Revenue, Seller
shall give notice of such dispute to Buyer within 14 days after the Kodiak
Revenue Statement shall have been provided to Seller. Within 5 days after the
giving of such notice, Buyer and Seller shall refer the dispute to their
respective independent accountants (the "Parties' Accountants") with
instructions to attempt to resolve the dispute. Buyer shall cooperate with the
Parties' Accountants and furnish the Parties' Accountants with all information
reasonably requested by them. Within 20 days after the matter shall be referred
to them, the Parties' Accountants shall give Buyer and Seller written notice as
to whether they have been able to reach agreement as to the determination of
Kodiak Revenue. If the Parties' Accountants shall have reached agreement, such
agreement shall be conclusive and binding on the Parties. If the Parties'
Accountants shall be unable to reach agreement, they shall jointly and promptly
select a third independent certified public accounting firm (the "Third
Accountant"). The Third Accountant shall, within 30 days after the matter is
referred to it, notify Buyer and Seller in writing of its determination of
Kodiak Revenue. Any such determination by the Third Accountant shall be
conclusive and binding on the Parties. If the Third Accountant shall determine
that the Kodiak Revenue proposed by Seller shall be at least 15.0% higher than
the Kodiak Revenue determined by the Third Accountant, then the fees and
expenses of the Third Accountant and all costs associated with the Third
Accountant shall be paid by Seller. If the Third Accountant shall determine that
the Kodiak Revenue proposed by Buyer shall be at least 15.0% lower than the
Kodiak Revenue determined by the Third Accountant, then the fees and expenses of
the Third Accountant and all costs associated with the Third Accountant shall be
paid by Buyer. In all other cases, Buyer and Seller shall each pay one-half of
the fees and expenses of the Third Accountant and all other costs associated
with the Third Accountant. Buyer and Seller shall be responsible for their
respective attorneys' fees, accountants' fees and other expenses incurred in
connection with the dispute.
2.3.2 During the Earn Out Period, Buyer shall:
(a) Operate Kodiak in a commercially reasonable manner consistent
with Kodiak's current practice, and not, without the consent of the Operating
Shareholders, (1) reassign Kodiak employees to other subsidiaries or operating
divisions of Buyer or (2) change contract or credit terms for existing
customers;
(b) In cases where Kodiak shall provide services to another
subsidiary or division of Buyer, on a sub-contract or other basis, such services
shall be charged at full standard rate for purposes of the calculation of Kodiak
Revenue, unless such services shall be for a non-revenue producing internal
project (an "Internal Project");
(c) Obtain the approval of the Vice President and General Manager of
Kodiak before assigning an Internal Project to Kodiak, which approval shall not
be withheld unless the Vice President and General Manager reasonably determines
that such Internal Project shall interfere with Kodiak's revenue-producing
customer work;
(d) Maintain Kodiak's corporate and business existence; and
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(e) Not merge or consolidate Kodiak into another entity or sell all
or substantially all of the assets of Kodiak.
2.4 Because of Kodiak's status as a disregarded entity, the sale of the
Share will be treated for tax purposes as if Buyer had purchased all of Kodiak's
assets. Buyer and Seller agree that the Purchase Price (including any additional
consideration paid to Seller pursuant to Section 2.3) shall be allocated among
Kodiak's assets, tangible and intangible, on the basis of an allocation (the
"Allocation") to be prepared by Buyer and reasonably acceptable to Seller which
(i) allocates a portion of the Purchase Price to Kodiak's fixed assets in an
amount equal to the value of such fixed assets as shown on the books of Seller
in accordance with GAAP immediately prior to the Closing, and (ii) allocates the
remainder of the Purchase Price to intangible assets and goodwill in proportions
to be determined by Buyer. Buyer and Seller may agree upon a different
allocation of the Purchase Price than set forth above, in which case such
different allocation shall be controlling. Buyer shall use its reasonable best
efforts to deliver to Seller the final version of the Allocation on or prior to
January 31, 2006, and such final version of the Allocation shall become a part
of this Agreement for all purposes. Seller and Buyer agree to use the
Allocation, in accordance with Section 1060 of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Code"), in the preparation and filing of all Tax Returns
(including IRS form 8594) for the applicable period. Neither Seller nor Buyer
will take any action that would call into question the bona fides of such
Allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND OPERATING SHAREHOLDERS
Except as disclosed in a document dated as of the date of this Agreement
and delivered by Seller to Buyer prior to the execution and delivery of this
Agreement and referring to the relevant representations and warranties in this
Agreement (the "Disclosure Schedules"), as of the date of this Agreement, Seller
and the Operating Shareholders hereby jointly and severally represent and
warrant to Buyer the following:
3.1 Organization and Qualification.
(a) Seller is a Massachusetts business trust duly formed, validly
existing and in good standing under the laws of Massachusetts, with the
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted.
(b) Kodiak is a corporation duly organized, validly existing and in
good standing under the laws of Massachusetts, with the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Kodiak is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a
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material adverse effect on the financial condition or results of operations of
Kodiak or the Business, taken as a whole.
(c) Kodiak has no Subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest in any corporation,
association, partnership, joint venture arrangement or other business entity. As
used herein, "Subsidiary" shall mean any corporation or other entity more than
50% of the stock or other ownership interest of which (measured by virtue of
voting rights) is directly or indirectly owned by Kodiak. Kodiak does not own
any equity interest in any partnership or joint venture arrangement or other
business entity.
3.2 Title to the Share. Seller holds of record and beneficially owns the
Share free and clear of any Liens or any other restrictions on transfer (other
than any restrictions on transfer under the Securities Act of 1933, as amended
and state securities laws). The Share constitutes all of the outstanding capital
stock of Kodiak. Neither Seller nor Kodiak is a party to any option, warrant,
right, contract, call, put or other agreement or commitment providing for the
disposition or acquisition of capital stock of Kodiak (other than this
Agreement). Seller is not a party to any voting trust, proxy or other agreement
or understanding with respect to the Share.
3.3 Articles of Organization and Bylaws. The copies of Kodiak's Articles
of Organization and Articles of Amendment thereto (collectively, "Articles") and
Bylaws attached hereto as Exhibit A are true, complete and correct copies of
Kodiak's current Articles and Bylaws and are in full force and effect. Kodiak is
not in violation of any of the provisions of its Articles or Bylaws.
3.4 Authority Relative to This Agreement. Seller and Kodiak have all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
and validly authorized by all necessary action of the Trustees and Seller's
shareholders, and no other proceedings on the part of Seller are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Kodiak and the consummation by
Kodiak of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Kodiak are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and Kodiak and, assuming the due authorization, execution
and delivery by Buyer, constitutes the legal, valid and binding obligation of
Seller and Kodiak, enforceable against Seller and Kodiak in accordance with its
terms, subject to applicable laws of bankruptcy, insolvency or similar laws
relating to creditors' rights generally and to general principles of equity
(whether applied in a proceeding in law or equity).
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Seller and Kodiak does
not, and the performance by Seller and Kodiak of their respective obligations
hereunder will not, assuming that all consents, approvals, authorizations and
permits described in Section 3.5(a) of the Disclosure Schedules have been
obtained and all filings and notifications described in Section 3.5(a) of the
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Disclosure Schedules have been made, (i) conflict with or violate any provision
of Seller's Declaration of Trust dated as of December 14, 2001 (the
"Declaration") or the Articles or Bylaws of Kodiak, (ii) conflict with or
violate any law applicable to Seller or Kodiak or by which any property or asset
of Seller or Kodiak is bound or affected or (iii) result in any breach of or
constitute a default (or an event which with the giving of notice or lapse of
time or both could reasonably be expected to become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any material property
or asset of either Seller or Kodiak pursuant to any contract, agreement,
covenant, sale or purchase order or other arrangement (collectively,
"Contracts"), permit, franchise or other obligation to which either Seller or
Kodiak is a party or by which any property or asset of either Seller or Kodiak
is bound.
(b) The execution and delivery of this Agreement by Seller, the Operating
Shareholders and Kodiak does not, and the performance by Seller, the Operating
Shareholders and Kodiak of their respective obligations hereunder will not,
require any consent, approval, authorization or permit of, or filing with or
notification by Seller, the Operating Shareholders or Kodiak to, any
governmental entity which, if not obtained or made, would, individually or in
the aggregate, have a Material Adverse Effect.
3.6 Permits; Compliance with Laws. Kodiak is in possession of all permits
necessary for it to own, lease and operate its properties or to produce, store,
distribute and market its products or otherwise to carry on the Business as it
is now being conducted, and, as of the date of this Agreement (the "Permits"),
none of the Permits has been suspended or cancelled nor is any such suspension
or cancellation pending or, to the knowledge of the Operating Shareholders,
threatened, except for such Permits for which the failure to possess or the
suspension or termination of which would not, individually or in the aggregate,
have a Material Adverse Effect. Kodiak is not in conflict with, or in default or
violation of, (i) any law applicable to Kodiak or by which any property or asset
of Kodiak is bound or affected or (ii) any Permits, except for such conflict,
default or violation which would not have a Material Adverse Effect. Kodiak has
not received from any governmental entity any written notification with respect
to possible conflicts, defaults or violations of laws.
