1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
SILVERSTREAM SOFTWARE, INC.
OBJECTERA, INC.
AND
THE STOCKHOLDERS OF
OBJECTERA, INC.
December 13, 1999
2
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE OF THE COMMON SHARES......................................................... 2
1.1 Purchase of the Common Shares from the Company Stockholders............................. 2
1.2 Purchase Price.......................................................................... 2
1.3 The Closing............................................................................. 4
1.4 Further Assurances...................................................................... 5
ARTICLE IIA REPRESENTATIONS AND WARRANTIES REGARDING
THE COMMON SHARES................................................................................ 5
2A.1 Ownership of Common Shares.............................................................. 5
2A.2 Authority............................................................................... 6
2A.3 Noncontravention........................................................................ 6
2A.4 Investment Representations.............................................................. 6
ARTICLE IIB REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANY...................................................................................... 7
2B.1 Organization, Qualification and Corporate Power......................................... 7
2B.2 Capitalization.......................................................................... 8
2B.3 Noncontravention........................................................................ 9
2B.4 Subsidiaries............................................................................ 9
2B.5 Financial Statements.................................................................... 9
2B.6 Absence of Certain Changes.............................................................. 10
2B.7 Undisclosed Liabilities................................................................. 10
2B.8 Tax Matters............................................................................. 10
2B.9 Assets.................................................................................. 12
2B.10 Owned Real Property..................................................................... 12
2B.11 Real Property Leases.................................................................... 12
2B.12 Intellectual Property................................................................... 13
2B.13 Contracts............................................................................... 16
2B.14 Accounts Receivable..................................................................... 17
2B.15 Powers of Attorney...................................................................... 18
2B.16 Insurance............................................................................... 18
2B.17 Litigation.............................................................................. 00
-x-
0
0X.00 Xxxxxxxxx............................................................................... 18
2B.19 Employee Benefits....................................................................... 18
2B.20 Legal Compliance........................................................................ 19
2B.21 Customers and Suppliers................................................................. 19
2B.22 Permits................................................................................. 19
2B.23 Certain Business Relationships With Affiliates.......................................... 19
2B.24 Broker's Fees........................................................................... 20
2B.25 Books and Records....................................................................... 20
2B.26 Disclosure.............................................................................. 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER.................................................. 20
3.1 Organization, Qualification and Corporate Power......................................... 20
3.2 Capitalization.......................................................................... 21
3.3 Authorization of Transaction............................................................ 21
3.4 Noncontravention........................................................................ 21
3.5 Reports and Financial Statements........................................................ 22
3.6 Absence of Material Adverse Change...................................................... 22
3.7 Litigation.............................................................................. 22
3.8 Brokers' Fees........................................................................... 23
3.9 Disclosure.............................................................................. 23
ARTICLE IV COVENANTS..................................................................................... 23
4.1 Closing Efforts......................................................................... 23
4.2 Governmental and Third-Party Notices and Consents....................................... 23
4.3 Operation and Business.................................................................. 24
4.4 Access to Information................................................................... 25
4.5 Notice of Breaches...................................................................... 26
4.6 Exclusivity............................................................................. 27
4.7 Expenses................................................................................ 27
ARTICLE V CONDITIONS TO CONSUMMATION OF TRANSACTION...................................................... 27
5.1 Conditions to Obligations of the Buyer.................................................. 27
5.2 Conditions to Obligations of the Company Stockholders................................... 29
ARTICLE VI INDEMNIFICATION............................................................................... 30
6.1 Indemnification by the Company Stockholders............................................. 30
-ii-
4
6.2 Indemnification by the Buyer............................................................ 31
6.3 Indemnification Claims.................................................................. 31
6.4 Survival of Representations and Warranties.............................................. 34
6.5 Limitations............................................................................. 34
ARTICLE VII TERMINATION.................................................................................. 35
7.1 Termination of Agreement................................................................ 35
7.2 Effect of Termination................................................................... 36
ARTICLE VIII DEFINITIONS................................................................................. 36
ARTICLE IX MISCELLANEOUS................................................................................. 39
9.1 Press Release and Announcements......................................................... 39
9.2 No Third Party Beneficiaries............................................................ 39
9.3 Entire Agreement........................................................................ 39
9.4 Succession and Assignment............................................................... 39
9.5 Counterparts and Facsimile Signature.................................................... 39
9.6 Headings................................................................................ 39
9.7 Notices................................................................................. 39
9.8 Governing Law........................................................................... 40
9.9 Amendments and Waivers.................................................................. 40
9.10 Severability............................................................................ 41
9.11 Construction............................................................................ 41
EXHIBIT A Forms of Non-Competition and Non-Solicitation
Agreement, Invention and Non-Disclosure Agreement and
Employment Agreement
-iii-
5
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of December 13, 1999 by and among SilverStream
Software, Inc., a Delaware corporation (the "Buyer"), ObjectEra, a California
corporation (the "Company"), and the stockholders of the Company listed on
Schedule I attached hereto (individually, a "Company Stockholder" and
collectively, the "Company Stockholders"). The Buyer, the Company and the
Company Stockholders are referred to collectively herein as the "Parties."
PRELIMINARY STATEMENT
1. The Company Stockholders collectively own all of the outstanding
shares of the capital stock (collectively, the "Common Shares") of the Company,
as set forth in more detail on Schedule I attached hereto.
