EXHIBIT 10.30
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 15 day
of September, 1999, by and between National Information Consortium, Inc., a
Colorado corporation ("BUYER"), and Electric Press, Inc., a Virginia
corporation ("SELLER").
R E C I T A L S:
A. Buyer desires to purchase, and Seller desires to sell, substantially
all of Seller's assets, properties and rights in the business conducted by
Seller's eFed division (the "BUSINESS").
B. Buyer is to acquire only specified liabilities in connection with
its purchase of the Business, as herein described.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, agreements, representations, warranties and covenants herein
contained, the parties hereby agree as follows:
SECTION 1
PURCHASE AND SALE OF ASSETS
1.1. CLOSING DATE. The closing (the "CLOSING") of the transactions
contemplated hereby shall be held at the offices of counsel to Buyer, Xxxxxxxx &
Xxxxxxxx LLP, 0000 Xxxxxxxxxxxx Xxxxxx, XX, Xxxxxxxxxx, X.X. 00000-0000 on the
second Business Day following the satisfaction or waiver of all of the
conditions specified in Sections 4.3, 4.4 and 4.5 or on such other date as may
be mutually agreed upon by the parties (the "CLOSING DATE").
1.2. SALE OF ASSETS.
At the Closing, Seller shall sell, transfer, convey, assign and deliver
to the Subsidiary, free and clear of all liens, security interests, other
encumbrances, restrictions on transfer and adverse claims ("ENCUMBRANCES"), and
Buyer shall purchase from Seller, all of Seller's right, title and interest in
the assets, properties, goodwill and rights of Seller set forth on
SCHEDULE 1.2(a) (the "Assets").
(a) Without limiting the generality of the foregoing or the
description of "Assets" set forth on Schedule 1.2(a), the Assets shall include
the following:
(i) Seller's entire right, title and interest in and
to all current and archived code, articles, reviews, ratings,
commentary and other content, including all web site pages, used
exclusively in connection with the Business, including media on which
only such content is stored, and further including all inventory of
such materials, whether in printed form or on film, microfilm,
microfiche or other negative;
1
(ii) all of the software and scripting, in all
formats (including object and source formats), relating to or used
exclusively in connection with the Business, including all web site
design and operational software set forth on Schedule 1.2(a), and
including with respect thereto: (1) all inventories of computer program
code (in all media) for said software and scripting; (2) any related
documentation and user materials; and (3) Seller's rights under all
related warranties; the source and object code for the procurement
management software used by Seller to conduct the Business;
(iii) the web sites and the domain names described in
SCHEDULE 1.2(a)(iii);
(iv) the tangible personal property used to conduct
the Business to the extent listed in SCHEDULE 1.2(a)(iv), together with
all related documentation and user materials, and all related
warranties;
(v) Seller's entire right, title and interest to the
third-party software licensed by Seller used exclusively in connection
with the Business, including any related documentation and user
materials, and Seller's rights under all related warranties;
(vi) all of the technical data and know-how,
including research, product plans, marketing materials, developments,
inventions, discoveries, processes, formulas, algorithms, technology,
designs, drawings, and business strategies, presently used exclusively
in and material to, the Business;
(vii) all of the trademarks, service marks, and trade
names (including registrations, licenses, and applications to register
pertaining thereto) used to identify the Business and/or its goods or
services (including any trademarks registered, or for which
registration is applied, after the date hereof), as set forth on
SCHEDULE 1.2(a)(vii) (the "TRADEMARKS");
(viii) all patents and copyrights (including
registrations, licenses, and applications to register pertaining
thereto), and all other intellectual property rights, trade secrets,
and other proprietary information, processes, and formulas used
exclusively in the Business;
(ix) all accounts receivable of Seller relating to
the Business (the "ACCOUNTS RECEIVABLE") as specified in a schedule to
be prepared by Seller in accordance with an accounting procedure to be
agreed upon by Buyer and Seller and provided to Buyer by Seller two
days prior to the Closing Date (the "ACCOUNTS RECEIVABLE SCHEDULE");
(x) all goodwill of the Business as a going concern;
all goodwill associated with the Trademarks;
(xi) Seller's entire right, title and interest in, to
and under all contracts, agreements, licenses, permits, arrangements,
permissions and other commitments and
2
arrangements, oral or written, with any person or entity (including
legal authorities) with respect solely to the Business, including,
subject to the consent of the applicable government agency, all
contracts with governmental bodies or agencies under which Seller
provides services in connection with the Business; PROVIDED that Buyer
acknowledges that certain government contracts, specified on
SCHEDULE 1.2(a)(xi), require the prior consent of the other parties
to the assignment of such contracts;
(xii) all rights of Seller under express or implied
warranties from suppliers or contractors with respect to the Assets;
(xiii) all claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind arising
out of the Assets or the Business;
(xiv) all existing business and marketing records of
the Business, including accounting and operating records, asset
ledgers, inventory records, budgets, databases, customer lists,
employment and consulting agreements, supplier lists, information and
data respecting leased or owned equipment, files, books, correspondence
and mailing lists, creative, promotional and advertising materials and
brochures, and other business records; and
(xv) all media, including disks, tapes and CDs, and
other tangible property necessary for the transfer of the Assets from
Seller to Buyer pursuant to the terms and conditions of this Agreement.
1.3. XXXX OF SALE. The sale and delivery of the Assets shall be
effected by a Xxxx of Sale, Assignment and Assumption Agreement in the form of
EXHIBIT A attached hereto (the "XXXX OF SALE") and such endorsements,
assignments, licenses, drafts, checks and other instruments of transfer and
conveyance, agreements, and documents in form described herein or reasonably
acceptable to Buyer; PROVIDED that the consent to the assignment of contracts
relating to the Business between Seller and the United States government shall
be accomplished by a separate agreement among Buyer, Seller and the United
States government (the "Novation").
1.4. ASSUMED LIABILITIES.
(a) At the Closing, Buyer shall assume:
(i) the trade accounts payable of the Seller relating
to the Business that were incurred in the ordinary course of the
Business and are set forth on SCHEDULE 1.4(a) (the "Assumed Liabilities
Schedule") prepared by Seller in accordance with an accounting
procedure to be agreed upon by Buyer and Seller and provided to Buyer
by Seller two days prior to the Closing;
(ii) the duties and obligations required to be
performed after the Closing under the contracts, leases and other
agreements included in the Assets; and
(iii) the employment related payables of Seller to
the extent specifically
3
related to the operation of the Business arising subsequent to the
Closing and set forth on SCHEDULE 1.4(a).
(b) Seller shall, when due, satisfy all of its liabilities or
obligations, except for the liabilities listed on the Assumed Liabilities
Schedule.
1.5. BASE PURCHASE PRICE. As consideration for the sale and transfer of
the Assets, Buyer shall pay or deliver to Seller at the Closing:
(a) $15 million in cash and
(b) 606,000 shares of Buyer's common stock ("BUYER COMMON
STOCK");
PROVIDED that the 606,000 shares of Buyer Common Stock delivered under in this
Section 1.5 shall be issued pursuant to the terms and restrictions contained in
Section 1.9; and PROVIDED FURTHER that all shares of Buyer Common Stock
delivered pursuant to this Section 1.5 and any other provision of this Agreement
shall be valued at $16.50165 per share, unless the terms of such other provision
specifically calculate the per share valuation of Buyer Common Stock on a
different basis.
1.6. ADDITIONAL PURCHASE PRICE. Buyer shall make additional payments to
Seller as follows:
(a) On or before March 31 of 2000, 2001, 2002, 2003 and 2004
(each, a "REVENUE PAYMENT DATE") Buyer shall at its option either (i) issue to
Seller a number of shares of Buyer Common Stock or (ii) pay the cash equivalent
of the prior clause (i) determined as of such date (the "REVENUE PAYMENT")
determined by the following formula:
(__(X-Y)____) * 606,000
($200,000,000)
where (X) means Cumulative Business Revenues and (Y) means Cumulative Previous
Business Revenues on which a Revenue Payment has been made.
The Revenue Payment shall be payable on the first Revenue Payment Date
on which the Cumulative Business Revenues is equal to or exceeds $10,000,000.
Buyer shall not be obligated to issue more than 606,000 shares of Buyer Common
Stock.
(b) On or before March 31 of 2000, 2001, 2002, 2003 and 2004
(each, an "EBITDA PAYMENT DATE"), Buyer shall issue to Seller a number of shares
of Buyer Common Stock (the "EBITDA PAYMENT") determined by the following
formula:
(__(X-Y)____) * Potential EBITDA Shares
($110,000,000)
4
where (X) means Cumulative Business EBITDA and (Y) means Cumulative Previous
EBITDA on which an EBITDA payment has been made.
The EBITDA Payment shall be payable on the first EBITDA Payment Date on
which the Cumulative EBITDA is equal to or exceeds $10,000,000. Buyer shall not
be obligated to issue more than the number of Potential EBITDA Shares to Seller.
(c) For purposes of this Agreement, terms used in subsections
(a) and (b) above shall be defined as follows:
(i) "CURRENT YEAR BUSINESS REVENUES" means revenues
reflected on Buyer's financial statements for the calendar year
immediately preceding the Revenue Payment Date which were derived by
Buyer from the operation of the Business, determined in accordance with
generally accepted accounting principles applied on a consistent basis,
based upon audited financial statements of Buyer performed by its
independent accounting firm.
(ii) "CUMULATIVE BUSINESS REVENUES" means the total
of all Current Year Business Revenues for the calendar years ending
prior to the Revenue Payment Date.
(iii) "CUMULATIVE PREVIOUS BUSINESS REVENUES" means
the total of all Current Year Business Revenues for calendar years
ending more than one year prior to a particular Revenue Payment Date.
(iv) "CURRENT YEAR BUSINESS EBITDA" means earnings
before interest, taxes and depreciation reflected on Buyer's financial
statements for the calendar year immediately preceding the EBITDA
Payment Date which were derived by Buyer from the operation of the
Business, determined in accordance with generally accepted accounting
principles applied on a consistent basis, based upon audited financial
statements of Buyer performed by its independent accounting firm,
subject to the limitations of Section 1.6(c)(viii) below.