3.7 Financial Statements.
(a) The Operating Shareholders have delivered to Buyer in the Disclosure
Schedules true, complete and correct copies of the following financial
statements:
(i) audited statement of income and cash flows of Kodiak for the
fiscal year ended September 30, 2004, and an audited balance sheet
of Kodiak as of September 30, 2004, together with the related notes
and schedules, if any (such audited balance sheet, statements of
income and cash flows and the related notes and schedules are
referred to herein as the "2004 Financial Statements");
(ii) audited statements of income and cash flows of Kodiak for the
fiscal year ended September 30, 2003, and an audited balance sheet
of Kodiak as at September 30, 2003, together with the related notes
and schedules, if any (such
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audited balance sheet, statements of income and cash flows and the
related notes and schedules are referred to herein as the "2003
Financial Statements");
(iii) audited statements of income and cash flows of Kodiak for the
fiscal year ended September 30, 2002, and an audited balance sheet
of Kodiak as at September 30, 2002, together with the related notes
and schedules, if any (such audited balance sheet, statements of
income and cash flows and the related notes and schedules are
referred to herein as the "2002 Financial Statements"); and
(iv) unaudited statements of income and cash flows of Kodiak for the
fiscal year ended September 30, 2005, and an unaudited balance sheet
of Kodiak as at September 30, 2005 (the "Balance Sheet Date"),
together with the related notes and schedules, if any (such
unaudited balance sheet, statements of income and cash flows and the
related notes and schedules are referred to herein as the "September
30 Financial Statements" and, together with the 2004 Financial
Statements, the 2003 Financial Statements, the 2002 Financial
Statements, and the September 30 Financial Statements, the
"Financial Statements"); and
(v) a schedule of all of the liabilities of Kodiak as of the date of
this Agreement (the "Liabilities Schedule"), which schedule shall be
updated by the Operating Shareholders as of the Closing Date.
(b) Except as set forth on the September 30 Financial Statements, Kodiak
has no liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that is, individually or in the aggregate, material to
the Business and that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with GAAP, except for immaterial
liabilities or obligations incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date. All reserves
established by Kodiak and set forth in the Financial Statements are in
accordance with GAAP, consistently applied. On the Balance Sheet Date, there
were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standard No. 5) that are not adequately provided for in the
September 30 Financial Statements.
(c) The Financial Statements fairly present, in all material respects, the
financial position of Kodiak and results of operations and cash flows as of and
for the periods indicated.
3.8 Owned Real Property. Kodiak does not own any real property or hold any
option to purchase real property.
3.9 Absence of Certain Changes or Events. Since the Balance Sheet Date,
Kodiak has conducted the Business only in the ordinary course consistent with
past practice. Without limiting the generality of the foregoing, except as
specifically contemplated by this Agreement or set forth in Section 3.9 of the
Disclosure Schedules, since the Balance Sheet Date:
(a) There have been no events that, individually or in the aggregate,
would have a Material Adverse Effect;
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(b) Neither the business, properties nor assets of Kodiak have suffered a
loss (whether or not covered by insurance), as a result of fire, explosion,
earthquake, accident, labor trouble, condemnation or taking of property by any
governmental entity, flood, windstorm, pestilence, embargo, riot, act of God or
the public enemy, any other casualty or similar event or any other cause, which
loss has, will have or could reasonably be expected to have a Material Adverse
Effect;
(c) Other than for cash, Kodiak has not declared or paid any dividend or
other distribution (whether in ownership interests or property (other than cash)
or any combination thereof) in respect of any ownership interests of Kodiak;
(d) Kodiak has not purchased, redeemed or otherwise acquired (or committed
itself to purchase, redeem or acquire), directly or indirectly, any ownership
interests or other security of Kodiak;
(e) Kodiak has not made any acquisition of all or any part of the assets,
properties, capital stock or business of any other entity, other than inventory,
equipment and supplies acquired in the ordinary course of business consistent
with past practice;
(f) Kodiak has not, except in the ordinary course of business consistent
with past practice, sold or otherwise disposed of any of its material assets;
(g) Kodiak has not sold, assigned, transferred, conveyed or licensed, or
committed itself to sell, assign, transfer, convey or license, any Intellectual
Property (as defined in Section 3.14), other than in the ordinary course of
business;
(h) Kodiak has not waived or released any right or claim of material value
to its business, including any write-off or other compromise of any material
account receivable of Kodiak;
(i) Kodiak has not paid, directly or indirectly, any of its material
liabilities before the same became due in accordance with its terms other than
in the ordinary course of business consistent with past practice;
(j) Kodiak has not made any payment or commitment to pay any severance or
termination pay to any employee of Kodiak;
(k) Kodiak has not made any wage or salary increase or bonus, or increase
in any other direct or indirect compensation for or to any employee, officer,
director, consultant, agent or other representative, other than to non-officers
or non-director employees, consultants, agents or other representatives in the
ordinary course of business consistent with past practice;
(l) Kodiak has not made any loan, advance or other payment to any of its
or Seller's equity owners, officers, directors, employees, consultants, agents
or other representatives (other than travel advances made in the ordinary course
of business), or made any other loan, advance or other payment other than in the
ordinary course of business consistent with past practice;
(m) Kodiak has not pledged or otherwise, voluntarily or involuntarily,
encumbered any of its assets or properties, except for Liens for current taxes
which are not yet delinquent or which are
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being contested in good faith and purchase-money Liens arising out of the
purchase or sale of products made in the ordinary course of business and in any
event not in excess of $10,000 for any single item or $30,000 in the aggregate;
(n) Kodiak has not materially changed any of its accounting methods,
principles, procedures or practices;
(o) Kodiak has not materially changed any of its business policies or
practices, including advertising, marketing, pricing, purchasing, personnel,
sales or budget policies; and
(p) Kodiak has not entered into any agreement to do any of the foregoing.
3.10 Employee Benefit Plans; Labor Matters.
(a) (i) No asset of Kodiak is subject to any Lien relating to any
"employee benefit plan" (as such term is defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that would affect in any
manner whatsoever Buyer's right, title and interest in, or Buyer's right to use
or enjoy (free and clear of any Lien) any asset of Kodiak or any aspect of the
Business. "ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with Kodiak is, or at any time for which any
relevant statute of limitations remains open was, treated as a single employer
pursuant to sections 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Code").
(ii) Neither Kodiak nor any ERISA Affiliate has maintained, contributed
to, or incurred any liability or obligation with respect to, any employee
pension benefit plan subject to Title IV of ERISA or section 412 of the Code,
including any "multi-employer plan" (as defined in ERISA), nor to any "multiple
employer welfare arrangement" (as defined in ERISA) that could reasonably be
expected by reason of the transactions contemplated by this Agreement to become
a liability of Buyer or Kodiak or to attach to any asset of Kodiak.
(iii) Kodiak maintains for its employees the 401(k) plan described on
Section 3.10(a)(iii) of the Disclosure Schedules.
(iv) Kodiak does not maintain any employee welfare benefit plan that
provides medical or life insurance following an employee's termination of
employment, other than as required by section 4980B of the Code, Part 6 of
Subtitle B of Title I of ERISA or other applicable law. Kodiak does not have any
ERISA Affiliates.
(b) Kodiak is not a party to any collective bargaining or other labor
union contract applicable to persons employed by Kodiak, and no collective
bargaining agreement is being negotiated by Kodiak. As of the date of this
Agreement, there is no labor dispute, strike or work stoppage against Kodiak
pending or, to the knowledge of the Operating Shareholders, threatened that may
interfere with the business activities of Kodiak. As of the date of this
Agreement, to the knowledge of the Operating Shareholders, neither Kodiak nor
any of its representatives or employees has committed any unfair labor practice
in connection with the operation of the Business,
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and there is no charge or complaint against Kodiak by the National Labor
Relations Board or any comparable governmental entity pending or threatened in
writing.
(c) Kodiak is in compliance in all material respects with all currently
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices. There are no controversies pending
or, to the knowledge of the Operating Shareholders, threatened, between Kodiak
and any of its employees, which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic, and
there are no existing factors or circumstances that could reasonably be expected
to result in such an action, suit, proceeding, claim, arbitration or
investigation. To the knowledge of the Operating Shareholders, no employees of
Kodiak are in violation of any term of any employment Contract, patent
disclosure agreement, noncompetition agreement, or any restrictive covenant to a
former employer relating to the right of any such employee to be employed by
Kodiak because of the nature of the business conducted or presently proposed to
be conducted by Kodiak or to the use of trade secrets or proprietary information
of others. Except as set forth in Section 3.10(c) of the Disclosure Schedules,
Kodiak has not received since January 1, 2005, any written or, to the Operating
Shareholders' knowledge, oral notice that any employee intends to terminate his
or her employment with Kodiak.
(d) The Operating Shareholders have delivered to Buyer in Section 3.10(d)
of the Disclosure Schedules a true, complete and correct list of all proposed or
anticipated bonuses to be paid to any employee, representative or agent of
Kodiak through or relating to activities performed prior to the Closing Date.
3.11 Contracts. Set forth in Section 3.11 of the Disclosure Schedules is a
list of the following Contracts to which Kodiak is a party or by which any of
the assets of Kodiak is bound or subject, in effect on the date hereof
(collectively, the "Material Contracts"), true and complete copies of which have
been provided or made available to Buyer:
(a) distributor, sales, marketing, vendor, advertising, financial
advisory, broker-dealer, agency or manufacturer's representative Contracts
involving more than $20,000;
(b) continuing Contracts for the purchase or provision of materials,
supplies, equipment or services involving in the case of any such Contract more
than $20,000 over the life of the Contract;
(c) Contracts that expire, or may be renewed at the option of any Person
(as defined herein) other than Kodiak so as to expire, more than one year after
the date of this Agreement and involving more than $20,000 in the aggregate;
(d) trust indentures, mortgages, promissory notes, loan agreements or
other Contracts for the borrowing of money, any currency exchange, commodities
or other hedging arrangement or any leasing transaction of the type required to
be capitalized in accordance with GAAP;
(e) Contracts for capital expenditures in excess of $20,000 in the
aggregate;
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(f) Contracts currently in effect that were entered into in the ordinary
course of business and that involve the payment or receipt of consideration in
excess of $20,000;
(g) Contracts for the sale, lease or sublease of real property;
(h) Contracts for the sale of any material assets or properties of Kodiak
or for the grant to any Person any preferential rights to purchase any material
assets or properties of Kodiak, other than in the ordinary course of business;
(i) Contracts establishing joint ventures or partnerships;
(j) Contracts containing any material obligations or liabilities of any
kind to holders of ownership interests of Kodiak except for contracts for the
sale or purchase of such ownership interests which have been fully performed;
(k) Contracts relating to the acquisition by Kodiak of any operating
business or any capital stock of any other Person;
(l) Contracts requiring the payment to any Person of any material override
or similar commission or fee;
(m) Contracts with any current or former officer or director, including
any employment or deferred compensation Contract and any compensation, bonus,
incentive plan, severance or change-in-control Contract;
(n) Agreements of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person that involve the potential payment by Kodiak of amounts in
excess of $25,000 in the aggregate; or
(o) Contracts that were not made in the ordinary course of business and
that are material to Kodiak taken as a whole.