2. The Buyer desires to purchase from the Company Stockholders, and the
Company Stockholders desire to sell to the Buyer, the Common Shares for the
consideration set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE COMMON SHARES
1.1 Purchase of the Common Shares from the Company Stockholders. Upon
and subject to the terms and conditions of this Agreement, at the closing of the
purchase and sale of the Common Shares contemplated by this Agreement (the
"Closing"), each Stockholder shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase, acquire and accept from each Company
Stockholder, all of the Common Shares owned by such Company Stockholder.
6
1.2 Purchase Price. The purchase price to be paid by the Buyer for the
Common Shares shall be as follows (collectively the "Purchase Price"):
(a) At the Closing, the Buyer shall pay to the Company
Stockholders the sum of $4,200,000, allocated among the Stockholders as set
forth on Schedule I attached hereto;
(b) on February 1, 2000, the Buyer shall pay to Xxxxx Xxxx
$3,900,000; and
(c) on each of (1) January 2, 2001, (2) January 2, 2002, (3)
the date that a commercially viable solution is available for JTS on the
SilverStream Application Server, where the solution technology is mutually
agreed upon by Xxxxx Xxxxxxx and Xxxxx Xxxx as (A) new code or (B) code licensed
by SilverStream from a third party, or a combination of (A) and (B) (provided
such date is not later than December 1, 2005), and (4) the date that a
commercially viable solution is available for JMS on the SilverStream
Application Server, where the solution technology is mutually agreed upon by
Xxxxx Xxxxxxx and Xxxxx Xxxx as (A) new code or (B) code licensed by
SilverStream from a third party, or a combination of (A) and (B) (provided such
date is not later than December 1, 2005) the Buyer shall pay to Xxxxx Xxxx (i)
$487,500 and (ii) a number of shares of Common Stock, $.001 par value per share,
of the Buyer ("Buyer Common Stock") equal to $487,500 divided by the product of
the average of the last reported sales prices per share of the Buyer Common
Stock on the Nasdaq National Market over the 30 consecutive trading days ending
on the trading day that is two trading days prior to the date of issuance (the
"Average Price"); provided, however, in the event the Buyer, in its sole
discretion, elects to fix a maximum number of shares of Buyer Common Stock to be
issued pursuant to this clause (c)(ii) such maximum number shall not be less
than 20,000, and, to the extent that the value of such number of shares of Buyer
Common Stock actually issued (determined using the Average Price) is less than
$487,500, an amount in cash equal to such difference shall be distributed to
Xxxxx Xxxx; and provided, further, that no such payments or issuances shall be
made on any such date pursuant to this clause (c) if Xxxxx Xxxx has breached the
Invention and Non-Disclosure Agreement, Non-Competition and Non-Solicitation
Agreement or Employment Agreement, each between Xxxxx Xxxx and the Buyer, and
such breach remains uncured ten days after receipt of written notice from the
Buyer of such breach. And further provided, such cash payments and issuance of
shares that remain eligible for delivery to Xxxxx Xxxx pursuant to this Section
1.2(c) will be delivered promptly (x) in the event Xxxxx Xxxx is terminated
without Cause (as defined below) and (y) in the event of a Change in Control (as
defined below) of the Buyer.
-2-
7
(d) Fractional Shares. No certificates or scrip representing
fractional Buyer Common Stock shall be issued to Xxxxx Xxxx, and he shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
shares that would have otherwise been issued to him. In lieu of any fractional
shares that would have otherwise been issued, Xxxxx Xxxx shall receive such
whole number of shares of Buyer Common Stock as is equal to the precise number
of shares to which he would be entitled, rounded up or down to the nearest whole
number (with a fractional interest equal to .5 rounded up to the nearest whole
number).
(e) For purposes of this Agreement, the following terms shall
have the following definitions:
(A) "Cause" for termination shall mean (a) Xxxxx
Xxxx'x willful misconduct, embezzlement, fraud, or other criminal act involving
moral turpitude, or (b) gross negligence in the performance of his duties to the
Buyer, or (c) any material and intentional breach by Xxxxx Xxxx of any
employment agreement, invention and non-disclosure agreement, non-competition
agreement or similar agreement with the Buyer which breach remains uncured ten
days after receipt of written notice of such breach.
(B) "Change in Control" shall be defined as (i) the
consummation of a merger, consolidation, reorganization, recapitalization or
tender offer involving the Buyer, immediately following which the individuals
and entities who were the beneficial owners of the Buyer Common Stock
immediately prior to such transaction beneficially own, directly or indirectly,
less than 50% of the combined voting power of the then-outstanding securities
entitled to vote generally in the election of directors, of the resulting or
acquiring corporation in such transaction or (ii) a sale of substantially all of
the business by sale of stock or assets.
1.3 The Closing.
(a) The Closing shall take place at the offices of Xxxx and
Xxxx LLP in Boston, Massachusetts, commencing at 10:00 a.m., local time, on
December 13, 1999, or, if all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby have not been
satisfied or waived by such date, on such mutually agreeable later date as soon
as practicable (and in any event not later than three business days) after the
satisfaction or waiver of all conditions (excluding the delivery of any document
to be delivered at the Closing by any of the Parties) set forth in Article V
hereof (the "Closing Date"). The closing of the
-3-
8
purchase of all of the Common Shares from each of the Company Stockholders shall
take place simultaneously.