(v) "CUMULATIVE EBITDA" means the total of all
Current Year EBITDA for the calendar years ending prior to the EBITDA
Payment Date.
(vi) "CUMULATIVE PREVIOUS EBITDA" means the total of
all Current Year EBITDA for calendar years ending more than one year
prior to a particular EBITDA Payment Date.
(vii) "POTENTIAL EBITDA SHARES" means $10,000,000
divided by the average of the closing sale price of Buyer Common Stock
on the Nasdaq National Market on each of the five (5) trading days
immediately preceding (but not including) the first EBITDA Payment Date
on which Buyer is obligated to issue Buyer Common Stock to Seller with
respect to an EBITDA Payment.
5
(viii) For the purposes of determining Current Year
Business EBITDA, Buyer shall not allocate to the Business any corporate
financial overhead, accounting or legal expenses that are not incurred
in the operation of the Business.
(ix) Buyer shall manage and operate the Business and
the Assets as a separate business unit after the Closing, and shall
maintain a financial reporting system that will separately account for
the revenue and expenses of the Business and the Assets, through
December 31, 2003 (the "Earn Out Period"). Moreover, neither Buyer
(through operating divisions or units other than the Business) nor its
subsidiaries or other entities contracted by it shall, during the Earn
Out Period,(x) compete with the Business; (y) transfer personnel from
the Business without Seller's consent, which shall not be unreasonably
withheld; or (z) cause or permit assets of the Business to be sold or
transferred without Seller's consent, which consent shall not be
unreasonably withheld. For the purposes of calculating the Revenue
Payment, Buyer shall not allocate to the Business expenses or costs
that are not incurred in the operation of the Business.
1.7. ALLOCATION. Within 90 days after the Closing Date, Buyer shall
prepare and finalize a schedule setting forth an allocation of the Purchase
Price among the Assets (the "ALLOCATION SCHEDULE"), subject to the approval of
Seller which shall not be unreasonably withheld. Each party agrees to report the
transactions contemplated hereby for federal income tax and all other tax
purposes (including for purposes of Section 1060 of the Internal Revenue Code of
1986, as amended (the "CODE")) in a manner consistent with the Allocation
Schedule, and in accordance with all applicable rules and regulations, and to
take no position inconsistent with the allocation set forth therein in any
administrative or judicial examination or other proceeding. Each of Buyer and
Seller shall timely file the appropriate forms in accordance with the
requirements of Section 1060 of the Code and this Section.
1.8. METHOD OF PAYMENT.
(a) Except as otherwise expressly provided herein, all cash
payments from one party to another under this Agreement shall be made by wire
transfer in United States dollars to an account designated in writing by the
party to receive such payment. With respect to all payments made pursuant to
this Section 1, the parties agree that such designation has been already been
provided in advance of the scheduled date of payment and need not be provided
two Business Days before the Closing Date.
(b) Buyer shall not be required to deliver or issue fractional
shares, and instead may deliver an equivalent cash amount in lieu of any
fractional share.
(c) Any payment or delivery hereunder due on a day which is
not a Business Day shall be postponed, without interest, until the next Business
Day.
(d) Buyer shall have no obligation to register under the
Securities Act of 1933, as amended (the "Securities Act"), any shares of Buyer
Common Stock delivered to Seller pursuant to this Agreement except as provided
in Section 6 herein.
6
(e) Buyer shall be entitled to deduct and withhold from any
payment or delivery of Buyer Common Stock to Seller or Shareholders hereunder
such amount as Buyer is legally required to deduct and withhold with respect to
the making of such payment or delivery under the Code or any provision of state,
local or foreign tax laws.
1.9. REPURCHASE RIGHT; CANCELLATION RIGHT; ESCROW.
(a) With respect to 151,500 shares (the "Indemnity Shares") of
the Buyer Common Stock to be delivered to the Seller at the Closing pursuant to
Section 1.5(b):
(i) The Indemnity Shares shall be divided equally
between and issued to each of Xxxxxx X. Xxxxx XX, Xxxxxx Xxxx and
Xxxxxx Xxxxxxx (each a "Shareholder"). The certificates representing
the Indemnity Shares shall each be stamped or otherwise imprinted with
a legend in the form set forth on EXHIBIT B attached hereto, which,
inter alia, shall have the effect of prohibiting each of the
Shareholders from offering to sell, contracting to sell or otherwise
selling, disposing of, loaning, pledging or granting any rights with
respect to any such shares of Buyer, any options or warrants to
purchase any such shares of Buyer Common Stock, or any securities
convertible into or exchangeable for such shares of Buyer Common Stock
until up to the second anniversary of the Closing Date and subject to
cancellation in whole or in part, subject to Section 1.9(a)(ii)(2), in
order to satisfy Seller's obligations under Section 5.2(c).
(ii) Pursuant to the terms of this Agreement and
Section 5.2(c), under certain circumstances Buyer may have a claim
against the Indemnity Shares (a "CLAIM") from the period following the
Closing Date until up to the second anniversary of the Closing Date.
Subject to the provisions of Section 1.9(a)(ii)(4) and the procedures
set forth in Section 5.2(c):
(1) From time to time, on or before the first
anniversary of the Closing Date, Buyer
may give a notice (the "NOTICE") to
Seller specifying in reasonable detail
the nature and dollar amount (to the
extent ascertainable at the time) of any
Claim it may have under this Agreement
and Section 5.2(c). Buyer may make more
than one Claim with respect to any
underlying state of facts. If Seller
gives a notice to Buyer disputing any
Claim (a "COUNTER NOTICE") within 30 days
following receipt by Seller of Buyer's
Notice, both Buyer and Seller agree to
comply fully with the provisions set
forth under Section 1.9(a)(ii)(4) below.
If Buyer does not receive a Counter
Notice within the period ending 30 days
after the receipt by Seller of such
Notice, then the dollar amount claimed by
Buyer as set forth in the Notice shall be
deemed established for purposes of this
Agreement and Section 5.2(c), and Buyer
has the immediately exerciseable right to
repurchase up to the number of
7
Indemnity Shares (the "CLAIMED SHARES")
equal to the quotient achieved by
dividing the dollar value of such Claim
by $16.50165. At the end of such 30-day
period, Seller shall cause Shareholders
to deliver to Buyer's transfer agent the
certificates representing the Indemnity
Shares, and Buyer shall instruct its
transfer agent to cancel that portion of
Claimed Shares represented by the
certificate and to reissue three
certificates representing the balance of
uncancelled Indemnity Shares, each
bearing a legend in the form set forth on
Exhibit B, in the names of the
Shareholders.
(2) Immediately after the first anniversary
of the Closing Date, Seller shall cause
Shareholders to deliver to Buyer's
transfer agent the certificates
representing the remaining Indemnity
Shares, and Buyer shall instruct its
transfer agent to cancel such
certificates and reissue (A) three
certificates in equal amounts
representing in the aggregate 15,150
shares of Buyer Common Stock, each in the
name of a Shareholder and each stamped or
otherwise printed with a legend in the
form set forth on Exhibit B; and (B)
three certificates in equal amounts
representing in the aggregate the balance
of the Indemnity Shares held by
Shareholder on the first anniversary of
the Closing Date, each to be issued in
the name of a Shareholder and without
bearing restrictive legends and not
subject to Claims presented on or before
such date.
(3) From time to time, on or before the
second anniversary of the Closing Date,
Buyer may give a Notice to Seller
specifying in reasonable detail the
nature and dollar amount (to the extent
ascertainable at the time) of any Claim
it may have arising under the matter
described in SCHEDULE 5.2(c). If Seller
gives a Counter Notice to Buyer, within
30 days following receipt by Seller of
Buyer's Notice, both Buyer and Seller
agree to comply fully with the provisions
set forth under Section 1.9(a)(ii)(4)
below. If Buyer does not receive a
Counter Notice within the period ending
30 days after the receipt by Seller of
Buyer's Notice, then the dollar amount
claimed by Buyer as set forth in the
Notice shall be deemed established for
purposes of this Agreement and Section
5.2(c), and Buyer has the immediately
exerciseable right to repurchase up to
15,150 Indemnity Shares. At the end of
such 30-day period, Seller shall cause
Shareholders to deliver to Buyer's
transfer agent the certificates
8
representing the Indemnity Shares, and
Buyer shall instruct its transfer agent
to cancel that portion of Claimed Shares
represented by the certificate and to
reissue three certificates, each bearing
a legend in the form set forth on Exhibit
B, in the names of the Shareholders.
(4) If a Counter Notice is given with respect
to a Claim, Seller and Buyer may
apportion the Indemnity Shares only in
accordance with (A) joint written
instructions of Buyer and the Seller or
(B) a final non-appealable order from
binding arbitration (an "ORDER"). Both
Buyer and Seller shall act on such Order
without further question.
(b) With respect to 363,600 shares of the Buyer Common Stock
(the "RETENTION HOLDBACK") to be delivered pursuant to Sections 1.5(b):
(i) The Retention Holdback shall be divided equally
between and issued to each of the Shareholders. The certificates
representing the Retention Holdback shall each be stamped or otherwise
imprinted with a legend in the form set forth on EXHIBIT C attached
hereto.
(ii) If, on or prior to the first anniversary of the
Closing Date, either or both of Xxxxxx Xxxxxxx or Xxxxxx Xxxx are no
longer employed by Buyer for any reason except death or Buyer's
termination of employment without Cause (as defined in Section 7.9),
Buyer shall, subject to the provisions of Section 1.9(b)(iv), on or
after the first anniversary of the Closing Date, notify Seller in
writing (the "RETENTION CLAIM") that, within 30 days from the date of
the Retention Claim, Buyer shall repurchase the Retention Holdback and
instruct its transfer agent to cancel all of the certificates held by
Seller that represent the Retention Holdback. If Seller does not
dispute in a written notice given to Buyer (the "COUNTER RETENTION
NOTICE") within 30 days from the date of the Retention Notice, Buyer
may at any time thereafter repurchase the Retention Holdback at a price
equal to the greater of (1) $0.001 per share or (2) Seller's obligation
incurred in protecting the price of such Buyer Common Stock, if any,
and instruct its transfer agent to cancel all of the certificates held
by Seller that represent the Retention Holdback. In the event Seller
should receive any payments from third parties as a result of any
agreement protecting the price of such Buyer Common Stock repurchased
by Buyer, Seller shall promptly remit the premiums paid to Buyer.