Kodiak is not in violation of or in default under (nor has there occurred any
event that with the giving of notice or the expiration of any cure period would
result in such a violation of or default under) any Material Contract, except
for (i) those violations and defaults described in Section 3.11 of the
Disclosure Schedules and (ii) such violations or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect. Each Material
Contract is in full force and effect and is a legal, valid and binding
obligation of Kodiak and, to the knowledge of the Operating Shareholders,
enforceable in accordance with its terms, in each case, subject to applicable
laws of bankruptcy, insolvency or similar laws relating to creditors' rights
generally and to general principles of equity (whether applied in a proceeding
in law or equity). As used herein, "Person" shall mean any person, limited
liability company, partnership, trust, corporation or other entity.
3.12 Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Operating Shareholders,
threatened against Kodiak and, to the knowledge of the Operating Shareholders
after reasonable inquiry, Kodiak has not received any written or oral
11
claim that could reasonably be expected to result in such a suit, claim, action,
proceeding or investigation. Kodiak has not received any written or, to the
knowledge of the Operating Shareholders, oral notice that could reasonably be
expected to result in the denial of insurance coverage under policies issued to
Kodiak in respect of such suits, claims, actions, proceedings and
investigations. Kodiak is not subject to any outstanding order, writ, injunction
or decree. No injunction, judgment, or other order has been issued by any court
or governmental authority in any legal action or proceeding instituted by a
third party against Seller, Kodiak or any of their assets arising by reason of
the acquisition of the Share pursuant to this Agreement, which restrains,
prohibits or invalidates or seeks to restrain, prohibit or invalidate, the
consummation of the transactions contemplated by this Agreement, or seeks
damages related thereto.
3.13 Environmental Matters. Except as would not have, individually or in
the aggregate, a Material Adverse Effect, to the knowledge of the Operating
Shareholders (i) Kodiak is in compliance with all federal, state, local and
foreign statutes, codes, laws, ordinances, regulations, rules, guidance,
notices, permits, judgments, orders and decrees applicable to it or any of its
properties, assets, operations and businesses relating to pollution or the
protection of human health or the environment ("Environmental Laws"); (ii) all
past noncompliance of Kodiak with Environmental Laws, if any, has been resolved
without any pending, ongoing or future obligation, cost or liability; and (iii)
Kodiak has not released a Hazardous Waste, Hazardous Material or Hazardous
Substance (as defined in any Environmental Law) at, or transported a Hazardous
Material to or from, any real property leased or occupied by Kodiak, in
violation of any Environmental Law.
3.14 Intellectual Property.
(a) As used in this Agreement, "Intellectual Property" shall mean Licensed
Intellectual Property (defined below), all patents, inventions, trademarks,
trade names, service marks, trade dress, Internet domain name registrations,
copyrights, copyrightable material (whether or not registered) and any renewal
rights therefor, trade secrets, know-how, computer software programs, Software
Programs (defined below) or applications in both source and object code form,
technical documentation of such software programs, registrations and
applications for any of the foregoing that are used in the Business and/or in
any product, technology or process (i) currently manufactured, used, referenced,
licensed, published, marketed, sold or owned by Kodiak, or (ii) previously or
currently under development for possible future manufacturing, publication,
marketing, licensing or other use by Kodiak.
(b) Section 3.14(b) of the Disclosure Schedules contains a true and
complete list of all of the following items of Intellectual Property owned by
Kodiak: patents, patent applications, trademark registrations, trademark
applications, other material trademarks, trade names, service xxxx
registrations, service xxxx applications, other material service marks, Internet
domain name registrations and copyright registrations and applications and
material copyrightable material.
(c) Except as would not have a Material Adverse Effect, the Intellectual
Property consists solely of items and rights that are: (i) owned by Kodiak; (ii)
in the public domain; or (iii) used by Kodiak pursuant to a valid third party
license (the "Licensed Intellectual Property"). Section 3.14(c) of the
Disclosure Schedules contains a true and complete list of all the material
Licensed Intellectual Property used by Kodiak, including the parties, date, term
and subject matter of each such third party
12
license agreement (each, a "License Agreement") (Buyer acknowledges that any
License Agreement to any commercially available Licensed Intellectual Property
that can be acquired or licensed for less than $5,000, individually including
without limitation, commercially available software programs, need not be set
forth in Section 3.14(c) of the Disclosure Schedules). To the Operating
Shareholders' knowledge and except as would not have a Material Adverse Effect,
Kodiak has all rights in the Intellectual Property necessary to carry out
Kodiak's current activities (and had all rights necessary to carry out its
former activities at the time such activities were being conducted), including,
without limitation, to the extent required to carry out the Business, rights to
make, use, reproduce, modify, adopt, create derivative works based on,
translate, distribute (directly and indirectly), transmit, display and perform
publicly, license, rent and lease and, other than with respect to the
Intellectual Property in the public domain and Licensed Intellectual Property,
assign and sell, the Intellectual Property. Kodiak is not in breach of any
License Agreement.
(d) Kodiak owns or possesses adequate licenses or other valid rights to
use all Intellectual Property within its Business, except as would not have a
Material Adverse Effect, and, to the knowledge of the Operating Shareholders,
the operation of the Business as currently conducted does not infringe on any
copyright, trade secret, trademark, service xxxx, trade name, trade dress, logo,
mask work or patent or any other personal or intellectual property right of any
Person. No written or, to the knowledge of the Operating Shareholders, oral
claims (i) challenging the validity, effectiveness or, other than with respect
to the Licensed Intellectual Property, ownership of any of the Intellectual
Property owned by Kodiak, (ii) challenging the validity of Kodiak's use of the
Licensed Intellectual Property in its business or claiming a breach of any
License Agreement; or (iii) to the effect that Kodiak's operation of the
Business infringes or will infringe on any intellectual property or other
personal right of any Person have been asserted or, to the knowledge of the
Operating Shareholders, are threatened by any Person, nor are there, to the
knowledge of the Operating Shareholders, any valid grounds for any bona fide
claim of any such kind. All registered, granted or issued patents, trademarks,
Internet domain name registrations and copyrights owned by Kodiak are
enforceable and subsisting. To the knowledge of the Operating Shareholders,
there is no unauthorized use, infringement or misappropriation of any of the
Intellectual Property by any third-party or any current or former agent,
director, officer, employee of Kodiak.
(e) All personnel, including employees, officers, directors, agents,
consultants and contractors, who have contributed to or participated in the
conception, use or development of the Intellectual Property have executed
agreements that require such personnel to assign any and all interest in the
Intellectual Property to Kodiak and to keep confidential all trade secrets,
proprietary data, customer information or other business information of Kodiak.
No such personnel is a party to any Contract with any Person other than Kodiak
that requires such personnel to assign interest in any Intellectual Property to
any Person other than Kodiak.
(f) Kodiak is not, nor as a result of the execution or delivery of this
Agreement will it be, in violation of any license, sublicense, agreement or
instrument to which Kodiak is a party or otherwise bound, nor will execution or
delivery of this Agreement, or performance of Kodiak's obligations hereunder,
cause the diminution, termination or forfeiture of any Intellectual Property,
except as will not have, individually or in the aggregate, a Material Adverse
Effect.
13
(g) Section 3.14(g) of the Disclosure Schedules contains a true and
complete list of all of the material software programs owned by or under the
development of Kodiak (the "Software Programs"). Software Programs do not
include Licensed Intellectual Property. Kodiak owns full and unencumbered right
and good and marketable title to the Software Programs free and clear of all
mortgages, pledges, security interests, conditional sales agreements, charges or
other Liens of any kind, except for (i) Kodiak's licensing of the Software
Programs in the ordinary course of business and (ii) those Liens set forth in
Section 3.14(g) of the Disclosure Schedules.
(h) Except for arrangements under escrow agreements executed in the
ordinary course of business with Persons listed in Section 3.14(h) of the
Disclosure Schedules, and Persons listed in Section 3.14(h) of the Disclosure
Schedules who are bound by an appropriate confidentiality Contract, the source
code and system documentation relating to the Software Programs (i) have been
disclosed by Kodiak only to personnel who have a "need to know" the contents
thereof in connection with the performance of their duties to Kodiak, and (ii)
have not been disclosed to any third party.
3.15 Taxes.
(a) To the extent that failure to do so would adversely affect Buyer,
Kodiak, the Business or Buyer's ownership of the Share or operation of Kodiak or
the Business, each of Seller and Kodiak has timely filed all material Tax
Returns that it was required to file. All such Tax Returns have been true and
complete in all material respects. All Taxes owed by Seller or Kodiak (whether
or not shown or required to be shown on any Tax Return) have been paid to the
extent that failure to do so would adversely affect Buyer, Kodiak, the Business
or Buyer's ownership of the Share or operation of Kodiak or the Business. No
claim has ever been made in writing by an authority in a jurisdiction where
Seller or Kodiak does not file Tax Returns that Seller or Kodiak is or may be
subject to taxation in such jurisdiction. To the extent that failure to do so
would adversely affect Buyer, Kodiak, the Business or Buyer's ownership of the
Share or operation of Kodiak or the Business, Kodiak has withheld and paid all
material Taxes required to have been withheld and paid in connection with any
amounts paid or owing to any employee, independent contractor, creditor, or
stockholder or other third party, and all Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed in all material
respects. There is no material dispute or claim concerning any Tax liability of
Kodiak (A) raised by any authority in writing or (B) of which the Operating
Shareholders have knowledge. Kodiak has not waived any statute of limitations in
respect of Taxes nor agreed to any extension of time with respect to a Tax
assessment or deficiency. Neither Seller nor Kodiak is a party to any Tax
allocation or sharing agreement pursuant to which Buyer could have any liability
following Closing.