(b) At the Closing:
(i) the Company Stockholders shall deliver to the
Buyer the various certificates, instruments and documents referred to in Section
5.1;
(ii) the Buyer shall deliver to the Stockholders the
various certificates, instruments and documents referred to in Section 5.2;
(iii) each Company Stockholder shall deliver to the
Buyer one or more certificates evidencing all of the Common Shares owned by such
Company Stockholder, duly endorsed in blank or with stock powers duly executed
by the Company Stockholder, with signature guaranteed;
(iv) the Buyer shall deliver to each Company
Stockholder (i) the portion of the Purchase Price set forth on Schedule I
payable by cashier's or certified check or by wire transfer of immediately
available funds to an account designated by such Company Stockholder;
(v) Xxxxx Xxxx shall execute and deliver:
(A) an Employment Agreement in the form
attached hereto as Exhibit A;
(B) a Non-Compete Agreement in the form
attached hereto as Exhibit A;
(C) an Invention and Non-Disclosure
Agreement in the form attached hereto as Exhibit A; and
(vi) the Buyer and each Company Stockholder shall
execute and deliver a cross-receipt evidencing the purchase and sale of the
Common Shares referred to above.
1.4 Further Assurances. At any time and from time to time after the
Closing, at the reasonable request of the Buyer and without further
consideration, the Company Stockholders
-4-
9
shall promptly execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take all such other action as the
Buyer may reasonably request, more effectively to transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Common Shares, to put
the Buyer through its ownership of the Common Shares in actual possession and
operating control of the assets (including without limitation the original
corporate minute books of the Company and all corporate seals), properties and
business of the Company, and to carry out the purpose and intent of this
Agreement.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMMON SHARES
Each of the Company Stockholders severally represents and warrants to the Buyer
as follows:
2A.1 Ownership of Common Shares. Each Company Stockholder has good and
marketable title, free and clear of any and all Security Interests (as defined
below), to all of the Common Shares listed on Schedule I as being owned by him
or her. Each Stockholder has the full right, power and authority to sell,
transfer, convey, assign and deliver to the Buyer at the Closing the Common
Shares owned by him or her and, upon consummation of the purchase and sale
contemplated hereby, the Buyer will acquire from him or her good and marketable
title to such Common Shares, free and clear of all Security Interests. For
purposes of this Agreement: "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge or other lien (whether arising by
contract or by operation of law), other than (i) mechanic's, materialmen's, and
similar liens, (ii) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, and (iii) liens
on goods in transit incurred pursuant to documentary letters of credit, in each
case arising in the Ordinary Course of Business (as defined below) of the
Company and not material to the Company; and "Ordinary Course of Business" means
the ordinary course of the Company's business, consistent with past custom and
practice (including with respect to frequency and amount).
2A.2 Authority. Each Company Stockholder has all requisite power and
authority to execute and deliver this Agreement and to perform his or her
obligations hereunder. This Agreement has been duly and validly executed and
delivered by him or her, and constitutes a
-5-
10
valid and binding obligation of him or her, enforceable against him or her in
accordance with its terms.
2A.3 Noncontravention. Neither the execution and delivery of this
Agreement by such Company Stockholder, nor the consummation by him or her of the
transactions contemplated hereby, will (i) conflict with, result in a breach of,
constitute a default under, or require any notice, consent or waiver under, any
agreement or instrument to which such Company Stockholder is a party or by which
such Company Stockholder is bound, (ii) result in the imposition of any Security
Interest upon the Common Shares owned by him or her, or (iii) violate any law,
rule, regulation, order, writ, injunction or decree applicable to such Company
Stockholder or to the Common Shares owned by such Company Stockholder.
2A.4 Investment Representations.
(a) Xxxxx Xxxx is acquiring the Buyer Common Stock pursuant to
this Agreement (the "Purchase Price Securities") for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of such shares in violation of the Securities Act of 1933, as
amended (the "Securities Act"), or any rule or regulation under the Securities
Act.
(b) Xxxxx Xxxx has had adequate opportunity to obtain from
representatives of the Buyer such information, in addition to the
representations set forth in the Agreement, as is necessary to evaluate the
merits and risks of his acquisition of the Purchase Price Securities.
(c) Xxxxx Xxxx has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Purchase Price Securities and to make an informed
investment decision with respect to such acquisition.
(d) Xxxxx Xxxx understands that the Purchase Price Securities
have not been registered under the Securities Act and are "restricted
securities" within the meaning of Rule 144 under the Securities Act; and that
until such shares are so registered, the Purchase Price Securities cannot be
sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
-6-
11
(e) Xxxxx Xxxx agrees and understands that a legend
substantially in the following form may be placed on the certificate
representing the Purchase Price Securities to be issued him:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement under such Act
or an opinion of counsel satisfactory to the corporation to
the effect that such registration is not required."
(f) Xxxxx Xxxx is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
ARTICLE IIB
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company and each of Xxxxx Xxxx, Xxxxxx Xxxxxxx and Xxxxx Xxxxxxx represent
and warrant to the Buyer that the statements contained in this Article IIB are
true and correct, except as set forth in the disclosure schedule provided by the
Company to the Buyer on the date hereof and accepted in writing by the Buyer
(the "Disclosure Schedule"). The Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article II.
2B.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of California. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company
Material Adverse Effect (as defined below). The Company has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Company has
furnished to the Buyer complete and accurate copies of its Articles of
Incorporation and By-laws. The Company is not in default under or in violation
of any provision of its Articles of Incorporation or By-laws. For purposes of
this Agreement, "Company Material Adverse Effect" means a material adverse
effect on the assets, business, condition (financial or otherwise), results of
operations or future prospects of the Company, taken as a whole.