(iii) If, on or prior to the first anniversary of the
Closing Date, either or both of Xxxxxx Xxxxxxx or Xxxxxx Xxxx remain
employed by Buyer or are no longer employed by Buyer due to death or
Buyer's termination of employment without Cause (as defined in
Section 7.9), Buyer shall provide written instruction to its transfer
agent to cancel the certificates representing the Retention Holdback
and issue to the Shareholders replacement certificates that no longer
bear restrictive legends.
9
(iv) If a Counter Notice is given with respect to a
Retention Claim, only in accordance with (i) joint written instructions
of Buyer and the Seller, or (ii) a final non-appealable Order, may the
restrictions from transfer be lifted from the certificates. Both Buyer
and Seller shall act on such Order and legal opinion without further
question.
(c) Subject to the terms of Section 1.9(c)(iv) below, with
respect to 90,900 shares of the Buyer Common Stock (the "GOVERNMENT CONTRACTS
HOLDBACK") to be delivered pursuant to Section 1.5(b):
(i) The Government Contracts Holdback shall be
divided equally between and issued to each of the Shareholders and
delivered to Xxxxxxxx & Xxxxxxxx LLP (the "ESCROW AGENt"), 0000
Xxxxxxxxxxxx Xxxxxx, XX, Xxxxxxxxxx, X.X. 00000-0000. The certificates
representing the Government Contracts Holdback shall each be stamped or
otherwise imprinted with a legend in the form set forth on Exhibit C
attached hereto. The parties agree that the Government Contracts
Holdback shall be held in escrow, pursuant to reasonable terms to be
established by Escrow Agent, until the earlier of (1) Seller's
obtaining the consent of the parties listed on Schedule 1.2(a)(xi) to
the assignment to Buyer of the agreements between Seller and such
parties, (2) Seller's securing alternate agreements that replace those
listed on Schedule 1.2(a)(xi) by providing the same services to the
same governmental agencies as those provided by the agreements listed
on Schedule 1.2(a)(xi) or (3) 120 days after the Closing Date.
(ii) If, before 120 days following the Closing Date,
the events described in either Sections 1.9(c)(i)(1) or 1.9(c)(i)(2)
occur, Buyer shall instruct Escrow Agent to deliver the Government
Contracts Holdback to Seller. If the events described in either
Sections 1.9(c)(i)(1) or 1.9(c)(i)(2) do not occur before 120 days
following the Closing Date, Buyer shall promptly give to Seller and to
Escrow Agent a notice (the "HOLDBACK NOTICE") that Buyer intents to
instruct Escrow Agent to deliver the Government Contracts Holdback to
Buyer. If Seller gives a notice to Buyer disputing the Holdback Notice,
(a "COUNTER HOLDBACK NOTICE") within 30 days following receipt by Buyer
of such Counter Notice, both Buyer and Seller agree to comply fully
with the provisions set forth under Section 1.9(c)(iii) below. If Buyer
does not receive a Counter Notice within the period ending 30 days
after the receipt by Buyer of such Counter Notice, then the dollar
amount claimed by Buyer as set forth in the Notice shall be deemed
established for purposes of this Agreement, and Buyer has the
immediately exerciseable right to instruct Escrow Agent to deliver the
Government Contracts Holdback to Buyer equal to the quotient achieved
by dividing the dollar value of such Claim by $16.50165.
(iii) If a Counter Holdback Notice is given with
respect to a Claim, Buyer may instruct its transfer agent to deliver
the Government Contracts Holdback to Buyer, only in accordance with
(A) joint written instructions of Buyer and the Seller or (B) an
Order. Any such Order shall be accompanied by a legal opinion of
counsel for the presenting party satisfactory to the other party to
the effect that the Order is final and non-
10
appealable. Both Buyer and Seller shall act on such Order and legal
opinion without further question.
1.10. ACCOUNTS RECEIVABLES. Any amounts paid to Seller with respect to
any Account Receivable after the Closing Date will be delivered by Buyer to
Seller as soon as reasonably practicable. Any revenues or compensation received
in connection with the Business that are paid to Seller prior to the Closing
Date for services to be provided after the Closing Date will be held until the
Closing Date and then delivered by Seller to Buyer.
1.11. EXCLUDED ASSETS. The following items are not included in the
Assets or the Business (the "EXCLUDED ASSETS"): (i) all assets, tangible or
intangible, used by Seller in its publishing business; (ii) all trademarks,
trade names and intellectual property used by Seller in its business operations
for both the business and the publishing business, except to the extent
specifically listed in Schedules 1.2(a), 1.2(a)(iii), 1.2(a)(iv), 1.2(a)(vii)
and the Accounts Receivables Schedule.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date as follows, except for disclosure contained on the Schedules
hereto numbered to correspond to the sections below (the "DISCLOSURE
SCHEDULES"):
2.1. DUE ORGANIZATION, POWER AND AUTHORITY. Seller is a corporation
duly and validly incorporated under the laws of the Commonwealth of Virginia and
is qualified to conduct business in every jurisdiction where such qualification
is required. Seller has the full corporate power and authority to conduct its
business as presently conducted and to enter into this Agreement and the other
Transaction Documents and to consummate the transactions contemplated herein and
therein.
2.2. POWER; AUTHORIZATION AND ENFORCEABILITY. All action on the part of
Seller necessary for the authorization, execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party has
been taken and remains in full force and effect. Seller has all requisite power
and capacity to execute and deliver this Agreement and to carry out and perform
its obligations under the terms of this Agreement and each of the Transaction
Documents to which it is a party. All action on the part of Seller necessary for
the authorization, execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party has been taken and remains in
full force and effect. Delivery of the Xxxx of Sale and other instruments of
transfer contemplated by Section 1.3 will transfer to Buyer good and marketable
title to all of the Assets, free and clear of any Encumbrance. This Agreement
constitutes, and the other Transaction Documents will each constitute, the valid
and binding obligations of Seller, enforceable in accordance with its terms,
except as such
11
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws and by general
principles of equity.
2.3. NO CONFLICT. Seller is not in violation in any material respect of
any term or provision of any agreement to which it is a party. The execution,
delivery and performance of this Agreement and each of the other Transaction
Documents by Seller have not resulted and will not result in, nor will
consummation of the transactions contemplated hereby or thereby result in, any
violation of or conflict with, or constitute a default under, any agreement, or
result in the creation of any Encumbrance upon any of the Assets or any of the
other assets of Seller or the acceleration of maturity of or other change in any
obligation of Seller or right of any third-party; and there exists no such
violation, conflict or default that does or could reasonably be expected to
materially adversely affect the condition or prospects of the Business or the
Assets or the ability of Seller to consummate its obligations hereunder and
under the Transaction Documents.
2.4. GOVERNMENTAL CONSENTS, ETC. To the best of Seller's knowledge, no
consent, approval or authorization of or designation, declaration, or filing
with any governmental, regulatory or administrative body, agency or authority,
or any court or judicial authority (each, an "AUTHORITY") on the part of Seller
is required in connection with the valid execution and delivery of this
Agreement or any other Transaction Document or the consummation of the
transactions contemplated hereby or thereby. The execution, delivery, and
performance of this Agreement and each Transaction Document, and the
consummation of the transactions contemplated hereby or thereby, do not require
consent, approval, or authorization under any agreement to which Seller is a
party or by which the Assets or Business is bound or affected.
2.5. FINANCIAL STATEMENTS AND CONDITION.
(a) Seller has delivered to Buyer financial statements for the
periods January 1, 1997 through December 31, 1997, January 1, 1998 through
December 31, 1998 (the "Financial Statements"), and for the period January 1,
1999 through June 30, 1999 (the "Interim Statements"). The Financial Statements
are audited and prepared in accordance with United States generally accepted
accounting principles consistently applied throughout the period covered by the
Financial Statements. Seller's independent auditors have provided a review
report covering the Interim Statements. The Financial Statements and the Interim
Statements constitute true and complete financial statements for the periods
specified and are in accordance with the books and records of the Seller. Such
statements present fairly the position of the Business as of the respective
dates thereof and the results of operations and cash flows of the Business for
the periods covered thereby.
(b) Seller has no direct or indirect indebtedness,
liabilities, claims, losses, damages, deficiencies, obligations or
responsibilities, liquidated or unliquidated, accrued, absolute, contingent, or
otherwise ("LIABILITIES") which in any way encumber the Assets and no
Liabilities otherwise exist that encumber the Assets.
(c) Since June 30, 1999, Seller has not:
12
(i) suffered any change, event or condition that, in
any case or in the aggregate, has had or could reasonably be expected
to have a material adverse effect upon the Business or the Assets or
Seller's ability to consummate the transactions contemplated herein and
in the other Transaction Documents;
(ii) entered into any material transaction, contract
or commitment relating to the Business in any manner; and
(iii) incurred or paid any liability or obligation
not in the ordinary course of business, consistent with past custom and
practice including as to quantity and frequency with respect to the
Business.
2.6. TAX MATTERS. Seller has, within the times and in the manner
prescribed by law, filed all required tax returns, including sales and use tax
returns, has paid or provided for all taxes, including sales and use tax owed by
Seller, with respect to the Business (whether or not shown on any tax return to
be due and owing by him), has paid or provided for all deficiencies or other
assessments of taxes, interest or penalties owed by it, and, to the best of
Seller's Knowledge (as defined), all such tax returns were correct and complete.
No taxing authority has asserted, or, to the best of Seller's Knowledge, will
successfully assert, any claim for the assessment of any additional taxes of any
nature with respect to any periods covered by any such tax returns; and all
taxes or other charges required to be withheld or collected by Seller, with
respect to the Business, have been duly withheld or collected and, to the extent
required, have been paid to the proper taxing Authority or properly segregated
or deposited as required by law.