(b) For purposes of this Section:
(i) "Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
windfall profits, custom duties, ownership interests, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value-added,
alternative, or other tax of any kind whatsoever, whether computed on a separate
or consolidated, unitary, or combined basis or in any other manner, including
any interest, penalty, or addition thereto, whether
14
disputed or not and including any obligation to indemnify or otherwise assume or
succeed to the Tax liability of any other Person.
(ii) "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
3.16 Insurance. Kodiak is presently insured, and during each of the past
three calendar years has been insured, against such risks as companies engaged
in a similar business would, in accordance with good business practice,
customarily be insured. The policies of fire, theft, liability and other
insurance maintained with respect to the assets of Kodiak or the Business
provide adequate coverage against loss. Kodiak maintains, in full force and
effect, the insurance policies set forth in Section 3.16 of the Disclosure
Schedules.
3.17 Properties. Kodiak has good and marketable title, free and clear of
all Liens, to all its material properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the September 30 Financial
Statements as being owned by Kodiak as of the date thereof, other than (i) any
properties or assets that have been sold or otherwise disposed of in the
ordinary course of business consistent with past practices since the Balance
Sheet Date, (ii) Liens disclosed in Section 3.17 of the Disclosure Schedules,
and (iii) any Liens arising in the ordinary course of business consistent with
past practices after the Balance Sheet Date. All buildings, and all fixtures,
equipment and other property and assets that are material to the Business on a
consolidated basis, held under leases or sub-leases by Kodiak are held under
valid instruments enforceable in accordance with their respective terms, subject
to applicable laws of bankruptcy, insolvency or similar laws relating to
creditors' rights generally and to general principles of equity (whether applied
in a proceeding in law or equity). Substantially all of Kodiak's equipment in
regular use has been reasonably maintained and is in serviceable condition,
reasonable wear and tear excepted. The assets of Kodiak constitute all of the
assets, tangible and intangible, of any nature whatsoever, necessary to operate
the Business in the manner presently operated by Kodiak.
3.18 Brokers. Except as set forth in Section 3.18 of the Disclosure
Schedules, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf of
Seller, the Operating Shareholders or Kodiak.
3.19 Certain Business Practices. Neither Kodiak nor, to the knowledge of
the Operating Shareholders, any director, officer, agent or employee of Kodiak
(in his or her capacity as such) has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
3.20 Business Activity Restriction. Except as set forth in Section 3.20 of
the Disclosure Schedules, there is no non-competition or other similar
agreement, commitment, judgment, injunction, order or decree to which Kodiak is
a party or subject to that has or could reasonably be
15
expected to have the effect of prohibiting or impairing the conduct of the
Business by Kodiak as currently conducted. Except as set forth in Section 3.20
of the Disclosure Schedules, Kodiak has not entered into any agreement under
which Kodiak is restricted from selling, licensing or otherwise distributing any
of its technology or products to, or providing services to, customers or
potential customers or any class of customers, in any geographic area, during
any period of time or in any segment of the market or line of business.
3.21 Export Control Laws. Kodiak has conducted its export transactions in
accordance with applicable provisions of United States export control laws and
regulations, including but not limited to the Export Administration Act and
implementing Export Administration Regulations, except for such violations which
would not have, individually or in the aggregate, a Material Adverse Effect.
3.22 Interested Party Transactions. No executive officer, director,
Affiliate or equity owner of Kodiak has engaged in any business dealings with
Kodiak during the last three years other than business dealings engaged on
behalf of Kodiak in which such Person had no pecuniary interest other than
compensation from Kodiak or such Person's equity ownership interest in Kodiak.
"Affiliate" of a Person shall mean: (i) any other Person directly, or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with such Person; (ii) any officer, director, partner, employer, or
direct or indirect beneficial owner of any 10% or greater equity or voting
interest of such Person; or (iii) any other Person for which a Person described
in clause (ii) acts in any such capacity.
3.23 Accounts Receivable. All accounts receivable of Kodiak that are
reflected on the September 30 Financial Statements represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business. Unless paid prior to the Closing Date, such accounts
receivable are, as of the Balance Sheet Date, reasonably current (meaning not
more than approximately 60 days past the date of invoicing) and reasonably
anticipated to be collectible net of the allowances or reserves shown on the
September 30 Financial Statements or on the accounting records of Kodiak as of
the Balance Sheet Date. Section 3.23 of the Disclosure Schedules sets forth an
aged list of accounts receivable of Kodiak as of the Balance Sheet Date.
3.24 Customers and Suppliers. Except as set forth in Section 3.24 of the
Disclosure Schedules, neither Seller nor Kodiak has received any written, or to
the knowledge of the Operating Shareholders, or oral notice from any material
customer or supplier of Kodiak that such customer does not intend to pay for
services rendered or products purchased, such customer is dissatisfied with any
service or product of Kodiak in any material respect, such supplier does not
intend to continue to supply goods or services to Kodiak or there exists any
breach or event of default under any Contract with such customer or supplier, no
material customer or supplier has cancelled or otherwise terminated, or to the
Operating Shareholders' knowledge, threatened to cancel or otherwise terminate,
its relationship with Kodiak since January 1, 2005. Kodiak has no agreements or
arrangements establishing, creating or relating to any rebate, promotion or
other allowance that involves any obligation or liability to any customer that
is material.
3.25 Employee Complaints. Since January 1, 2005, to the Operating
Shareholders' knowledge, Kodiak has not discharged, demoted, suspended,
threatened, harassed or in any other
16
manner discriminated against any employee (i) who had previously submitted to
his or her supervisor or anyone else in a position of authority with Kodiak any
written, or to the knowledge of the Operating Shareholders, oral complaint,
concern or allegation regarding any alleged unlawful or unethical conduct by
Kodiak or its employees relating to accounting, internal accounting controls or
auditing matters, or (ii) who has provided information to, or otherwise assisted
any investigation by, any law enforcement, regulatory or other governmental
authority or a member of the United States Congress. Since January 1, 2005, no
employee of Kodiak (i) has submitted to his or her supervisor or to someone else
in a position of authority any written, or to the knowledge of the Operating
Shareholders, oral complaint, concern or allegation regarding any alleged
unlawful or unethical conduct by Kodiak or its employees relating to accounting,
internal accounting controls or auditing matters or (ii) has provided
information to, or otherwise assisted any investigation by, any law enforcement,
regulatory or other governmental authority or a member of the United States
Congress.
3.26 Business Information. The Pipeline Report attached to Section 3.26 of
the Disclosure Schedules represents known active interactions with prospective
customers regarding the potential sale of Kodiak's software and services. This
report in no way represents or guarantees that such prospective customers will
choose to purchase software or services from Kodiak or its successors.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date of this Agreement, Buyer represents and warrants to Seller
the following:
4.1 Organization; Good Standing. Buyer has been duly organized and is
validly existing and in good standing under the laws of Delaware and has the
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted.
4.2 Authority Relative to This Agreement. Buyer has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly executed and
delivered by Buyer and, assuming the due authorization, execution and delivery
by Seller, the Operating Shareholders and Kodiak, constitutes the legal, valid
and binding obligation of Buyer enforceable against Buyer in accordance with its
terms, subject to applicable laws of bankruptcy, insolvency or similar laws
relating to creditors' rights generally and to general principles of equity
(whether applied in a proceeding in law or equity).
4.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Buyer does not, and
the performance by Buyer and of its obligations hereunder will not, (i) conflict
with or violate any
17
provision of the Certificate of Incorporation or Bylaws of Buyer, (ii) assuming
that all consents, approvals, authorizations and permits described on Schedule
4.3 attached hereto have been obtained and all filings and notifications
described on Schedule 4.3 have been made, conflict with or violate any law
applicable to Buyer or (iii) result in any breach of or constitute a default (or
an event which with the giving of notice or lapse of time or both could
reasonably be expected to become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any property or asset of Buyer pursuant to, any Contract,
permit, franchise or other obligation, which conflict, violation, breach or
default would have a Material Adverse Effect on Buyer.
(b) The execution and delivery of this Agreement by Buyer does not, and
the performance by Buyer of its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing by Buyer with or
notification by Buyer to, any governmental entity which, if not obtained or
made, would individually or in the aggregate, have a Material Adverse Effect.
4.4 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with this Agreement
or transactions contemplated hereby based upon arrangements made by or on behalf
of Buyer.
ARTICLE V
COVENANTS
5.1 Employees of the Business. Prior to the Closing Date, the Operating
Shareholders, Seller and Kodiak will provide Buyer and its representatives
reasonable access to all personnel files for the employees engaged in the
Business.
5.2 Consents. Prior to Closing, Seller, the Operating Shareholders and
Kodiak will, upon request of Buyer, use their reasonable commercial efforts to
obtain any consents, approvals and waivers of any and all third parties required
in connection with the transactions contemplated by this Agreement, including
those listed on Schedule 5.2 attached hereto.
5.3 Further Assurances. Seller and the Operating Shareholders shall
execute and deliver to Buyer, at Closing or thereafter, any other instrument
which may be requested by Buyer and which is reasonably appropriate to perfect
or evidence any of the transactions contemplated by this Agreement or to
transfer the Share after Closing. Buyer shall execute and deliver to Seller, at
Closing or thereafter, any other instrument that may be requested by Seller, and
which is reasonably appropriate to perfect or evidence any of the transactions
contemplated by this Agreement.