-7-
12
2B.2 Capitalization. The authorized capital stock of the Company
consists of 1,000,000 Common Shares, of which, as of the date of this Agreement,
800,000 shares were issued and outstanding. Section 2B.2 of the Disclosure
Schedule sets forth a complete and accurate list of (i) all stockholders of the
Company, indicating the number and class or series of Common Shares held by each
stockholder (ii) all outstanding options and warrants to purchase capital stock
of the Company, indicating (A) the holder thereof, (B) the number of Common
Shares subject to each option and warrant (C) the exercise price, date of grant,
vesting schedule and expiration date for each option or warrant, and (D) any
terms regarding the acceleration of vesting, and (iii) all stock option plans
and other stock or equity-related plans of the Company. All of the issued and
outstanding Common Shares are, and all Common Shares that may be issued upon
exercise of options or warrants will be (upon issuance in accordance with their
terms), duly authorized, validly issued, fully paid, nonassessable and free of
all preemptive rights. Other than the options and warrants listed in Section
2B.2 of the Disclosure Schedule, there are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Company is a party or
which are binding upon the Company providing for the issuance or redemption of
any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company. There
are no agreements to which the Company is a party or by which it is bound with
respect to the voting (including without limitation voting trusts or proxies),
registration under the Securities Act, or sale or transfer (including, without
limitation, agreements relating to pre-emptive rights, rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of the Company. To the
knowledge of the Company, there are no agreements among other parties, to which
the Company is not a party and by which it is not bound, with respect to the
voting (including without limitation voting trusts or proxies) or sale or
transfer (including without limitation agreements relating to rights of first
refusal, co-sale rights or "drag-along" rights) of any securities of the
Company. All of the issued and outstanding Common Shares were issued in
compliance with applicable federal and state securities laws.
2B.3 Authorization of Transaction. The Company has all requisite power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. Without limiting the generality of the foregoing,
the Board of Directors of the Company, at a meeting duly called and held, by the
unanimous vote of all directors (i) determined that the transaction is fair and
in the best interests of the Company and its stockholders, and (ii) adopted this
Agreement in accordance with the
-8-
13
provisions of the California General Corporation Law. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
2B.4 Noncontravention. Neither the execution and delivery by the
Company of this Agreement, nor the consummation by the Company of the
transactions contemplated hereby, will (a) conflict with or violate any
provision of the Articles of Incorporation or By-laws of the Company, (b)
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity"), (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, modify or cancel, or require any notice, consent
or waiver under, any contract or instrument to which the Company is a party or
by which the Company is bound or to which any of its assets is subject, except
for (i) any conflict, breach, default, acceleration, termination, modification
or cancellation which would not have a Company Material Adverse Effect and would
not adversely affect the consummation of the transactions contemplated hereby or
(ii) any notice, consent or waiver the absence of which would not have a Company
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby, (d) result in the imposition of any Security
Interest upon any assets of the Company or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets.
2B.5 Subsidiaries. There are no corporations, partnerships, joint
ventures or other entities in which the Company has, directly or indirectly, an
equity interest representing 50% or more of the capital stock thereof or other
equity interests therein.
2B.6 Financial Statements. The Company has provided to the Buyer (a)
the balance sheets and statements of income, changes in stockholders' equity and
cash flows of the Company as of and for each fiscal year since inception; and
(b) the unaudited consolidated balance sheet and statements of income, changes
in stockholders' equity and cash flows as of and for the nine months ended as of
September 30, 1999 (the "Most Recent Balance Sheet Date"). Such financial
statements (collectively, the "Financial Statements") have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby, fairly
present the financial condition, results of operations and cash flows of the
Company as of the respective dates thereof and for the periods
-9-
14
referred to therein and are consistent with the books and records of the
Company; provided, however, that the Financial Statements referred to in clause
(b) above are subject to normal recurring year-end adjustments (which will not
be material) and do not include footnotes.
2B.7 Absence of Certain Changes. Since the Most Recent Balance Sheet
Date, (a) there has occurred no event or development which has had, or could
reasonably be expected to have in the future, a Company Material Adverse Effect,
and (b) the Company has not taken any of the actions set forth in paragraphs (a)
through (o) of Section 4.3.
2B.8 Undisclosed Liabilities. The Company has no liabilities (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet referred to in clause (b) of Section 2B.6 (the "Most Recent
Balance Sheet"), (b) liabilities which have arisen since the Most Recent Balance
Sheet Date in the Ordinary Course of Business and which are similar in nature
and amount to the liabilities which arose during the comparable period of time
in the immediately preceding fiscal period and (c) contractual and other
liabilities incurred in the Ordinary Course of Business which are not required
by GAAP to be reflected on a balance sheet.
2B.9 Tax Matters.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or
other similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
-10-
15
(b) The Company has filed on a timely basis all Tax Returns
that it was required to file, and all such Tax Returns were complete and
accurate in all material respects. The Company is not nor has it ever been a
member of a group of corporations with which it has filed (or been required to
file) consolidated, combined or unitary Tax Returns. The Company has paid on a
timely basis all Taxes that were due and payable. The unpaid Taxes of the
Company for tax periods through the Most Recent Balance Sheet Date do not exceed
the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Most Recent Balance Sheet. The Company has no actual or
potential liability for any Tax obligation of any taxpayer (including without
limitation any affiliated group of corporations or other entities that included
the Company during a prior period) other than the Company. All Taxes that the
Company is or was required by law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Entity.