2.7. COMPLIANCE AND LAWS. Seller has in all respects complied with, and
is now in all respects in compliance with, all laws, rules, regulations, orders,
judgments and decrees of all Authorities applicable to the Business with which
failure to comply would result in a Material Adverse Effect (as defined) on
Seller, and the Business is otherwise in compliance with all such laws,
regulations, orders, judgments and decrees. Seller possesses each franchise,
license, permit, authorization, certification, consent, variance, permission,
order or approval of or from any Authority, and has filed all filings, notices
or recordings with any Authority (collectively, "LICENSES") with which the
failure to comply would result in a Material Adverse Effect on the Seller and is
now, and has at all times in the past been, in compliance with each thereof.
Each such License is identified on SCHEDULE 2.7. No proceeding or other action
is pending or, to the best of Seller's Knowledge, threatened, to revoke, amend,
or limit any License, and Seller has no basis to believe that any such
proceeding or action would result from the consummation of the transactions
contemplated hereby or by the other Transaction Documents, or that any such
License would not be renewed in the ordinary course.
2.8. LITIGATION. There is no pending or, to the best of Seller's
Knowledge, threatened adverse claim, dispute, governmental investigation, suit,
action, arbitration, legal, administrative or other proceeding of any nature,
domestic or foreign, criminal or civil, at law or in equity, by or against or
otherwise affecting Seller, the Business or the Assets.
2.9. TANGIBLE PROPERTY. Seller has good and marketable title to each
item of tangible personal property that is an Asset, free and clear of all
Encumbrances, and each such item of
13
tangible personal property is in good operating condition and repair, useable
in the ordinary course of business. SCHEDULE 1.2(a)(iv) contains a complete
and accurate list setting forth a description of each item of tangible
property that is an Asset.
2.10. AGREEMENTS.
(a) SCHEDULE 2.10(a) sets forth a true and complete list of
all Material agreements, written or oral, express or implied, including all
commitments, guarantees of indebtedness and other instruments, binding Seller
with respect to the Business or the Assets or that otherwise bind or affect the
Business or Assets, and all powers of attorney. True and complete copies of each
such written agreement have been delivered to Buyer.
(b) With respect to such agreements:
(i) Each such agreement is the valid and binding
obligation of the other contracting party, enforceable in accordance
with its terms against the other contracting party, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws and by
general principles of equity, and is in full force and effect;
(ii) Seller has fulfilled all material obligations
required to have been performed by him prior to the Closing Date, and
there is no reason to believe that the other contracting party will not
be able to fulfill all of its or its obligations when due in respect
thereof; and
(iii) to the best of Seller's Knowledge, no other
contracting party to any such agreement is in breach thereof, and there
are not, nor have there been in the twelve (12) month period prior to
the date hereof, any material disputes between Seller and any other
contracting party.
(c) Seller is not a party to, nor is Seller otherwise bound
by, any agreement or commitment that (i) restricts the conduct of the Business
anywhere in the world; (ii) contains any unusual or burdensome provisions that
could reasonably be expected to have an adverse effect upon the condition
(financial or otherwise) of the Business or the Assets; or (iii) grants
exclusive rights to sell advertising on the Web Sites or any other exclusive
rights.
(d) All representations and warranties that have been provided
by Seller and which are contained in any agreement with any federal, state or
local governmental authority listed on Schedule 2.10(a) are true and complete.
2.11. EMPLOYEES AND CONSULTANTS.
(a) SCHEDULE 2.11(a) is a true and complete list of each
employee of Seller and each consultant with whom Seller has done business within
twelve months prior to the date hereof involving the Business. The schedule sets
forth for each employee the current rate of compensation for such employee and
the employee's hire date.
14
(b) Seller has provided to Buyer true and complete copies of
all employee benefits plans and other related materials of Seller.
(c) Schedule 2.11(c) lists (i) all "employee benefit plans"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), (ii) all employment agreements, including,
but not limited to, any individual benefit arrangement, policy or practice with
respect to any current or former employee or director of Seller or of any trade
or business, whether or not incorporated, which would be treated as a single
employer with Seller under Section 4001 of ERISA or Section 414(b), (c), (m) or
(o) of the Internal Revenue Code of 1986, as amended (the "CODE") (each such
trade or business, a "MEMBER OF THE CONTROLLED GROUP"), and (iii) all other
employee benefit, bonus or other incentive compensation, stock option, stock
purchase, stock appreciation, severance pay, lay-off or reduction in force,
change in control, sick pay, vacation pay, salary continuation, retainer, leave
of absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, which Seller or any Member of the Controlled Group maintains, to which any
of them contributes, or for which any of them has any obligation or liability
(collectively, the "EMPLOYEE PLANS" and each an "EMPLOYEE PLAN").
(d) None of the Employee Plans is a plan described in Section
3(35) of ERISA or a plan subject to the minimum funding standards set forth in
Section 302 of ERISA and Section 412 of the Code (a "DEFINED BENEFIT PLAN"), and
neither Seller nor any Member of the Controlled Group has ever sponsored,
maintained or contributed to, or ever been obligated to contribute to, a Defined
Benefit Plan.
(e) None of the Employee Plans is a plan described in Section
3(37) of ERISA (a "MULTIEMPLOYER PLAN," and neither Seller nor any Member of the
Controlled Group has ever contributed to, or ever been obligated to contribute
to, a Multiemployer Plan.
(f) Seller does not maintain or contribute to any plan that
provides health benefits to an employee after the employee's termination of
employment or retirement except as required under Section 4980B of the Code and
Sections 601 through 608 of ERISA.
(g) Each Employee Plan which is an "employee benefit plan," as
defined in Section 3(3) of ERISA, complies by its terms and in operation with
the requirements provided by any and all statutes, orders or governmental rules
and regulations currently in effect and applicable to the Employee Plan,
including but not limited to ERISA and the Code.
(h) All reports, forms and other documents required to be
filed with any government entity or furnished to employees, former employees or
beneficiaries with respect to any Employee Plan (including without limitation,
summary plan descriptions, Forms 5500 and summary annual reports) have been
timely filed and furnished and are accurate.
(i) Each of the Employee Plans that is intended to qualify
under Section 401(a) of the Code has been determined by the Internal Revenue
Service so to qualify after January 1, 1989, and each trust maintained pursuant
thereto has been determined by the Internal Revenue Service to be exempt from
taxation under Section 501 of the Code. Nothing has occurred since
15
the date of the Internal Revenue Service's favorable determination letter
that could adversely affect the qualification of the Employee Plan and its
related trust. Seller and each Member of the Controlled Group have timely
amended and operated each of the Employee Plans to comply with the Small
Business and Job Protection Act of 1996 and subsequent legislation enacted
through the date hereof, and Section 501 of the Code.
(j) All contributions for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) have been made [or will have been made prior to the Closing
Date] by Seller or by a Member of the Controlled Group.
(k) All insurance premiums have been paid in full, subject
only to normal retrospective adjustments in the ordinary course, with regard to
the Employee Plans for plan years ending on or before the Closing Date.
(l) With respect to each Employee Plan:
(i) no prohibited transactions (as defined in Section
406 or 407 of ERISA or Section 4975 of the Code) have occurred for
which a statutory exemption is not available;
(ii) no action or claims (other than routine claims
for benefits made in the ordinary course of plan administration for
which plan administrative review procedures have not been exhausted)
are pending or threatened or imminent against or with respect to the
Employee Plan, any employer who is participating (or who has
participated) in any Employee Plan or any fiduciary (as defined in
Section 3(21) of ERISA), of the Employee Plan;
(iii) neither Seller, nor any fiduciary has any
Knowledge of any facts that could give rise to any such action or
claim; and
(iv) each Employee Plan provides that it may be
amended or terminated at any time and, except for benefits protected
under Section 411(d) of the Code, all benefits payable to current,
terminated employees or any beneficiary may be amended or terminated by
Seller at any time without liability.
(m) Neither Seller nor any Member of the Controlled Group has
any liability or is threatened with any liability (whether joint or several)
(i) for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of
the Code, or (ii) to a fine under Section 502 of ERISA.
(n) All of the Employee Plans, to the extent applicable, are
in compliance with the continuation of group health coverage provisions
contained in Section 4980B of the Code and Sections 601 through 608 of ERISA.
(o) True, correct and complete copies of all documents
creating or evidencing any Employee Plan have been delivered to Buyer, and true,
correct and complete copies of all
16
reports, forms and other documents required to be filed with any governmental
entity or furnished to employees, former employees or beneficiaries
(including, without limitation, summary plan descriptions, Forms 5500 and
summary annual reports for all plans subject to ERISA, but excluding
individual account statements and tax forms) have been delivered to Buyer.
There are no negotiations, demands or proposals which are pending or have
been made which concern matters now covered, or that would be covered, by the
type of agreements required to be listed in Schedule 2.11(c).
(p) All expenses and liabilities relating to all of the
Employee Plans have been, and will on the Closing Date be fully and properly
accrued on Seller's books and records and disclosed in accordance with generally
accepted accounting principles and in plan financial statements.
(q) To the best knowledge of Seller, Seller is not engaged,
and has never been engaged, in any unfair labor practice of any nature. There
has never been any slowdown, work stoppage, labor dispute or union organizing
activity, or any similar activity or dispute, affecting Seller or any of its
employees. There is not now pending, and to the best knowledge of Seller no
person has threatened to commence, any such slowdown, work stoppage, labor
dispute or union organizing activity or any similar activity or dispute, nor has
any event occurred, nor does any condition or circumstance exist, that likely
would directly or indirectly give rise to or provide a basis for the
commencement of any such slowdown, work stoppage, labor dispute or union
organizing activity or similar activity or dispute.
2.12. BROKERS OR FINDERS. Seller has not incurred, nor will incur,
directly or indirectly, any liability, for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Seller shall indemnify and hold Buyer harmless
with respect to any claim by any broker, agent, or finder claiming to have acted
on behalf of Seller, respecting the subject matter hereof.
2.13. INTELLECTUAL PROPERTY.
(a) Seller owns, Buyer shall receive at Closing, and Seller's
intellectual property includes, all trademarks, service marks, trade names, and
copyrights (including registrations, licenses, and applications pertaining
thereto) and all other intellectual property rights, software (in object and
source code formats), trade secrets, and other proprietary information,
processes, and formulas used in the Business and set forth on Schedule 1.2(a).