5.4 Tax Returns. Seller shall duly prepare and file or cause to be
prepared and filed all Tax Returns related to Taxes of any nature with respect
to Kodiak or the Business for all periods ending on or prior to the Closing Date
and pay all Taxes due with respect to such periods. Buyer shall duly prepare and
file or cause to be prepared and filed all required Tax Returns related to Taxes
of any nature with respect to Kodiak or the Business for all periods ending
after the Closing Date and pay all Taxes due with respect to such periods.
18
5.5 Transition Cooperation; Mail Received After Closing. Seller agrees to
reasonably cooperate with Buyer to facilitate the transition of ownership of
Kodiak and the Business to Buyer. Following the Closing, Buyer may receive and
open all mail addressed to Seller which on its face relates to Kodiak or the
Business, and, to the extent that such mail and the contents thereof relate to
Kodiak or the Business, deal with the contents thereof at its discretion. Buyer
shall promptly notify Seller and provide Seller the originals of any mail that
on its face obliges Seller to take any action or indicates that action may be
taken against Seller and any mail applicable solely to Seller.
5.6 Confidentiality.
(a) Prior to the Closing, Buyer will treat and hold as confidential all
information belonging to, used by or in the possession of Seller or Kodiak that
shall relate to the business, products, services, research or development of
Seller or Kodiak, including, without limitation, (i) internal business
information, including, without limitation, financial statements, reports,
summaries of operations, projections, accounting and business methods,
information relating to strategic and staffing plans and practices, business,
marketing, promotional and sales plans, practices and programs, training
practices and programs and cost, rate and pricing structures; (ii) trade
secrets, ideas, inventions or designs (whether or not patentable or
copyrightable and whether or not reduced to practice or fixed in a tangible
medium), including, without limitation, all drawings, formulas, patterns,
models, methods, procedures, specifications, technology, development plans,
samples, memoranda, notes and other related information; (iii) computer
software, program listings, documentation, data and data bases; (iv) identities
and individual requirements of suppliers, distributors and customers; and (v)
compilations of data, including, without limitation, the form or format of
information that may comprise or include information otherwise not deemed
confidential (the "Confidential Business Information"). "Confidential Business
Information" shall not include any information that (i) is generally known or
available to the public, or is in the public domain, at the time of disclosure
or, after such disclosure, becomes generally known to the public, or falls into
the public domain, other than by a breach of this Agreement by Buyer; (ii) is
already in the possession of Buyer without restriction at the time of
disclosure; (iii) is disclosed to Buyer on a non-confidential basis by a third
party having the right to make such disclosure; or (iv) is independently
developed by Buyer without reliance in any way on any Confidential Business
Information received from Seller or Kodiak. Except as may be required to be
disclosed by applicable law or administrative or legal process or pursuant to
any applicable securities laws, prior to the Closing, Buyer shall not disclose
any of the Confidential Business Information to any Person for any reason or
purpose whatsoever (except to authorized representatives of Buyer and to counsel
and other advisers, provided that such representatives and advisors (other than
counsel) agree to the confidentiality provisions of this Section 5.6(a)). In the
event that prior to the Closing Buyer is requested or required, by oral question
or request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process (each a "Proceeding"),
to disclose any Confidential Business Information, Buyer will notify Seller
promptly of the request or requirement so that Seller may seek an appropriate
protective order or waive compliance with the provisions of this Section. If, in
the absence of a protective order or the receipt of a waiver hereunder, Buyer
is, on the advice of counsel, compelled to disclose any Confidential Business
Information in connection with any Proceeding, Buyer may disclose the
Confidential Business Information to the Person so requesting it; provided,
however, that Buyer shall use its commercially reasonable efforts to obtain, at
the reasonable request of Seller, an order or other
19
assurance that confidential treatment will be accorded to such portion of the
Confidential Business Information required to be disclosed as Seller shall
designate.
(b) The Operating Shareholders, Seller and Kodiak will treat and hold as
confidential the Confidential Business Information. Except as may be required to
be disclosed by applicable law or administrative or legal process or pursuant to
any securities exchange rules, neither the Operating Shareholders, Seller nor
Kodiak shall disclose any of the Confidential Business Information to any Person
for any reason or purpose whatsoever (except to authorized representatives of
Seller or Kodiak and to counsel and other advisers, provided that such
representatives and advisors (other than counsel) agree to the confidentiality
provisions of this Section 5.6(b)). In the event that the Operating
Shareholders, Seller or Kodiak is requested or required, by oral question or
request for information or documents in any Proceeding, to disclose any
Confidential Business Information, the Operating Shareholders will notify Buyer
promptly of the request or requirement so that Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section. If, in
the absence of a protective order or the receipt of a waiver hereunder, the
Operating Shareholders, Seller or Kodiak is, on the advice of counsel, compelled
to disclose any Confidential Business Information in connection with any
Proceeding, the Operating Shareholders, Seller or Kodiak, as applicable, may
disclose the Confidential Business Information to the Person so requesting it;
provided, however, that the Operating Shareholders shall use their commercially
reasonable efforts to obtain, at the reasonable request of Buyer, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Business Information required to be disclosed as Buyer shall
designate.
(c) Notwithstanding anything herein to the contrary, the Parties agree and
acknowledge that each Party (and each employee, representative, or other agent
of each Party) may disclose to any and all Persons, without limitation of any
kind, the tax treatment and tax structure of the transaction contemplated by
this Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to each Party relating to such tax treatment or tax
structure (provided that the confidentiality provisions of this Agreement shall
continue to apply to information that is irrelevant to understanding the tax
treatment or tax structure of the transactions contemplated hereby and thereby).
5.7 Public Announcements. Neither Buyer, Seller, the Operating
Shareholders nor Kodiak shall make any press release or public announcement
concerning the existence of this Agreement or the transactions contemplated
hereby, except with the consent of the other Parties and except as and to the
extent that any such Party shall be so obligated by law, in which case the other
Parties shall be advised and the Parties shall use their reasonable efforts to
cause a mutually agreeable release or announcement to be issued; provided,
however, that the foregoing shall not preclude communications or disclosures
necessary to implement the provisions of this Agreement to comply with
accounting and Securities and Exchange Commission disclosure obligations or
applicable regulatory disclosure obligations.
5.8 Sales and Transfer Tax Expenses. If the transactions contemplated by
this Agreement are not exempt from sales and use taxes and other transfer taxes,
Buyer shall pay such taxes and any and all recording fees imposed upon the
transfer of the Share hereunder and the filing of any instruments.
20
5.9 Exclusivity. For a period beginning on the date hereof and ending on
the earlier of the Closing Date or the date of termination of this Agreement,
neither Seller, the Operating Shareholders nor Kodiak shall (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of all or substantially all of the Business, the
Share, or all or substantially all of the capital shares or assets of Kodiak
(including any acquisition structured as a merger or exchange) or (ii)
participate in any negotiations or discussions regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person in favor of any such
acquisition.
5.10 Conduct of the Business. During the period from the date of this
Agreement and continuing until the earlier of the Closing or the termination of
this Agreement pursuant to its terms, the Operating Shareholders, Seller and
Kodiak agree, except to the extent that Buyer shall otherwise consent in writing
(which consent shall not be unreasonably withheld or delayed), to carry on the
Business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to use all commercially reasonable efforts
consistent with past practices and policies to preserve the Business and all
Intellectual Property, not to provide any increased compensation or make any
severance payment to any executive officer and not to enter into any material
Contract without the prior written consent of Buyer.
5.11 Payment of Loans. Simultaneous with the Closing, Seller shall cause
to be paid in full the (a) outstanding loans to Kodiak by Massachusetts Capital
Resource Company and MB Capital Fund II, LLC (a/k/a MassBusiness Mezzanine Fund
II, LLC), and (b) Kodiak's line of credit with Legacy Banks.
5.12 Employment Agreements for Kodiak Executives. At the Closing, Buyer
shall enter into employment agreements with Xxxxxxx X. Xxxxxxxx, Xxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx in the form of Exhibit B
attached hereto (the "Employment Agreements").
5.13 Life Insurance. At the request of the Operating Shareholders,
following the Closing, Buyer shall cause a duly authorized officer of Kodiak to
execute all documents that shall be necessary to assign each Jefferson Pilot
Financial Life Insurance Company term insurance policy described on Schedule
5.13 attached hereto to the Operating Shareholder whose life shall be insured by
such policy. Each Operating Shareholder shall reimburse Kodiak for the prepaid
portion of the premium on his policy for the current term year.
ARTICLE VI
CONDITIONS PRECEDENT; CLOSING DELIVERIES
6.1 Conditions Precedent of Buyer. The obligations of Buyer to effect the
Closing under this Agreement are subject to the satisfaction of each of the
following conditions, unless waived by Buyer in writing to the extent permitted
by applicable law ("Buyer's Conditions Precedent"):
(a) Each of the representations and warranties of Seller and the Operating
Shareholders contained in this Agreement shall be true and correct in all
material respects at and as of the Closing
21
Date as though made at and as of that time other than such representations and
warranties as are specifically made as of another date, except where the failure
to be so true and correct has not had a Material Adverse Effect, and the
Operating Shareholders shall have delivered to Buyer a certificate to that
effect.
(b) Seller, the Operating Shareholders and Kodiak shall have performed and
complied in all material respects with all covenants under this Agreement to be
performed or complied with by any of them at or prior to the Closing Date,
except where the failure to so perform and comply has not had a Material Adverse
Effect, and Seller shall have delivered to Buyer a certificate to that effect.
(c) No injunction, judgment, or other order shall have been issued by any
court or governmental authority in any legal action or proceeding instituted by
a third party against Seller, Kodiak, any of Kodiak's assets or Buyer arising by
reason of the acquisition of the Share pursuant to this Agreement, which
restrains, prohibits or invalidates or seeks to restrain, prohibit or
invalidate, the consummation of the transactions contemplated by this Agreement,
or seeks damages related thereto, and Seller shall have delivered to Buyer a
certificate to that effect (provided that such certificate shall not include
certification regarding legal actions or proceedings against Buyer).