(c) The Company has delivered to the Buyer complete and
accurate copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company since
its inception. No examination or audit of any Tax Return of the Company by any
Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. The Company has not been informed by any
jurisdiction that the jurisdiction believes that the Company was required to
file any Tax Return that was not filed. The Company has not waived any statute
of limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.
(d) The Company: (i) is not a "consenting corporation" within
the meaning of Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), and none of the assets of the Company are subject to an election
under Section 341(f) of the Code; (ii) has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code;
(iii) has not made any payments, is not obligated to make any payments, or is
not a party to any agreement that could obligate it to make any payments that
may be treated as an "excess parachute payment" under Section 280G of the Code;
or (iv) has no actual or potential liability for any Taxes of any person (other
than the Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
-11-
16
(e) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (iii) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(f) The Company has not undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481 of the Code.
(g) No state or federal "net operating loss" of the Company
determined as of the Closing Date is subject to limitation on its use pursuant
to Section 382 of the Code or comparable provisions of state law as a result of
any "ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
2B.10 Assets. The Company owns or leases all tangible assets necessary
for the conduct of its businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from material
defects, has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear). No asset
of the Company (tangible or intangible) is subject to any Security Interest.
2B.11 Owned Real Property. The Company owns no real property.
2B.12 Real Property Leases. There is no real property leased or
subleased to or by the Company.
2B.13 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual
Property (as defined below) necessary (i) to use, develop, market and distribute
the products developed, marketed, sold or licensed, and to provide the services
provided, by the Company to other parties (together, the "Customer
Deliverables") or (ii) to operate the Company's internal systems that are
material to the business or operations of the Company, including, without
limitation, computer hardware systems, software applications and embedded
systems (the "Internal Systems"; the Intellectual Property owned by or licensed
to the Company and incorporated in or underlying the Customer Deliverables or
the Internal Systems is referred to herein as the "Company Intellectual
Property"). Each item of Company Intellectual Property will be owned or
available for use by
-12-
17
the Company immediately following the Closing on substantially identical terms
and conditions as it was immediately prior to the Closing. The Company has taken
all commercially reasonable measures to protect the proprietary nature of each
item of Company Intellectual Property. To the knowledge of the Company, (a) no
other person or entity has any rights to any of the Company Intellectual
Property owned by the Company (except pursuant to agreements or licenses
specified in Section 2B.13(c) of the Disclosure Schedule), and (b) no other
person or entity is infringing, violating or misappropriating any of the Company
Intellectual Property. For purposes of this Agreement, "Intellectual Property"
means all (i) patents and patent applications, (ii) copyrights and registrations
thereof, (iii) mask works and registrations and applications for registration
thereof, (iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) trademarks, service marks, trade names, domain names and applications and
registrations therefor and (vii) other proprietary rights relating to any of the
foregoing. Section 2B.13(a) of the Disclosure Schedule lists each patent, patent
application, copyright registration or application therefor, mask work
registration or application therefor, and trademark, service xxxx and domain
name registration or application therefor of the Company.
(b) To the knowledge of the Company, after due inquiry, none
of the Customer Deliverables, or the development, marketing, distribution,
provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
To the knowledge of the Company, after due inquiry, none of the Internal
Systems, or the use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
Section 2B.13(b) of the Disclosure Schedule lists any complaint, claim or
notice, or written threat thereof, received by the Company alleging any such
infringement, violation or misappropriation; and the Company has provided to the
Buyer complete and accurate copies of all written documentation in the
possession of the Company relating to any such complaint, claim, notice or
threat. The Company has provided to the Buyer complete and accurate copies of
all written documentation in the Company's possession relating to claims or
disputes known to the Company concerning any Company Intellectual Property.
(c) Section 2B.13(c) of the Disclosure Schedule identifies
each license or other agreement (or type of license or other agreement) pursuant
to which the Company has licensed,
-13-
18
distributed or otherwise granted any rights to any third party with respect to,
any Company Intellectual Property.
(d) Section 2B.13(d) of the Disclosure Schedule identifies
each item of Company Intellectual Property that is owned by a party other than
the Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant to
"shrink wrap" licenses).
(e) The Company has not disclosed the source code for any of
the software owned by the Company (the "Software") or other confidential
information constituting, embodied in or pertaining to the Software to any
person or entity, except pursuant to the agreements listed in Section 2B.13(e)
of the Disclosure Schedule, and the Company has taken commercially reasonable
measures to prevent disclosure of such source code.
(f) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created by
employees of the Company within the scope of their employment by the Company or
by independent contractors of the Company who have executed agreements expressly
assigning all right, title and interest in such copyrightable materials to the
Company. No portion of such copyrightable materials was jointly developed with
any third party.
(g) To the knowledge of the Company, the Customer Deliverables
and the Internal Systems are free from significant defects or programming errors
and conform in all material respects to the written documentation and
specifications therefor.
(h) All of the Customer Deliverables currently being
developed, marketed, distributed or licensed by the Company or which were
developed, marketed, distributed or licensed by the Company since January 1,
1997, and all Internal Systems, are Year 2000 Compliant. The Company is not
aware of any failure to be Year 2000 Compliant of any third-party system that is
material to the business or operations of the Company, including without
limitation any system belonging to any of the Company's suppliers, service
providers or customers.