At the date hereof, Seller has no registered trademarks, service marks, trade
names or copyrights. Buyer acknowledges that the Assets do not include
intellectual property used by Seller in its other businesses, including, but not
limited to the name "Electric Press" and the domain registration
xxx.xxxxxxx.xxx.
(b) Each employee and consultant of Seller has executed a
proprietary rights and information agreement in a form provided to Buyer.
(c) No intellectual property right or other claims have been
asserted by any person or entity to the use of any Asset and there is no valid
basis for any such claim. The use of any
17
Asset by Seller, and the operation of the Business as currently conducted,
does not infringe on the intellectual property or other rights of any person
arising out of the laws of the United States.
(d) Seller has good and marketable title to each item of
intellectual property used in the Business as more fully described in
Sections 1.2(a)(v), 1.2(a)(vi), 1.2(a)(vii) and 1.2(a)(viii), free and clear
of all Encumbrances. Seller is the sole and rightful owner of all right,
title and interest in and to each of such items of intellectual property, and
has the unrestricted right to market, license and otherwise exploit each
intangible Asset.
2.14. THIRD-PARTY COMPONENTS, RIGHTS, ETC.
(a) To the best of Seller's knowledge, Seller has validly and
effectively obtained the right and license to use the third-party programs and
other intellectual property included in the Assets and used to operate the
Business as it is currently operated or has been conducted in the last year,
including intellectual property rights and licenses as provided for under the
agreements set forth in SCHEDULE 1.2(a), except for any open source software and
derivatives thereof developed by Seller which Seller has and at all times has
had the right to use in the Business without obtaining a license and which Buyer
similarly will be entitled to so use following the Closing Date. Seller has the
right to assign and transfer to Buyer the foregoing rights and licenses, and, to
the best of Seller's Knowledge, the Assets contain no other programming or
materials in which any third-party may claim superior, joint, or common
ownership, including any right or license other than licenses granted in the
ordinary course of business. The Assets do not contain derivative works of any
programming or materials not owned in their entirety by Seller and included in
the Assets.
(b) Seller has not granted, transferred or assigned any of
Seller's right, title or interest in or to any Asset to any person or entity
other than in the ordinary course of business. There are no contracts,
agreements, licenses, and other commitments and arrangements in effect with
respect to the marketing, distribution, licensing or promotion of any Asset by
any independent salesperson, distributor, sublicensor or other remarketer or
sales organization, except as set forth on SCHEDULE 1.2(a).
2.15. GENERAL.
(a) No representation or warranty made by Seller herein or in
any other Transaction Document, or any schedule or exhibit attached hereto or
thereto, contains any material misstatement of any fact or omits to state
anything necessary to make any material statement made herein or therein not
misleading. The information to be provided to Buyer by Seller or any of its
representatives for inclusion in the Registration Statement will not contain any
material misstatement of any fact or omit to state anything necessary to make
any material fact contained therein not misleading.
(b) Other than the facts or other information disclosed in the
Disclosure Schedules, there is no fact within the Knowledge of Seller (other
than publicly known facts relating exclusively to political or economic matters
of general applicability that will adversely affect all comparable businesses)
that:
18
(i) may have a Material Adverse Effect on the
Business or its condition, assets, liabilities, operations, financial
performance, net income or prospects, or the ability of Seller to
comply with or perform any covenant or obligation under this Agreement
or any of the other Transaction Documents; or
(ii) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the transactions
contemplated hereby or by any of the other Transaction Documents.
2.16. INVESTMENT REPRESENTATIONS.
(a) Seller is an "accredited investor," as defined in
Rule 501(a) under the Securities Act. Seller, by reason of its business and
financial experience has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of this
type that it is capable of (i) evaluating the merits and risks of an
investment in Buyer Common Stock and making an informed investment decision,
(ii) protecting its own interest and (iii) bearing the economic risk of such
investment.
(b) Seller is acquiring the Buyer Common Stock to be issued
pursuant to Section 1.5(b) and 1.6 for investment for Seller's own account, not
as a nominee or agent and not with the view to, or any intention of, a resale or
distribution thereof, in whole or in part, or the grant of any participation
therein, except distributions to its shareholders pro rata, from time to time.
Seller understands that such shares have not been, and will not be, registered
under the Securities Act or state securities laws. Seller will comply with the
Securities Act in connection with any offer, sale, pledge, transfer or other
disposition of such shares.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date as follows:
3.1. REQUISITE POWER. Buyer has all requisite corporate power to
execute and deliver this Agreement and to carry out and perform its obligations
under the terms of this Agreement and the other Transaction Documents to which
it is a party.
3.2. AUTHORIZATION. All action on the part of Buyer necessary for the
authorization, execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party has been taken and remains in
full force and effect. This Agreement constitutes, and the other Transaction
Documents to which Buyer is a party will each constitute, the valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws and by
general principles of equity.
19
3.3. NO CONFLICT. The execution, delivery, and performance of this
Agreement and any of the other Transaction Documents to which it is a party by
Buyer has not resulted and will not result in, nor will consummation of the
transactions contemplated hereby or thereby result in, any material violation
of, or conflict with, or constitute a default under, any of its charter
documents or material agreements; and there exists no such violation or default
that does or could materially and adversely affect the ability of Buyer to
consummate its obligations hereunder.
3.4. GOVERNMENTAL CONSENTS, ETC. To the best of Buyer's knowledge, no
consent, approval or authorization of or designation, declaration, or filing
with any Authority on the part of Buyer is required in connection with the valid
execution and delivery of this Agreement or any Transaction Document to which
Buyer is a party or the consummation of the transactions contemplated thereby or
thereby.
3.5. BROKERS OR FINDERS. Buyer has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Buyer shall indemnify and hold Seller harmless
with respect to any claim by any broker, agent or finder claiming to have acted
on behalf of Buyer respecting the subject matter hereof.
3.6. BUYER'S COMMON STOCK. The issuance and delivery by Buyer of shares
of Buyer's Common Stock in connection with the Base Purchase Price and the
Additional Purchase Price will be, at the Closing, or at the Revenue Payment
Date, as applicable, duly and validly authorized by all necessary corporate
action on the part of Buyer. The shares of Buyer's Common Stock to be issued
will, when issued and delivered to Seller in accordance with this Agreement, be
validly issued, fully paid and non-assessable, and free and clear of all liens,
claims and Encumbrances.
3.7. GENERAL.
(a) No representation or warranty made by Buyer herein or in
any other Transaction Document contains any material misstatement of any fact or
omits to state anything necessary to make any material statement made herein or
therein not misleading.
(b) There is no fact within the Knowledge of Buyer (other than
publicly known facts relating exclusively to political or economic matters of
general applicability that will adversely affect all comparable businesses)
that:
(i) may have a material adverse effect on the ability
of Buyer to comply with or perform any covenant or obligation under
this Agreement or any of the other Transaction Documents; or
(ii) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the transactions
contemplated hereby or by any of the other Transaction Documents.
20
SECTION 4
CLOSING CONDITIONS/CLOSING DOCUMENTS/TERMINATION
4.1. SELLER DELIVERIES. At the Closing, Seller shall execute and
deliver to Buyer the following documents:
(a) a noncompetition agreement (the "NONCOMPETITION
AGREEMENT") in the form of EXHIBIT D with Seller;
(b) the Xxxx of Sale, and such other instruments of assignment
as Buyer and its counsel reasonably request to evidence or effect the sale,
transfer and conveyance and assignment of the Assets to the Subsidiary;
(c) a certificate, signed by the chief executive officer of
Seller and dated as of the Closing Date, to the effect that (i) all of the
representations and warranties of Seller in this Agreement are true and correct
as of the Closing Date, as if made on the Closing Date; and (ii) Seller has
fully performed each covenant required to be performed prior to the Closing
Date;
(d) a certificate, dated the Closing Date, of an officer of
Seller attaching resolutions of the Board of Directors of Seller in connection
with the authorization and execution, delivery and performance by Buyer of this
Agreement and the other Transaction Documents to which Buyer is a party,
certified as being in full force and effect as of the Closing Date;
(e) disks, tapes and/or CDs containing the intangible Assets
set forth in Section 1.2 and SCHEDULE 1.2(a); all records and other materials
and documentation set forth in Section 1.2 and SCHEDULE 1.2(a);
(f) all passwords and communications information used solely
to operate the Business;
(g) all other records of the Business not previously provided
to Buyer as reasonably requested by Buyer;
(h) an opinion of Seller's counsel in form and substance
satisfactory to Buyer and its counsel;
(i) all consents necessary to transfer agreements, domain
names and other tangibles and intangibles included in the Assets; and
(j) a receipt, executed by the Shareholders, acknowledging
issuance to them of the Buyer Common Stock and providing certain investment
representations and representations acknowledging the restrictions placed on the
shares pursuant to this Agreement.
4.2. BUYER DELIVERIES. At the Closing, Buyer shall execute and deliver
to Seller:
21
(a) the Xxxx of Sale;
(b) a certificate, signed on behalf of Buyer and dated as of
the Closing Date, to the effect that (i) all of the representations and
warranties of Buyer in this Agreement are true and correct as of the Closing
Date, as if made on the Closing Date; and (ii) Buyer has fully performed each
covenant required to be performed prior to the Closing Date;
(c) a certificate, dated the Closing Date, of an officer of
Buyer attaching resolutions of the Board of Directors of Buyer in connection
with the authorization and execution, delivery and performance by Buyer of this
Agreement and the other Transaction Documents to which Buyer is a party,
certified as being in full force and effect as of the Closing Date;
(d) the cash portion of the Purchase Price;
(e) certificates representing an aggregate amount of 151,500
shares of Buyer Common Stock, issued pursuant to the terms and restrictions
contained in Section 1.9(a);
(f) certificates representing an aggregate amount of 363,600
shares of Buyer Common Stock issued pursuant to the terms and restrictions
contained in Section 1.9(b); and
(g) certificates representing an aggregate amount of 90,900
shares of Buyer Common Stock issued pursuant to the terms and restrictions
contained in Section 1.9(c).