(d) Seller and Kodiak shall have procured all of the consents, approvals
and waivers of third parties or any regulatory body or authority listed on
Schedule 6.1(d) attached hereto.
(e) All documents described in Section 6.3 shall have been executed and
delivered to Buyer.
(f) There have occurred no events that, individually or in the aggregate,
have had a Material Adverse Effect.
(g) Buyer shall have received a certificate executed in the name of and on
behalf of Kodiak by the President and Treasurer of Kodiak, in their capacity as
officers and not in their capacity as individuals, to the effect that the
Financial Statements fairly represent in all material respects the financial
position of Kodiak and the results of operations and cash flows as of and for
the periods indicated therein.
(h) The Agreement and all transactions contemplated hereby shall have been
approved by the Trustees and shareholders of Seller.
6.2 Conditions Precedent of Seller. The obligations of Seller to effect
the Closing under this Agreement are subject to the satisfaction of each of the
following conditions, unless waived by Seller in writing to the extent permitted
by applicable law ("Seller's Conditions Precedent"):
(a) Each of the representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as though made at and as of that time other than such
representations and warranties as are specifically made as of another date, and
Buyer shall have delivered to Seller a certificate to that effect.
22
(b) Buyer shall have performed and complied in all material respects with
all covenants under this Agreement to be performed or complied with by it at or
prior to the Closing Date, and Buyer shall have delivered to Seller a
certificate to that effect.
(c) No injunction, judgment, or other order shall have been issued by any
court or governmental authority in any legal action or proceeding instituted by
a third party against Buyer arising by reason of the acquisition of the Share
pursuant to this Agreement, which restrains, prohibits or invalidates or seeks
to restrain, prohibit or invalidate, the consummation of the transactions
contemplated by this Agreement, or seeks damages related thereto, and Buyer
shall have delivered to Seller a certificate to that effect.
(d) Buyer shall have procured all of the consents, approvals and waivers
of third parties or any regulatory body or authority listed on Schedule 6.2(d)
attached hereto.
(e) All documents described in Section 6.4 shall have been executed and
delivered to Seller.
6.3 Deliveries by Seller. At the Closing, Seller will deliver or will
cause to be delivered to Buyer:
(a) Share Certificate representing the Share, accompanied by a stock power
duly executed in blank;
(b) Good standing certificates, or certificates of existence where
applicable, relating to Kodiak from the Secretary of State of Massachusetts and
each other jurisdiction in which Kodiak is conducting the Business;
(c) Originals of the Employment Agreements executed by each of Xxxxxxx X.
Xxxxxxxx, Xxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx;
(d) A Trustee's Certificate, in a form reasonably acceptable to Buyer,
attesting to the authorization of the Trustees to execute this Agreement;
(e) A Secretary's Certificate of Kodiak, in a form reasonably acceptable
to Buyer, attesting to the incumbency of the officers executing this Agreement,
and resolutions authorizing the execution of this Agreement by such officers;
and
(f) Resignations of the current officers and directors of Kodiak, in a
form reasonably acceptable to Buyer, listed on Schedule 6.3(f) attached hereto.
6.4 Deliveries by Buyer. At the Closing, Buyer will deliver or cause to be
delivered to Seller:
(a) A certificate of existence relating to Buyer from the Secretary of
State of the State of Delaware;
23
(b) A Secretary's Certificate of Buyer attesting to the incumbency of the
officers executing this Agreement, and resolutions authorizing the execution of
this Agreement by such officers;
(c) Originals of the Employment Agreements executed on behalf of Buyer;
and
(d) The Cash Consideration in immediately available funds in accordance
with Section 2.2(a).
ARTICLE VII
SURVIVAL
7.1 Survival of Representations and Warranties. The representations and
warranties of the Operating Shareholders, Seller and Buyer contained in Article
III and Article IV of this Agreement shall survive the Closing until the date
two years after the Closing Date; provided, however, that the representations
and warranties contained in Section 3.15 (Taxes) shall survive until 30 calendar
days after the expiration of the applicable statute of limitations governing
such claims. If written notice of a claim has been given prior to the expiration
of the applicable representations and warranties, then the relevant
representations and warranties shall survive as to such claim, until such claim
has been finally resolved.
ARTICLE VIII
NONCOMPETITION AND NON-SOLICITATION
8.1 Covenant Not to Compete. Each of Seller and the Operating Shareholders
agrees that, within the United States for a period of 36 months after the
Closing Date, it or he will not, without Buyer's prior written consent, directly
or indirectly, (a) establish or own any financial, beneficial or other interest
in (other than an interest consisting of less than 1% of a class of a publicly
traded security), make any loan to or for the benefit of, or render any
managerial, marketing or other business advice to any Person competing with the
Business, or (b) engage in, render services to, or become interested in any
manner, as director, employee, officer, consultant, or partner, or through
ownership (other than holding less than 1% of the outstanding equity securities
of a Person having securities that are listed for trading on a national
securities exchange) or otherwise, either alone or in association with any other
Person, any Person competing with the Business (the "Covenant Not to Compete").
8.2 Non-Solicitation. Each of Seller and the Operating Shareholders agrees
that, for a period of 36 months after the Closing Date, it or he will not in any
way, directly or indirectly, for itself or himself, or on behalf of or in
conjunction with any other Person:
(a) solicit or divert or attempt to solicit or divert any customer served
by Kodiak prior to the date hereof for the purpose of competing with the
Business;
24
(b) solicit or divert or attempt to solicit or divert any prospective
customer to which a written proposal was submitted by Kodiak during the 12 month
period prior to the date hereof for the purpose of competing with the Business;
or
(c) solicit or attempt to solicit any employee or independent contractor
of Kodiak or Buyer either to work for any Person whether or not competing with
the Business.
8.3 Remedies.
(a) Seller and the Operating Shareholders acknowledge that any violation
of this Article VIII will cause irreparable harm to Buyer and that damages are
not an adequate remedy. Seller and the Operating Shareholders therefore agree
that Buyer shall be entitled to injunctive relief enjoining, prohibiting and
restraining Seller and the Operating Shareholders from the continuance of any
such violation, in addition to any monetary damages that might occur by reason
of a violation of Article VIII of this Agreement or any other remedies at law or
in equity, including, without limitation, specific performance.
(b) Any damages to Buyer from any violation of this Article VIII by Seller
and the Operating Shareholders may be satisfied by on offset to any portion of
the Purchase Price owed to Seller or the refund of any portion of the Purchase
Price previously paid to Seller.
8.4 Independent Covenants. The covenants set forth in Article VIII of this
Agreement are and shall be deemed and construed as separate and independent
covenants. Should any part or provision of such covenants be held invalid, void
or unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall not render invalid, void or unenforceable any other part
or provision thereof. Specifically, and without limiting the generality of the
foregoing, if any portion of Article VIII of this Agreement is found to be
invalid by a court of competent jurisdiction because its duration and/or the
restricted activities are invalid or unreasonable in scope, such duration and/or
restricted activity, as the case may be, shall be redefined by consideration of
the concerns and needs of Buyer's business interests such that the intent of
Buyer, in consummating the transactions contemplated by this Agreement, will not
be impaired and shall be enforceable to the fullest extent permissible under
applicable laws.
8.5 Acknowledgment. Seller and the Operating Shareholders agree and
acknowledge that the covenants contained herein are provided in connection with
the sale of a business by Seller to Buyer. Seller and the Operating Shareholders
acknowledge that the consideration provided under this Agreement is good and
adequate consideration for the covenants given herein. Seller and the Operating
Shareholders acknowledge the reasonableness of the term and scope of the
covenants set forth in Article VIII of this Agreement, and agree that they will
not, in any action, suit or other proceeding, deny the reasonableness of, or
assert the unreasonableness of, the premises, consideration or scope of the
covenants set herein.
8.6 Termination of Covenant. If an Operating Shareholder's employment by
Buyer shall be terminated for any reason other than (a) his voluntary
termination under Section 4.3.4 of his Employment Agreement, (b) a Cause
Termination under Section 4.3.1 of his Employment Agreement, or (c) his
disability under Section 4.3.5 of his Employment Agreement, the Covenant
25
Not to Compete shall terminate as to such Operating Shareholder six months
following the date of such termination of his employment provided he shall have
received payment of Severance Pay (as defined in Section 6.2 of his Employment
Agreement) during such six-month period; if such Operating Shareholder shall not
have received the full Severance Pay during such six-month period, the Covenant
Not to Compete shall terminate as of the latest date of payment of Severance Pay
or Salary (as defined in Section 5.1 of his Employment Agreement), as the case
may be.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written agreement of Buyer and Seller;
(b) by Buyer upon notice to Seller that there has occurred such event that
may make the satisfaction of Buyer's Conditions Precedent impossible or
unlikely; in which event Buyer may choose, in its sole discretion, to either (i)
waive such failure of Buyer's Conditions Precedent and complete the Closing or
(ii) terminate this Agreement;
(c) by Seller, upon notice to Buyer that there has occurred such event
that may make the satisfaction of Seller's Conditions Precedent impossible or
unlikely; in which event Seller may choose, in its sole discretion, to either
(i) waive such failure of Seller's Conditions Precedent and complete the Closing
or (ii) terminate this Agreement;
(d) by Buyer or Seller, upon notice to the other, if the Closing shall not
have occurred on or prior to November 1, 2005 (or such later date as the Parties
may have agreed in writing); or
(e) by Buyer or Seller, upon notice to the other, if a court of competent
jurisdiction or governmental authority shall have issued an order, decree or
ruling or taken any other action, in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable.
9.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 9.1, all obligations of the Parties hereto under this
Agreement shall terminate and there shall be no liability or obligation on the
part of Seller or Buyer to any other Party hereto, except (i) that the
obligations of the Parties under Section 5.7 (Public Announcements), Section
10.2 (Expenses) and Section 10.6 (Governing Law and Jurisdiction) of this
Agreement shall remain in full force and effect, and (ii) that such termination
shall not relieve any Party of any liability for any breach of this Agreement if
this Agreement is terminated by operation of Section 9.1(b), (c) or (d) as a
result of a Party's breach of the terms of this Agreement.