(i) For purposes of this Agreement, "Year 2000 Compliant"
means that the applicable system or item:
-14-
19
(i) will accurately receive, record, store, provide,
recognize and process all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;
(ii) will accurately perform all date-dependent
calculations and operations (including, without limitation, mathematical
operations, sorting, comparing and reporting) from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years; and
(iii) will not malfunction, cease to function or
provide invalid or incorrect results as a result of (x) the change of years from
1999 to 2000, (y) date data, including date data which represents or references
different centuries, different dates during 1999 and 2000, or more than one
century or (z) the occurrence of any particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by the
Company correctly exchange date data with or provide data to such system or
item.
2B.14 Contracts.
(a) Section 2B.14 of the Disclosure Schedule lists the
following agreements (written or oral) to which the Company or any Subsidiary is
a party as of the date of this Agreement:
(i) any agreement (or group of related agreements)
for the lease of personal property from or to third parties providing for lease
payments in excess of $10,000 per annum or having a remaining term longer than
twelve (12) months;
(ii) any agreement (or group of related agreements)
for the purchase or sale of products or for the furnishing or receipt of
services (A) which calls for performance over a period of more than one year,
(B) which involves more than the sum of $20,000, or (C) in which the Company has
granted manufacturing rights, "most favored nation" pricing provisions or
marketing or distribution rights relating to any products or territory or has
agreed to purchase
-15-
20
a minimum quantity of goods or services or has agreed to purchase goods or
services exclusively from a certain party;
(iii) any agreement establishing a partnership or
joint venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed or guaranteed (or may create,
incur, assume or guarantee) indebtedness (including capitalized lease
obligations) involving more than $10,000 or under which it has imposed (or may
impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director
or stockholder of the Company or any affiliate (an "Affiliate"), as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), thereof;
(viii) any agreement under which the consequences of
a default or termination would reasonably be expected to have a Company Material
Adverse Effect;
(ix) any agreement which contains any provisions
requiring the Company or any Subsidiary to indemnify any other party thereto
(excluding indemnities contained in agreements for the purchase, sale or license
of products entered into in the Ordinary Course of Business); and
(x) any other agreement (or group of related
agreements) either involving more than $25,000 or not entered into in the
Ordinary Course of Business.
(b) The Company has delivered to the Buyer a complete and
accurate copy of each agreement listed in Section 2B.13 or Section 2B.14 of the
Disclosure Schedule. With respect to each agreement so listed: (i) the agreement
is legal, valid, binding and enforceable and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing; and (iii) neither the
Company nor, to the knowledge of the Company, any other party, is in breach or
violation of, or default under,
-16-
21
any such agreement, and no event has occurred, is pending or, to the knowledge
of the Company, is threatened, which, after the giving of notice, with lapse of
time, or otherwise, would constitute a breach or default by the Company or, to
the knowledge of the Company, any other party under such contract.
2B.15 Accounts Receivable. All accounts receivable of the Company
reflected on the Most Recent Balance Sheet are valid receivables subject to no
setoffs or counterclaims and are current and collectible (within 90 days after
the date on which it first became due and payable), net of the applicable
reserve for bad debts on the Most Recent Balance Sheet. All accounts receivable
reflected in the financial or accounting records of the Company that have arisen
since the Most Recent Balance Sheet Date are valid receivables subject to no
setoffs or counterclaims and are collectible (within 90 days after the date on
which it first became due and payable), net of a reserve for bad debts in an
amount proportionate to the reserve shown on the Most Recent Balance Sheet.
2B.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2B.17 Insurance. Section 2B.17 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company is a party. There is no material claim pending under any such policy as
to which coverage has been questioned, denied or disputed by the underwriter of
such policy. All premiums due and payable under all such policies have been
paid. The Company is in compliance in all material respects with the terms of
such policies. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policy. Each such policy
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
2B.18 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator (a "Legal Proceeding") which is pending or has been threatened in
writing against the Company.
2B.19 Employees. Section 2B.19 of the Disclosure Schedule contains a
list of all employees of the Company, along with the position and the annual
rate of compensation of each
-17-
22
such person. Section 2B.19 of the Disclosure Schedule also lists for each such
employee each agreement between the Company and such employee.
2B.20 Employee Benefits. Section 2B.20 of the Disclosure Schedule lists
all Employee Benefit Plans of the Company. "Employee Benefit Plan" means any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), any
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement involving direct or
indirect compensation, including without limitation insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation. "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended.
2B.21 Legal Compliance. The Company, and the conduct and operations of
its business, is in compliance with each applicable law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
2B.22 Customers and Suppliers. Section 2B.22 of the Disclosure Schedule
sets forth a list of (a) the largest ten (10) customers of the Company during
the last full fiscal year or the interim period through the Most Recent Balance
Sheet Date and the amount of revenues accounted for by such customer during each
such period and (b) each supplier that is the sole supplier of any significant
product to the Company.
2B.23 Permits. Section 2B.23 of the Disclosure Schedule sets forth a
list of all permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under environmental laws and those relating to the occupancy or use of
owned or leased real property) ("Permits") issued to or held by the Company.
Such listed Permits are the only Permits that are required for the Company to
conduct their respective businesses as presently conducted or as proposed to be
conducted, except for those the absence of which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect. Each such Permit is in full force and effect and, to
the knowledge of the Company, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit will not be
renewable upon expiration. Each such Permit will continue in full force and
effect immediately following the Closing.