4.3. BUYER'S CLOSING CONDITIONS. Buyer's obligation to consummate the
transactions contemplated hereby at the Closing is conditioned on the following:
(a) the representations and warranties of Seller contained in
this Agreement or in any other Transaction Document are true and correct on the
date hereof and on the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date;
(b) Seller shall have delivered all of the documents and
materials required under Section 4.1;
(c) all material registrations, filings, applications,
notices, consents, approvals, orders, qualifications and waivers required in
respect of the transactions contemplated hereby and by the other Transaction
Documents other than the Novations ("CONSENTS") shall have been filed, made or
obtained and remain effective;
(d) Seller's satisfaction of and compliance with all covenants
to be performed by Seller under this Agreement and the other Transaction
Documents prior to the Closing;
(e) each of the employees of Seller specified in
SCHEDULE 4.3(e) (the "KEY EMPLOYEES") shall have accepted employment with
Buyer effective as of the Closing and shall have executed a Buyer Employment
Agreement. Each of Xxxxxx Xxxxxxx and Xxxxxx Xxxx
22
shall have entered into a Buyer Employment Agreement and a key employee
agreement in the form set forth on EXHIBIT E attached hereto;
(f) the parties to each of the contracts listed in
SCHEDULE 4.3(f) shall have consented to the assignment of such contracts to
Buyer without requiring any change to the terms of such contracts that
diminishes their value or is otherwise adverse to Buyer other than the
Novations;
(g) the positive difference between the Accounts Receivable
and the Accounts Payable as stated on the Accounts Receivable Schedule and the
Accounts Payable Schedule, shall be no less than $300,000; and
(h) no event shall have occurred or be existing which has had,
or is reasonably likely to have, a material adverse effect on the condition or
prospects of the Business.
4.4. SELLER'S CLOSING CONDITIONS.
Seller's obligation to consummate the transactions contemplated hereby
at the Closing is conditioned on the following:
(a) the representations and warranties of Buyer contained in
this Agreement or in any other Transaction Document are true and correct on the
date hereof and on the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date;
(b) Buyer shall have delivered all of the documents required
under Section 4.2; and
(c) Buyer's satisfaction of and compliance with all covenants
to be performed by Buyer under this Agreement and the other Transaction
Documents prior to the Closing.
4.5. CONDITIONS TO EACH PARTY'S OBLIGATIONS. Each party's obligation to
consummate the transactions contemplated hereby at the Closing is further
subject to the conditions that:
(a) any applicable waiting period under the HSR Act (as
defined below) shall have expired or been terminated;
(b) there be no suit, action or other proceeding before any
Authority in which it is sought to prohibit the consummation of such
transactions or to restrict the transfer or use of any Assets; and
(c) no temporary restraining order or injunction or court
order preventing the consummation of such transactions or the transfer or use of
any Assets shall be in effect.
23
4.6. TERMINATION.
(a) Each party shall have the right to terminate this
Agreement on the signed written agreement of the other party.
(b) Buyer shall have the right to terminate this Agreement
upon notice to Seller if Buyer during the course of its due diligence review
discovers information that was not previously provided by Seller and such
information would have a material adverse effect on the Business.
(c) Each party shall have the right to terminate this
Agreement if the closing conditions for the terminating party have not been
satisfied within 90 days of date of this Agreement; PROVIDED that neither party
shall have a right to so terminate if the failure to satisfy that party's
closing conditions is caused by or results from the failure of that party to
satisfy its obligations under this Agreement or any of the other Transaction
Documents or if such party is otherwise in default of any of its
representations, warranties or covenants under this Agreement.
SECTION 5
COVENANTS
5.1. PRE-CLOSING COVENANTS.
(a) Each of Seller and Buyer shall use its reasonable efforts
to conduct the Closing within 5 days following the date hereof.
(b) Each of Seller and Buyer shall at its own expense file
with the United States Department of Justice and the Federal Trade Commission,
any required regulatory submissions under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX XXX") and shall use its commercially
reasonable efforts to obtain any necessary approvals of such agencies to the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents.
(c) Seller will take all commercially reasonable steps as may
be necessary to put Buyer in actual possession and operating control of the
Assets and Business as of the Closing Date, including obtaining all Consents.
(d) Until the earlier of termination of this Agreement or the
Closing Date: (i) neither Seller nor any of its representatives shall engage in
any discussions or negotiations with a third-party for the acquisition of all or
any portion of the Business or the Assets or solicit or otherwise facilitate or
encourage (through the provision of information or otherwise) an offer for the
acquisition of all or any portion of the Business or the Assets, and (ii) in the
event that Seller is approached by a third-party with respect to an acquisition
of all or any portion of the Business or the Assets, Seller shall immediately
notify Buyer in writing of the identity of such third-party.
24
(e) Until the earlier of the termination of this Agreement or
the Closing, Seller shall, except with the prior written consent of Buyer:
(i) operate the Business exclusively in the ordinary
course consistent with past practices and in a manner which neither
increases nor decreases web site Traffic in a manner inconsistent with
commercially reasonable past practices;
(ii) maintain the Assets in good repair and
condition, ordinary wear and tear excepted, and continue to preserve
and protect the Assets;
(iii) comply with all applicable laws, regulations,
rules, ordinances and court orders;
(iv) maintain the books and records of the Business
on a basis consistent with prior periods;
(v) perform in all respects under all obligations and
agreements of the Business, including paying when due all accounts
payable, rents, taxes and other obligations of Seller or otherwise
affecting the Business;
(vi) cause the positive difference between its
Accounts Receivable and Accounts Payable, determined immediately prior
to the Closing Date, to be less than $300,000; and
(vii) use all commercially reasonable efforts to
preserve the Business and preserve the goodwill of licensors,
suppliers, consultants, contributors, customers and others having
business relations with the Business.
(f) Until the earlier termination of this Agreement or the
Closing, Seller shall not, except with the prior written consent of Buyer,
except in the ordinary course of business:
(i) sell, lease, license or otherwise dispose of any
Assets other than in the ordinary course of business consistent with
past practices, grant any right or interest in any Asset to any person
or create or permit the imposition of any Encumbrance on any Asset, and
with respect to intellectual property licensed from third parties and
included in the Assets, sell, lease, license, or otherwise dispose of,
or enter into any other agreement with respect to, such intellectual
property in a manner which would prevent or interfere with the grant of
the license;
(ii) make any assignment, license or sub-license of
any of the intangible Assets;
(iii) enter into any contract or agreement with
respect to the Business;
(iv) incur, assume, guarantee or otherwise become
liable for any indebtedness for borrowed money with respect to the
Business or the Assets;
25
(v) waive any confidentiality rights pertaining to
the Assets or the Business;
(vi) enter into any joint venture, partnership or
other similar arrangement or form any other new material arrangement
for the conduct of the Business or with respect to the Assets; or
(vii) adopt or amend, or permit any Member of the
Controlled Group to adopt or amend, any Employee Plan, except to the
extent necessary to comply with changes in applicable law.
(g) Seller will afford, or cause to be afforded, to Buyer and
its representatives access to all personnel, facilities, properties, books, tax
returns, accounts, data, records, agreements and documents pertaining to or
included in the Assets or the Business. Seller will promptly advise Buyer in
writing of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Seller contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect or which is reasonably likely to
have a material adverse effect on the condition or prospects of the Business. ;
PROVIDED that Seller shall not be obligated to deliver to Buyer information the
delivery of which is prohibited by applicable law. Buyer will maintain the
confidentiality of all information (to the extent it is otherwise non-public and
not independently developed by Buyer) provided pursuant to this Section 5.1(g)
pending the Closing Date.
(h) Seller will provide Buyer with the Services pursuant to
the terms set forth on Schedule 1.2(a)(xvi). Seller will provide the employees
working for the Business with medical insurance coverage for approximately
thirty (30) days or until any applicable waiting period expires under Buyer's
plan, for which coverage Buyer will pay Seller.
(i) Buyer shall offer employment to each Key Employee,
including a grant of options to purchase Buyer Common Stock in an amount
specified on SCHEDULE 5.1(i).
(j) Buyer understands that its consent to the execution of a
counter party agreement by Seller's shareholders may be required, and that such
consent shall not be unreasonably withheld or unduly delayed.
5.2. POST-CLOSING COVENANTS.
(a) For a period of one year from and after the Closing,
Seller shall, at Buyer's expense, execute all such instruments or documents and
take all such other actions as Buyer may reasonably request to effectuate the
transactions contemplated hereby and by the other Transaction Documents,
including (i) obtaining of any necessary or advisable consents not required by
Buyer prior to Closing (including consents to assignment of contract rights and
obligations as Buyer may reasonably request); (ii) filing of tax returns,
including the filing of sales and use tax returns and notices as any party
hereto may reasonably require; and (iii) cooperating with Buyer to facilitate
the transition of Business customers, developers, content contributors and
advertisers to Buyer (such cooperation does not include going on joint sales
26
calls, preparation of marketing materials or presentations, or traveling to
any site outside of the northern Virginia area).
(b) Seller shall make available to Buyer the services
specified in SCHEDULE 5.2(b) AND Buyer shall pay Seller for such services
pursuant to a separate Services Agreement in the form set forth on Exhibit F
(the "SERVICES AGREEMENT").