26
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon delivery) by delivery in person, by telecopy
or facsimile with a confirming copy sent overnight by a nationally recognized
courier service, by registered or certified mail (postage prepaid, return
receipt requested) or by a nationally recognized courier service to the
respective Parties at the following addresses (or at such other address for a
Party as shall be specified in a notice given in accordance with this Section
10.1):
if to Buyer:
Internet Commerce Corporation
0000 Xxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopier: (000) 000-0000
and
Xxxxxx, Xxxxxxx & Xxxxxx, LLP
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxxx, Esq.
Telecopier: 000-000-0000
if to Seller, Kodiak or Operating Shareholders:
c/o The Kodiak Group, Inc.
00 Xxxx Xxxxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
with copies to:
Xxxx Xxxxxxx Xxxxx & Xxxx PC
00 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: C. Xxxxxxx Xxxx, Esq.
Telecopier: 000-000-0000
27
10.2 Expenses. Except as otherwise provided herein, expenses, including
the fees of any attorneys, accountants, investment bankers or others engaged by
a Party, incurred in connection with this Agreement and the transactions
contemplated hereby, shall be paid by the Party incurring such expenses whether
or not the transactions contemplated by this Agreement are consummated.
10.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable law.
10.4 Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the Parties (whether by operation of law or otherwise) without the prior written
consent of the other Parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the Parties and their
respective successors and permitted assigns. Notwithstanding anything contained
in this Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the Parties or their
respective successors and permitted assigns any rights or remedies under or by
reason of this Agreement.
10.5 Incorporation of Exhibits. The schedules and exhibits attached hereto
and referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein.
10.6 Governing Law and Jurisdiction. The validity, interpretation and
performance of this Agreement and any dispute connected herewith shall be
governed by and construed in accordance with the laws of the State of Georgia,
without regard to its conflicts of laws principles. Seller, the Operating
Shareholders, Kodiak and Buyer hereby irrevocably submit in any suit, action or
proceeding arising out of or related to this Agreement or any of the
transactions contemplated hereby or thereby to the jurisdiction of the United
States District Court for the Northern District of Georgia and the jurisdiction
of any court of the State of Georgia located in Gwinnett County, Georgia and
waive any and all objections to jurisdiction that they may have under the laws
of the State of Georgia or the United States
10.7 Waiver of Jury Trial; Arbitration.
(a) Each Party hereto hereby irrevocably waives all right to trial by jury
in any proceeding (whether based on contract, tort or otherwise) arising out of
or relating to this Agreement or any transaction or agreement contemplated
hereby or the actions of any Party hereto in the negotiation, administration,
performance or enforcement hereof.
(b) Any dispute related to this Agreement shall be submitted to
Arbitration pursuant to this Section 10.7 only upon consent of the Parties
involved in that dispute. Arbitration shall be by a single arbitrator
experienced in the matters at issue and selected by Buyer and Seller in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules"). The
28
arbitration shall be held in such place in the Atlanta, Georgia, metropolitan
area as may be specified by the arbitrator (or any place upon which Seller,
Buyer and the arbitrator may agree), and shall be conducted in accordance with
the Rules and (regardless of any other choice of law provision in this
Agreement) the United States Arbitration Act (9 U.S.C. Section 1-16) to the
extent not inconsistent with this Agreement. The decision of the arbitrator
shall be in writing and final and binding as to any matters submitted under this
Section; and, if necessary, any decision may be entered in any court of record
having jurisdiction over the subject matter or over the Party against whom the
judgment is being enforced. The determination of which Party (or combination of
them) shall bear the costs and expenses of such arbitration proceeding shall be
determined by the arbitrator. The arbitrator shall have jurisdiction to decide
any and all issues presented to it that arise out of or related to this
Agreement or the transactions contemplated hereby, including the issue of
whether or not the arbitrator has jurisdiction to decide any particular dispute,
controversy or claim. The arbitrator shall have the discretionary authority to
award that all or a part of the reasonable attorneys' fees of one Party in
connection with the arbitration shall be reimbursed by another Party.
10.8 Headings; Interpretation. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement
10.9 Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by the different
Parties in separate counterparts, each of which when executed and delivered
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
10.10 Entire Agreement. This Agreement (including the schedules and
exhibits) constitutes the entire agreement among the Parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings
among the Parties with respect thereto.
10.11 No Third-Party Beneficiaries. No Person not a Party to this
Agreement shall have rights under this Agreement as a third-party beneficiary or
otherwise.
10.12 Amendments and Waivers. This Agreement may be amended by the Parties
only by an instrument in writing signed by all of the Parties. Any term or
provision of this Agreement may be waived in writing at any time by the Party
that is entitled to the benefits thereof.
10.13 No Rule of Construction. All of the Parties have been represented by
counsel in the negotiations and preparation of this Agreement; therefore, this
Agreement will be deemed to be drafted by each of the Parties, and no rule of
construction will be invoked respecting the authorship of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
29
IN WITNESS WHEREOF, the Parties have executed this Agreement under seal on
the date first above written.
BUYER: SELLER:
INTERNET COMMERCE CORPORATION CONNECTIVE COMMERCE ASSOCIATES
By: /s/ Xxxxxxx X. Xxxxxxxx
By: /s/ Xxxxxx X. Xxxxxxxxx -----------------------------------
------------------------------------ Xxxxxxx X. Xxxxxxxx, as Trustee and
Name: Xxxxxx X. Xxxxxxxxx not individually, as provided in
Title: CEO Section 6.2 of the Declaration
By: /s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxxxx, as Trustee and
not individually, as provided in
Section 6.2 of the Declaration
OPERATING SHAREHOLDERS: THE KODIAK GROUP, INC.
/s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------- -----------------------------------
XXXXXXX X. XXXXXXXX Name: Xxxxxxx X. Xxxxxxxx
Title: President
/s/ Xxxx X. Xxxxxxxx
-------------------------------------
XXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
XXXXXX X. XXXXXXXX
30
EXHIBIT B
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is dated November 1, 2005 between INTERNET
COMMERCE CORPORATION, a Delaware corporation with a principal place of business
in Norcross, Georgia ("Employer"), and _________________, who resides at
________________ ("Employee").
WHEREAS, Employer is engaged in the business of providing Internet-based
e-commerce solutions for the business-to-business marketplace;
WHEREAS, Employee has been employed as a senior executive of The Kodiak
Group, Inc. ("Kodiak"); which is engaged in, among other things, providing
supply chain productivity and optimization software applications and solutions,
e-commerce system integration and related services (the "Kodiak Business");
WHEREAS, Kodiak is a wholly-owned subsidiary of Connective Commerce
Associates, a Massachusetts business trust ("Seller");
WHEREAS, pursuant to a Share Purchase Agreement dated as of November 1,
2005 among Employer, Seller, the operating shareholders of Seller and Kodiak,
Employer is, simultaneously with the execution of this Agreement, acquiring all
of the issued and outstanding share of Kodiak;
WHEREAS, Employer desires to employ Employee as an employee; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Employer and Employee agree as follows:
1. Employment. Employer hereby employs Employee as _______________, with
responsibility for the Kodiak Business, and Employee hereby accepts such
employment based on the terms and conditions set forth herein.
2. Base of Operations; Responsibilities. Employee shall be based in
______________________. Employee's duties and responsibilities shall consist of
all duties customarily attendant to the position of ________________ and such
other duties as may reasonably be assigned from time to time by the
_________________________. Employer shall not, without the prior consent of
Employee, (a) relocate Employee's office to a location outside of a 25-mile
radius of _______________ or (b), during the Term (as defined in Section 4.1),
(i) modify Employee's duties and responsibilities so that Employee's primary
responsibility shall no longer be the Kodiak Business or (ii) direct Employee to
report to anyone other than the ____________________.
3. Best Efforts of Employee. During the Term (as defined in Section 4.1),
Employee shall devote all of his business time, attention and energies to the
Kodiak Business and shall not be engaged in any other business activity whether
or not such business activity is pursued for gain, profit or other pecuniary
advantage; provided, however, that nothing contained herein shall restrict or
prohibit Employee from personally and on his own account being a passive owner
of not more than one percent of the outstanding stock or equity of an entity
which is publicly traded, so long as Employee has no active participation in the
business of such entity. Employee shall actively and industriously pursue his
profession in the interests of Employer, and shall carefully avoid any and all
personal acts, habits and usages which might injure in any way, directly or
indirectly, his professional reputation, the professional reputation of
Employer, or any employee of Employer, or which might otherwise be detrimental
to any interest of Employer.
4. Term of Employment; Termination.
4.1 Term. The term (the "Term") of employment hereunder shall
commence on November 1, 2005 (the "Commencement Date") and shall continue for a
period of one year through October 31, 2006 unless sooner terminated as set
forth in Section 4.3.
B-1
4.2 Expiration of Term. After the expiration of the Term, Employer
and Employee shall establish the terms of Employee's employment by Employer in
the same manner utilized by Employer in employment relationships with other
similarly situated managers of the Employer, and Employee will be subject to the
same severance policy as applicable to other similarly situated managers of the
Employer.
4.3 Termination. This Agreement may be terminated as follows:
4.3.1 By Employer for cause (a "Cause Termination") as
follows:
4.3.1.1 Immediately upon notice by Employer in the event
that: (a) Employee shall have committed fraud, been charged with, or convicted
of, a felony (whether or not employment related), misappropriated or embezzled
funds or engaged in other serious misconduct; or (b) Employee shall have
committed a substantial breach of Section 9.2 (a "Section 9.2 Breach").
4.3.1.2 30 days after notice by Employer in the event
that Employee shall have committed a substantial breach of this Agreement (other
than a Section 9.2 Breach), which notice shall make specific reference to this
Section 4.3.1.2 and set forth the details of such breach, unless such breach
shall be remedied, in the judgment of Employer, within said 30-day period.