-18-
23
2B.24 Certain Business Relationships With Affiliates. No Affiliate of
the Company (a) owns any property or right, tangible or intangible, which is
used in the business of the Company, (b) has any claim or cause of action
against the Company, or (c) owes any money to, or is owed any money by, the
Company. Section 2B.24 of the Disclosure Schedule describes any transactions or
relationships between the Company and any Affiliate thereof which have occurred
or existed since the Company's inception.
2B.25 Brokers' Fees. The Company has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2B.26 Books and Records. The minute books and other similar records of
the Company contain complete and accurate records of all actions taken at any
meetings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company and have been maintained in accordance with good
business and bookkeeping practices.
2B.27 Disclosure. No representation or warranty by the Company
contained in this Agreement, and no statement contained in the Disclosure
Schedule or any other document, certificate or other instrument delivered or to
be delivered by or on behalf of the Company Stockholders or the Company pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. The Company has disclosed to the
Buyer all material information relating to the business of the Company or any
Subsidiary or the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company as follows:
-19-
24
3.1 Organization, Qualification and Corporate Power. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. The Buyer is duly qualified to conduct business and is
in corporate and tax good standing under the laws of each jurisdiction in which
the nature of its businesses or the ownership or leasing of its properties
requires such qualification, except where the failure to be so qualified or in
good standing would not have a Buyer Material Adverse Effect (as defined below).
The Buyer has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Buyer has furnished or made available to the Company complete
and accurate copies of its Certificate of Incorporation and By-laws. For
purposes of this Agreement, "Buyer Material Adverse Effect" means a material
adverse effect on the assets, business, condition (financial or otherwise),
results of operations or future prospects of the Buyer and its subsidiaries,
taken as a whole.
3.2 Capitalization. The authorized capital stock of the Buyer consists
of (a) 100,000,000 shares of Buyer Common Stock, of which 17,519,808 shares were
issued and outstanding as of the close of business on December 8, 1999, and (b)
2,000,000 shares of Preferred Stock, $.001 par value per share, of which no
shares are issued or outstanding. All of the issued and outstanding shares of
Buyer Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the shares of Buyer
Common Stock issued as part of the Purchase Price Securities will be, when
issued in accordance with this Agreement, duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights.
3.3 Authorization of Transaction. The Buyer has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Buyer of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and delivered by the
Buyer and constitutes a valid and binding obligation of the Buyer, enforceable
against it in accordance with its terms.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws and
the Exchange Act, neither the execution and delivery by the Buyer of this
Agreement, nor the consummation by the Buyer of the transactions contemplated
hereby, will (a) conflict with or violate any provision of the charter or
By-laws of the Buyer, (b) require on the part of the Buyer any filing with, or
permit,
-20-
25
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the Buyer
is a party or by which either is bound or to which any of their assets are
subject, except for (i) any conflict, breach, default, acceleration,
termination, modification or cancellation which would not adversely affect the
consummation of the transactions contemplated hereby or (ii) any notice, consent
or waiver the absence of which would not adversely affect the consummation of
the transactions contemplated hereby, or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer or any
of its properties or assets.
3.5 Reports and Financial Statements. The Buyer has previously
furnished or made available to the Company complete and accurate copies, as
amended or supplemented, of its (a) Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, as filed with the Securities and Exchange
Commission (the "SEC"), and (b) all other reports filed by the Buyer under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC since August 20, 1999 (such reports are collectively referred to herein as
the "Buyer Reports"). The Buyer Reports constitute all of the documents required
to be filed by the Buyer under Section 13 or subsections (a) or (c) of Section
14 of the Exchange Act with the SEC from September 30, 1999 through the date of
this Agreement. The Buyer Reports complied in all material respects with the
requirements of the Securities Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Buyer as of the respective dates thereof and
for the periods referred to therein, and (iv) are consistent with the books and
records of the Buyer.
-21-
26
3.6 Absence of Material Adverse Change. Since September 30, 1999, there
has occurred no event or development which has had, or could reasonably be
expected to have in the future, a Buyer Material Adverse Effect.
3.7 Litigation. There is no Legal Proceeding which is pending or, to
the Buyer's knowledge, threatened against the Buyer or any subsidiary of the
Buyer which, if determined adversely to the Buyer or such subsidiary, could
have, individually or in the aggregate, a Buyer Material Adverse Effect or which
in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
3.8 Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.9 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any document, certificate or other
instrument delivered or to be delivered by or on behalf of the Buyer pursuant to
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the transaction are satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to
obtain, at its expense, all waivers, permits, consents, approvals or other
authorizations from Governmental Entities, and
-22-
27
to effect all registrations, filings and notices with or to Governmental
Entities, as may be required for such Party to consummate the transactions
contemplated by this Agreement and to otherwise comply with all applicable laws
and regulations in connection with the consummation of the transactions
contemplated by this Agreement.
(b) The Company shall use its Reasonable Best Efforts to
obtain, at its expense, all such waivers, consents or approvals from third
parties, and to give all such notices to third parties, as are required to be
listed in Section 2B.4 of the Disclosure Schedule.