(c) Subject to the limitations below, Seller shall indemnify,
defend and hold harmless Buyer, its officers, directors, employees, partners,
members, shareholders, affiliates and agents (and their officers, directors,
employees, members, partners and shareholders) (collectively, the "INDEMNIFIED
PARTIES") from and against any action, loss, liability, damage, claim, fine,
penalty, lien or expense, including legal costs, reasonable attorneys' fees and
expenses (collectively, "LOSSES") to the extent the same arises out of or is
related to (i) any breach by Seller of any representation, warranty, agreement
or covenant made by Seller herein or in any other Transaction Document;
(ii) Seller's failure to comply with any bulk sales or similar law; (iii) any
tax, including use or sales tax, in respect of the conduct of the Business
prior to the Closing Date; (iv) any claim arising out of or in connection
with the conduct of the Business on or prior to the Closing Date alleging
that all, or any portion of, the Business infringes any intellectual property
right or other interest of any person or entity; and (v) any claim, cause of
action or other obligation of Seller or of the Business relating to the
period prior to the Closing Date, whether the claim relating to such
obligation arises before or after the Closing Date, including any obligations
with respect to Assumed Liabilities to the extent that any such obligation or
Assumed Liability arose from or was the result of any facts or circumstances,
the existence of which constitutes a breach of a representation or warranty
made by Seller hereunder. Each Indemnified Party will give prompt notice to
Seller upon actual knowledge thereof of any claim or condition to which the
foregoing indemnification covenant relates; PROVIDED that failure to give
such notice shall not preclude any indemnity hereunder unless and to the
extent that such failure has actually and materially prejudiced Seller. With
respect to claims arising from the matter asserted on SCHEDULE 5.2(c), Buyer
must inform Seller of such claims within 24 months following the Closing
Date. With respect to claims arising from other breaches of representations
and warranties, Buyer must inform Seller of any such claims within 12 months
following the Closing Date except for breaches of representations and
warranties set forth in Section 2.6, which must be asserted within 30 days
after the expiration of the applicable statute of limitations governing the
assertion of liabilities which are the subject thereof, and Sections 2.1 and
2.2, as to which there is no limitation as to the date of assertion. The
liability of Seller under this Section 5.2(c) shall not exceed $2,500,000 and
shall be paid by each Shareholder, pro rata, from the aggregate 151,500
shares of Buyer Common Stock issued to and held by each Shareholder pursuant
to Section 1.9(a).
(d) Subject to the limitations below, Buyer shall indemnify,
defend and hold harmless Seller, its officers, directors, employees, partners,
members, shareholders, affiliates and agents (and their officers, directors,
employees, members partners and shareholders) (collectively, the "SELLER'S
INDEMNIFIED PARTIES") from and against any Losses to the extent the same arises
out of or is related to (i) any breach by Buyer of any representation, warranty,
agreement, or covenant made by Buyer herein or in any other Transaction
Document, (ii) any
27
claim, cause of action or other obligation of Buyer or of the Business
relating to the Assumed Liabilities, except to the extent arising from
circumstances constituting a breach of any representation, warranty or
covenant of Seller (without regard to any limit on the survival of such
representations, warranties or covenants); and (iii) any debt, liability or
obligation arising out of the Assets or the operation of the Business after
the Closing. Seller will give prompt notice to Buyer upon actual knowledge
thereof of any claim or condition to which the foregoing indemnification
covenant relates; PROVIDED that failure to give such notice shall not
preclude any indemnity hereunder unless and to the extent that such failure
has actually and materially prejudiced Buyer. Seller must inform Buyer of any
claims for breaches of representations and warranties within 12 months
following the Closing Date except for breaches of representations and
warranties set forth in Section 3.1 and 3.2, as to which there is no
limitation as to the date of assertion.
(e) Subject to the provisions of Section 5.2(h), Buyer shall
have the right to setoff any amount it is obligated to pay to Seller pursuant to
this Agreement or the other Transaction Documents against any amount owed by
Seller for any reason pursuant to this Agreement or the other Transaction
Documents; PROVIDED that where Buyer desires to exercise such setoff right in
respect of shares of Buyer Common Stock otherwise deliverable by Seller, Seller
may, at its option, elect to pay to Buyer in cash the amount to be setoff, which
payment must be made by Seller within five business days of Buyer's notice of
claim or Buyer shall again be entitled to exercise such right of setoff.
(f) From and after the Closing, if Seller becomes aware of any
Asset in its possession that was not delivered to Buyer at Closing, Seller shall
promptly notify Buyer of any such Asset, and deliver any such Asset to Buyer in
accordance with Buyer's reasonable instructions.
(g) From and after the date which is sixty days after the
Closing Date, Seller shall, upon the written request of Buyer, immediately
destroy or erase all of Seller's copies of the Assets set forth in
SCHEDULE 1.2(a) and, upon Buyer's request, promptly confirm destruction of
same by signing and returning to Buyer an "affidavit of destruction"
acceptable to Buyer.
(h) Except with respect to claims arising from the matter
described in Schedule 5.2(c), as to which Seller shall be liable for all amounts
up to but not in excess of $250,000, Seller shall not be liable to any
Indemnified Party unless an until the aggregate amount of Losses exceed the
amount of $100,000, and thereafter Indemnified Party shall be entitled to
indemnification only for the aggregate amount of such Losses in excess of
$100,000. The aggregate liability, including expenditures for legal fees and
disbursements, to which Seller shall be subject pursuant to the provisions of
Section 5.2(c) shall not exceed that number of shares of Buyer Common Stock
which equals $2,500,000, based upon the Closing Share Price. Any liability
directly to Buyer may be paid by the delivery of shares of Buyer's Common Stock
held in escrow pursuant to Section 1.9(a) or may be discharged at the election
of the Seller in cash. All damages to which the Indemnified Party may be
entitled pursuant to the provisions of Section 5.2(c) shall be net insurance
coverage in which Indemnified Party receives the benefits with respect thereto.
28
(i) With respect to disputes arising under Sections 1.9(a),
1.9(b) and 1.9(c), notwithstanding anything to the contrary contained in this
Agreement, all disputes shall be settled by arbitration administered by the
American Arbitration Association in accordance with the Commercial Arbitration
Rules then in effect. The arbitration shall be held in either Virginia or
Kansas; the location to be chosen by the respondent within 5 days after receipt
of claimant's demand for arbitration. The arbitration shall be conducted in by a
panel of three arbitrators to be selected within 15 days after respondent's
receipt of claimant's demand for arbitration and in the following manner: Buyer
shall select one arbitrator; Seller shall select one arbitrator; and a third
arbitrator, chose by the selected party arbitrators, to serve as a neutral
chairperson. If one or both of the parties fail to nominate an arbitrator within
the time limits specified herein, the American Arbitration Association shall
select an arbitrator on the party's behalf. The hearing shall be held no later
than 60 days following the appointment of the third arbitrator.
SECTION 6
REGISTRATION RIGHTS
6.1. PIGGYBACK REGISTRATION RIGHTS. If at any time Buyer proposes to
register for public offering any of its common stock under the Securities Act
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose such as a dividend
reinvestment plan, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another entity),
whether or not for its own account, Buyer shall furnish prompt (but in no event
later than thirty (30) days prior to the filing of the applicable registration
statement) written notice to each Shareholder of its intention to effect such
registration and the intended method of distribution in connection therewith.
Upon the written request of a Shareholder made to Buyer within 15 days after the
mailing of such notice by Buyer, Buyer shall include in such registration the
number of shares requested for inclusion by such Shareholder (the "Registrable
Securities"), subject to the provisions hereof and other customary terms,
conditions, limitations and cut-backs relating to the registration of securities
generally; PROVIDED, HOWEVER, that all rights granted pursuant to this Section 6
to any Shareholder shall terminate with respect to any Registrable Securities
held by such Shareholder upon the earlier to occur of (i) the time as all such
Registrable Securities of such Shareholder may immediately be sold pursuant to
Rule 144 and/or Rule 145 under the Securities Act within any ninety (90) day
period, or (ii) upon the sale of all such Registrable Securities pursuant to a
registration statement or Rule 144 and/or Rule 145 under the Securities Act.
6.2. In addition to the obligations set forth under Section 6.3, in
order to include any Registrable Securities of a Shareholder in a registration
statement pursuant to this Section 6 that the Shareholder shall furnish to Buyer
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of the Registrable Securities held by such Shareholder.
Any such information, or any comments on any such information included in a
draft of a registration
29
statement provided to such Shareholder for its comment, shall be provided to
Buyer within any reasonable time period requested by Buyer.
6.3. Each Shareholder shall notify Buyer, at any time when a prospectus
is required to be delivered under applicable law, of the happening of any event
as a result of which the prospectus included in the applicable registration
statement, as then in effect, with respect to information provided or confirmed
by such Shareholder, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Such Shareholder shall immediately upon the happening of any such event cease
using such prospectus.
6.4. In connection with any underwritten offering of a Shareholder's
Registrable Securities, Buyer shall not be required under this Section 6 to
register any of such Registrable Securities in connection with such underwritten
offering unless such Shareholder accepts the underwriters selected by Buyer and
executes an underwriting agreement with such underwriters containing such
provisions as are customary in an underwritten offering that includes shares
held by selling shareholders. Registrable Securities shall be sold in such
offering only in such quantity as the lead managing underwriter determines, in
its sole discretion, will not jeopardize the success of the offering by Buyer.
To the extent that the lead managing underwriter will not permit the
registration of all of the securities sought to be registered, in the case of a
registration pursuant to this Section 6, the securities to be included shall be
apportioned as follows: (i) first, Buyer and any holders of securities of Buyer
exercising any demand registration rights granted to such holders shall be
entitled to register all securities that Buyer or such other holders propose to
sell for their own account, in such proportion as they shall agree upon; (ii)
second, any holders of Buyer securities exercising piggyback registration rights
as and to the extent that such registration rights were granted prior to the
date hereof and have priority over the registration rights granted to
Shareholders hereunder; and (iii) lastly, any Shareholder, together with any
holders of other Buyer securities exercising piggyback registration rights as
and to the extent that such registration rights rank PARI PASSU with the
piggyback registration rights hereunder, shall be entitled to register, on a pro
rata basis (based on the number of Registrable Securities which a Shareholder
would be entitled, absent any apportionment pursuant to this Section 6.4 to have
Buyer register), up to that number of Registrable Securities and other shares of
common stock that is equal to the remaining shares of common stock that the lead
managing underwriter will permit to be registered after giving effect to the
apportionment set forth in clauses (i) and (ii) above, in connection with such
offering.
6.5. If requested by Buyer or a representative of the underwriters of
the offering, each Shareholder shall not sell or otherwise transfer or dispose
of any securities held by such Shareholder (other than those included in the
registration) for a period specified by the representative of the underwriters,
not to exceed one hundred eighty (180) days following the effective date of a
registration statement of Buyer filed under the Securities Act.