4.3.1.3 30 days after notice by Employer in the event of
Employee's intentional or grossly negligent refusal or failure to perform his
duties or carry out directions of the ___________________ or board of directors,
unless such breach shall be remedied, in the judgment of Employer, within said
30-day period.
4.3.2 30 days after notice by Employee following a substantial
breach of this Agreement committed by Employer, which notice shall make specific
reference to this Section 4.3.2 and set forth the details of such breach, unless
such breach shall be remedied, in the judgment of Employee, within said 30-day
period.
4.3.3 14 days after notice by Employer if, at the conclusion
of the nine-month period immediately following the Commencement Date (the
"Nine-Month Period"), Kodiak shall have a Revenue Default (as defined herein).
As used herein, a "Revenue Default" shall mean that, as of the end of the
Nine-Month Period, the total of (a) the revenue received by Kodiak for such
period and (b) the Forecast Revenue shall be less than $2,400,000. "Forecast
Revenue" shall mean the total of Kodiak's booked business, planned work and
factored pipeline determined as of the end of the Nine-Month Period in
accordance with Kodiak's usual practice.
4.3.4 Immediately upon (a) notice by Employer in the event
that Employee shall have become Permanently Disabled (as defined in Section
7.2), or (b) the death of Employee.
4.4 Resignation. In the event of termination of this Agreement for
any reason, Employee shall be deemed to have resigned from all positions held in
Employer, Kodiak or any of their affiliate or subsidiary companies,
including, without limitation, any position as director, officer or trustee.
5. Compensation and Benefits. During the Term, Employer shall pay Employee
the compensation and benefits set forth in this Section 5.
5.1 Salary. Employer shall pay Employee an annual salary of
$____________ (the "Salary") which shall be payable to Employee in accordance
with the normal payroll practices of Employer.
5.2 Benefits. Employer shall provide Employee with the following
benefits:
5.2.1 Vacation. Employee shall be entitled to vacation in
accordance with the standard vacation policies of Employer for full-time
similarly-situated employees, but in no event less than four weeks of
vacation during the Term.
5.2.2 Other Benefits. In addition to the compensation and
benefits provided for in this Agreement, Employee shall be entitled to
participate in those employee benefit plans, arrangements and
perquisites, including, without limitation, stock option plans, that Employer
shall offer to full-time similarly-situated employees and in which Employee
shall be eligible to participate.
B-2
6. Payments on Termination. The following payments shall be made to
Employee upon termination of this Agreement:
6.1 If this Agreement shall be terminated by Employer pursuant to
Section 4.3.1 (Cause) or Section 4.3.4 (death or Permanent Disability), Employee
shall be paid only such amount of the Salary that shall have accrued and be
unpaid (the "Accrued Salary") as of the date of termination (the "Termination
Date"). Employer shall pay the Accrued Salary to Employee as soon as practicable
after the Termination Date.
6.2 If this Agreement shall be terminated during the Term (a) by
Employer pursuant to Section 4.3.3, or (b) by Employee pursuant to Section
4.3.2, Employer shall pay Employee (i) the Accrued Salary and (ii) severance pay
equal to Employee's Salary for 6 months ("Severance Pay"). The Accrued Salary
shall be paid to Employee as soon as practicable after the Termination Date, and
the Severance Pay shall be paid in 6 equal monthly installments commencing one
month after the Termination Date. During the period that would have constituted
the remainder of the Term, Employee shall be entitled to continue to receive the
benefits to which he shall be entitled pursuant to Section 5.2.2.
6.3 If Employer shall not extend an offer to Employee for continued
employment upon expiration of the Term, Employee shall be paid (a) the Accrued
Salary and (b) severance pay in accordance with the severance policy then in
effect for other similarly situated managers of Employer.
7. Disability.
7.1 Employee shall be deemed "Temporarily Disabled" if he shall be
unable, as a result of physical or mental illness or accident to perform his
duties hereunder on a full-time basis (a minimum of 40 hours per business week).
7.2 Employee shall be deemed "Permanently Disabled" if (a) he and
Employer shall agree that he shall be permanently disabled, or (b) he shall be
Temporarily Disabled for at least six consecutive months.
7.3 During any period when Employee shall be Temporarily Disabled,
Employee shall continued to be paid his full Salary for the first 90 days of
such disability and one-half of his Salary for the next 90 days of such
disability. Thereafter, no further payments of Salary shall be paid until
Employee shall resume his duties on a full-time basis.
7.4 Employee shall be entitled to apply accrued vacation time to
reduce any period that he is Temporary Disabled.
8. Facilities. Employer shall make available to Employee such office
space, furniture, furnishings, equipment and supplies and secretarial and
administrative assistance as Employer shall deem necessary for the performance
of Employee's services hereunder.
9. Non-Disclosure of Confidential Information.
9.1 Confidential Information. During the Term, Employee may have
access to confidential and proprietary information concerning the business or
affairs of Employer and its subsidiaries and affiliates (collectively, the
"Employer Parties"), including, without limitation, (a) internal business
information such as financial statements, reports, summaries of operations,
projections, accounting and business methods, information relating to strategic
and staffing plans and practices, business, marketing, promotional and sales
plans, practices and programs, training practices and programs, business
contracts and cost, rate and pricing structures; (b) trade secrets, ideas or
designs (whether or not patentable or copyrightable and whether or not reduced
to practice or fixed in a tangible medium), including, without limitation, all
drawings, formulas, patterns, models, methods, procedures, specifications,
technology, development plans, samples, memoranda, notes and other related
information; (c) computer software, program listings, documentation, data and
data bases; (d) client lists and client confidential information; and (e)
compilations of data, including, without limitation, the form or format of
information that may comprise or include information otherwise not deemed
confidential (collectively, "Confidential Information"). Confidential
Information shall not include any records, data or information that is generally
known or available to
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the public, or is in the public domain, at the time of disclosure, or after such
disclosure, becomes generally known to the public, or falls into the public
domain, other than by a breach of this Agreement by Employee.
9.2 Non-Disclosure. The Employer Parties shall have the complete
right to possession, use and title to all Confidential Information which
Employee shall originate or which shall have come into Employee's possession in
any way, and Employee shall deliver such Confidential Information to Employer in
the ordinary course of business. Employee shall not during the Term, or
thereafter, disclose, directly or indirectly, any Confidential Information to
any person, other than (a) the Employer Parties, (b) executives of the Employer
Parties authorized to receive such Confidential Information at the time of such
disclosure, or (c) such other persons to whom Employee shall have been
specifically instructed to make disclosure by persons described in (a) and (b),
and in all such cases only to the extent required in the course of Employee's
employment by Employer, except as required by law. At the expiration or
termination of the Term, Employee shall deliver to Employer all Confidential
Information which shall be in Employee's possession or control and shall not
retain or use any copies or summaries thereof.
9.3 Remedies. Employee acknowledges that the Employer Parties are
engaged in a highly competitive business and that the protections for the
Employer Parties set forth in this Section 9 are fair and reasonable and are of
vital concern to the Employer Parties. Further, Employee acknowledges that
monetary damages for any violation of this Section 9 will not adequately
compensate the Employer Parties with respect to any such violation. Therefore,
in the event of a breach by Employee of any of the terms and provisions
contained in this Section 9, Employer shall be entitled to institute legal
proceedings to obtain damages for any such breach and/or to enforce the specific
performance of this Agreement by Employee and to enjoin Employee from any
further violations. The remedies available to Employer pursuant to this Section
9.3 may be exercised cumulatively by Employer in conjunction with all other
rights and remedies provided by law. The provisions of this Section 9 shall
survive the termination of this Agreement and the termination and expiration of
Employee's employment, regardless of how Employee's employment may be or shall
have been terminated.
10. Miscellaneous Provisions.
10.1 Waiver. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any other breach of that or any other
provision hereof.
10.2 Severability. If any provision of this Agreement shall be
deemed by any court having jurisdiction thereon to be invalid or unenforceable,
the balance of this Agreement shall remain in effect; if any provision of this
Agreement shall be deemed by any such court to be unenforceable because such
provision shall be too broad in scope by reason of the geographic or business
scope or the duration thereof, or for any other reason, such provision shall be
construed to be limited in scope to the extent such court shall deem necessary
to make it enforceable; and if any provision shall be deemed inapplicable by any
such court to any person or circumstances, it shall nevertheless be construed to
apply to all other persons and circumstances.
10.3 Governing Law; Effect. This Agreement shall be construed and
enforced in accordance with the substantive law of the Commonwealth of
Massachusetts, without giving effect to the conflicts or choice of law
provisions of Massachusetts or any other jurisdiction, and shall have the effect
of a sealed instrument.
10.4 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns. This Agreement is
personal to Employee, and Employee may not assign nor delegate any of Employee's
rights or obligations hereunder in any manner without the prior consent of
Employer.
10.5 Entire Agreement. This Agreement contains a complete statement
of the undertakings between the parties with respect to its subject matter,
cannot be changed or terminated orally, and supersedes all prior agreements and
undertakings. There are no representations not set forth in this Agreement which
have been relied upon by the parties.
10.6 Notice. Any notice, approval, consent or other communication
under this Agreement shall be in writing and shall be considered given when (1)
delivered personally, or (2) mailed by registered or certified mail, return
receipt requested or (3) transmitted by facsimile with a confirming copy sent by
overnight mail or courier
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service to the parties at the addresses indicated below (or at such other
address as a party may specify by notice to the others pursuant hereto). Notice
given by a party's counsel shall be considered notice given by that party.
(a) If to Employer, to it at:
0000 Xxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No. (000) 000-0000
(b) If to Employee, to him at:
______________________________________
______________________________________
Facsimile No._________________________
[SIGNATURES ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first written above.
INTERNET COMMERCE CORPORATION
By:___________________________________
Name:_________________________________
Title:________________________________
______________________________________
[INSERT EMPLOYEE'S NAME]
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