6.6. Nothing in this Section 6 shall create any liability on the part
of Buyer or any other person to any Shareholder if Buyer or any other person
should, for any reason, decide not
30
to file a registration statement proposed to be filed or to withdraw such
registration statement subsequent to its filing, regardless of any action
whatsoever that any Shareholder may have taken, whether as a result of the
issuance by Buyer of any notice under this Section 6 or otherwise.
6.7. Unless otherwise required by law, rule or regulation, if
Registrable Securities owned by Shareholders who have made the election provided
in Section 6.1 are included in such registration statement, the Buyer shall bear
and pay all fees, costs, and expenses incident to such inclusion, including,
without limitation, registration fees, blue sky qualification fees, exchange
listing fees and expenses, legal fees and disbursements of Buyer's counsel
(including blue sky counsel), reasonable legal fees and disbursements of one
counsel to the Shareholders, printing costs, costs of any special audits and
accounting fees. Each selling Shareholder shall pay all underwriting discounts
and commissions with respect to such Shareholder's Registrable Securities, as
well as fees and disbursements of counsel (other than the one counsel to the
Shareholders) and other advisors for such selling Shareholder and all internal,
overhead and other expenses of such selling Shareholder.
6.8. The Buyer, before filing a registration statement, amendment or
supplement thereto, will furnish copies of such documents to legal counsel
selected by the Shareholders. In addition, the Buyer will make available for
inspection by any selling Shareholder or by any attorney or other agent of any
selling Shareholder all information reasonably requested by such persons which
relates to such registration. All non-publicly available information provided to
any selling Shareholder, or any attorney or agent of any selling Shareholder
shall be kept strictly confidential by such selling Shareholder, or attorney or
agent of such selling Shareholder so long as such information remains nonpublic.
6.9. The Buyer will promptly notify each selling Shareholder of the
occurrence of any event which renders any prospectus then being circulated among
prospective purchasers misleading because such prospectus contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements made, in light of the circumstances in which they were made, not
misleading, and the Buyer will amend the prospectus so that it does not contain
any material misstatements or omissions and deliver the number of copies of such
amendments to each selling Shareholder as each selling Shareholder may require.
6.10. In connection with any registration of Registrable Securities
pursuant to this Agreement, the Buyer shall, at its expense, keep effective and
maintain such registration and any related qualification of Registrable
Securities under state securities laws for such period not exceeding 120 days as
may be necessary for the selling Shareholders, underwriters and selling agents
to dispose of such Registrable Securities, from time to time to amend or
supplement the Prospectus used in connection therewith to the extent necessary
to comply with applicable laws, and to furnish to such selling Shareholders such
number of copies of the registration statement, the prospectus constituting a
part thereof, and any amendment or supplement thereto as such selling
Shareholders may reasonably request in order to facilitate the disposition of
the registered Registrable Securities.
31
6.11. Subject to the requirements of the applicable securities laws,
nothing in this agreement to the contrary shall prevent Shareholders from
participating in any tender offer for outstanding Buyer Common Stock, which
tender offer is not in violation of the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder; PROVIDED that $16.50165 for
every share of Buyer Common Stock finally tendered by each Shareholder is set
aside, to the reasonable satisfaction of Buyer, secured and made available to
Buyer to cover claims that may arise from time to time against such shares under
the terms of this Agreement.
SECTION 7
MISCELLANEOUS
7.1. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Kansas, without giving effect to any choice or conflict
of law provision or rule (whether of the State of Kansas or any other
jurisdiction that would cause the application of the laws of any jurisdiction
other that the State of Kansas).
7.2. SURVIVAL. The representations and warranties made herein shall
survive any investigation made by the parties and the Closing for a period of 12
months following the Closing Date, except for the representations and warranties
set forth in Sections 2.1, 2.2, 2.6, 3.2 and 3.6 which shall survive until the
expiration of the applicable statute of limitations governing the assertion of
liabilities which are the subject thereof. Except as expressly provided
otherwise herein, the covenants and agreements made herein shall survive the
Closing.
7.3. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof and of the other Transactional Documents shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto. No party may assign any of its rights or
obligations hereunder or thereunder without the express written consent of the
other party hereto, which consent may not be unreasonably withheld; PROVIDED
that any party may assign any and all of its rights and interests hereunder of
thereunder to one or more of its affiliates and designate one or more of its
affiliates to perform its obligations hereunder; PROVIDED that such party
remains liable for full and total performance of its obligations hereunder and
thereunder.
7.4. NOTICES. Any notices authorized to be given hereunder or under any
of the other Transactional Documents shall be in writing and deemed given, if
delivered personally or by overnight courier, on the date of delivery, if a
Business Day, or if not a Business Day, on the first Business Day following
delivery, or if mailed, three days after mailing by registered or certified
mail, return receipt requested, and in each case, addressed, as follows:
32
If to Buyer:
National Information Consortium, Inc.
Attention: President
12 Corporate Xxxxx
00000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
and a copy to:
Xxxx X. Xxxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Seller:
Xxxxx Xxxxx,
Chief Executive Officer
Electric Press, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
and a copy to
Xxxxxxx Xxxx Xxxxxxx, Esq.
McGwire, Woods, Battle & Xxxxxx LLP
0000 Xxxxx'x Xxxxxxxxx
XxXxxx, XX 00000
Facsimile: (000) 000-0000
or if delivered by telecopier, on a Business Day before 4:00 PM local time of
addressee, on transmission confirmed electronically, or if at any other time or
day on the first Business Day succeeding transmission confirmed electronically,
to the facsimile numbers provided above, or to such other address or telecopy
number as any party shall specify to the other, pursuant to the foregoing notice
provisions.
7.5. WAIVER; AMENDMENTS. This Agreement and the other Transaction
Documents (i) set forth the entire agreement of the parties respecting the
subject matter hereof; (ii) supersede any prior and contemporaneous
understandings, agreements, or representations by or among the parties, written
or oral, to the extent they related in any way to the subject matter hereof; and
33
(iii) may not be amended orally, and no right or obligation of any party may be
altered, except as expressly set forth in a writing signed by such party.
7.6. COUNTERPARTS. This Agreement may be signed in several
counterparts.
7.7. EXPENSES. Each party shall bear its own expenses incurred with
respect to the preparation of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby.
7.8. POST-CLOSING CONFIDENTIALITY AND PUBLICITY. On and at all times
after the date of this Agreement:
(a) except to the extent required by law, and until Buyer has
made its public announcement regarding this transaction, Seller shall not make
any disclosure of any nature (to any of their suppliers, customers, landlords,
creditors or employees or to any other person) concerning any of the
transactions contemplated by this Agreement or any of the other Transactional
Documents except as contemplated by the Transactional Documents agreed to by
Buyer, and Seller shall keep the existence and terms of this Agreement and the
other Transaction Documents strictly confidential; and
(b) Seller shall keep strictly confidential, and shall not
use, or disclose to any other person, any non-public document or other
information that relates directly or indirectly to the Business or the Assets,
including personnel information, secret processes, proprietary know-how,
customer lists and other technical or business information included in the
Assets and not generally known in similar businesses.
7.9. CERTAIN DEFINITIONS.
(a) When used in this Agreement, "TRANSACTION DOCUMENTS" shall
mean this Agreement, the Seller Services Agreement and the Xxxx of Sale.
(b) When used in this Agreement, "BUSINESS DAY" shall mean a
day other than a Saturday, Sunday or a day on which commercial banks in Kansas
City, Kansas are generally closed for business.
(c) When used in this Agreement, "PERSON" shall mean and
include any individual, entity or Authority.
(d) When used in this Agreement, "CAUSE" shall mean an
employee's conviction of a felony or the willful and deliberate failure of an
employee to perform his customary duties, in a manner consistent with the manner
reasonably prescribed by the Board of Directors or President of Buyer (other
than any failure resulting from his incapacity due to physical or mental
illness, disability or death) after not less than thirty (30) days prior written
notice from Buyer.
(e) When used in this Agreement, "KNOWLEDGE" of a particular
fact or other matter shall mean, with respect to an individual, that:
34
(i) such individual is actually aware of such fact or
other matter; or
(ii) a reasonable individual could be expected to
discover or otherwise become aware of such fact or other matter in the
course of conducting a reasonably diligent investigation concerning the
truth or existence of such fact or other matter.
Seller shall be deemed to have "Knowledge" of a particular fact or
other matter if any officer or key employee of Seller has Knowledge of such fact
or other matter.
(f) When used in this Agreement, "MATERIAL" means, with
respect to the representations, warranties and covenants provided herein, a
contract, obligation, liability, transaction, breach, Encumbrance, proceeding or
other matter or event, if the aggregate amount or value involved with respect to
each such contract, obligation, liability, transaction, breach, Encumbrance,
proceeding or other matter or event exceeds $10,000.
(g) When used in this Agreement, "MATERIAL ADVERSE EFFECT"
means, with respect to Seller, (i) any material adverse effect on Seller's
business, financial condition, assets, liabilities, operations, financial
performance, net income or prospects or (ii) any material adverse effect on
Seller's ability to comply with or perform any material covenant or obligation
under this Agreement and the other Transactional Documents.
7.10. SEVERABILITY. In the event any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, the other provisions of this Agreement shall remain in full
force and effect.
7.11. INTERPRETATION.
(a) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(b) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(c) Except as otherwise indicated, all references in this
Agreement to "Sections," "Exhibits" and "Schedules" refer to Sections of this
Agreement and Exhibits and Schedules to this Agreement.
(d) A person shall be deemed to have "knowledge" of a
particular fact or matter if (i) such person is actually aware of such fact or
other matter or (ii) a reasonable person would be expected to become aware of
such fact or other matter in the course of performing such person's ordinary
duties and responsibilities in a reasonable and prudent manner consistent with
such person's position.
35
IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase
Agreement as of the date first written above.
NATIONAL INFORMATION CONSORTIUM, INC.
By: /s/
-----------------------------------------
Name:
Title:
ELECTRIC PRESS, INC.
By: /s/
-----------------------------------------
Name:
Title:
36