4.3 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing, the Company
shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, prior to the Closing, the Company shall not and the
Company Stockholders shall cause the Company not to, without the written consent
of the Buyer:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the conversion or exercise of
convertible securities or Options or Warrants outstanding on the date hereof),
or amend any of the terms of (including without limitation the vesting of) any
such convertible securities or Options or Warrants;
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
(c) create, incur or assume any indebtedness (including
obligations in respect of capital leases); assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(d) enter into, adopt or amend any Employee Benefit Plan or
any employment or severance agreement or arrangement of the type described in
Section 2B.20 or increase in any
-23-
28
manner the compensation or fringe benefits of, or materially modify the
employment terms of, its directors, officers or employees, generally or
individually, or pay any bonus or other benefit to its directors, officers or
employees (except for existing payment obligations listed in Section 2B.20 of
the Disclosure Schedule);
(e) acquire, sell, lease, license or dispose of any assets or
property, other than purchases and sales of assets in the Ordinary Course of
Business;
(f) mortgage or pledge any of its property or assets or
subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational
documents;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive any
rights under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess
of $5,000 per item or $25,000 in the aggregate;
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of the Company set
forth in this Agreement becoming untrue or (ii) any of the conditions to this
transaction set forth in Article V not being satisfied;
(n) agree in writing or otherwise to take any of the foregoing
actions;
(o) make any Tax election or settle or compromise any material
federal, state, local or foreign income Tax liability.
-24-
29
4.5 Access to Information.
(a) The Company and the Company Stockholders shall permit
representatives of the Buyer to have full access (at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Company) to all premises, properties, financial and accounting records,
contracts, other records and documents, and personnel, of or pertaining to the
Company.
(b) The Buyer and the Company (i) shall treat and hold as
confidential any Confidential Information (as defined below), (ii) shall not use
any of the Confidential Information except in connection with this Agreement,
and (iii) if this Agreement is terminated for any reason whatsoever, shall
return to the other party all tangible embodiments (and all copies) thereof
which are in its possession. For purposes of this Agreement, "Confidential
Information" means any confidential or proprietary information of one party (the
"Disclosing Party") that is furnished in writing to the other party (the
"Receiving Party") in connection with this Agreement and is labeled confidential
or proprietary; provided, however, that it shall not include any information (A)
which, at the time of disclosure, is available publicly, (B) which, after
disclosure, becomes available publicly through no fault of the Receiving Party,
(C) which the Receiving Party knew or to which the Receiving Party had access
prior to disclosure or (D) which the Receiving Party rightfully obtains from a
source other than the Disclosing Party.
4.6 Notice of Breaches.
(a) From the date of this Agreement until the Closing, the
Company and the Company Stockholders shall promptly deliver to the Buyer
supplemental information concerning events or circumstances occurring subsequent
to the date hereof which would render any representation, warranty or statement
in this Agreement or the Disclosure Schedule inaccurate or incomplete in any
material respect at any time after the date of this Agreement until the Closing
Date. No such supplemental information shall be deemed to cure any
misrepresentation or breach of warranty or constitute an amendment of any
representation, warranty or statement in this Agreement or the Disclosure
Schedule.
(b) From the date of this Agreement until the Closing, the
Buyer shall promptly deliver to the Company supplemental information concerning
events or circumstances occurring subsequent to the date hereof which would
render any representation or warranty in this Agreement inaccurate or incomplete
in any material respect at any time after the date of this Agreement until the
Closing Date. No such supplemental information shall be deemed to cure
-25-
30
any misrepresentation or breach of warranty or constitute an amendment of any
representation or warranty in this Agreement.
4.7 Exclusivity.
(a) The Company Stockholders and the Company shall not, and
the Company shall require each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (i) initiate,
solicit, encourage or otherwise facilitate any inquiry, proposal, offer or
discussion with any party (other than the Buyer) concerning any merger,
reorganization, consolidation, recapitalization, business combination,
liquidation, dissolution, share exchange, sale of stock, sale of material assets
or similar business transaction involving the Company, (ii) furnish any
non-public information concerning the business, properties or assets of the
Company to any party (other than the Buyer) or (iii) engage in discussions or
negotiations with any party (other than the Buyer) concerning any such
transaction.
(b) The Company Stockholders and the Company shall immediately
notify any party with which discussions or negotiations of the nature described
in paragraph (a) above were pending that the Company is terminating such
discussions or negotiations. If the Company receives any inquiry, proposal or
offer of the nature described in paragraph (a) above, the Company shall, within
one business day after such receipt, notify the Buyer of such inquiry, proposal
or offer, including the identity of the other party and the terms of such
inquiry, proposal or offer.
4.8 Expenses. Except as set forth in Article VI, each of the Parties
shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby; provided, however, should the Closing occur, the Company shall not incur
more than an aggregate of $25,000 in legal fees and expenses in connection with
the transaction.
ARTICLE V
CONDITIONS TO CONSUMMATION OF TRANSACTION
-26-
31
5.1 Conditions to Obligations of the Buyer. The obligation of each of
the Buyer to consummate the purchase of the Common Shares is subject to the
satisfaction (or waiver by the Buyer) of the following additional conditions:
(a) the Company shall have obtained (and shall have provided
copies thereof to the Buyer) all of the waivers, permits, consents, approvals or
other authorizations, and effected all of the registrations, filings and
notices, referred to in Section 4.2 which are required on the part of the
Company;
(b) the representations and warranties of the Company
Stockholders and the Company set forth in the first sentence of Section 2B.1
(Organization, Qualification and Corporate Power) and in Section 2B.3
(Authorization of Transaction) and any representations and warranties of the
Company Stockholders and the Company set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects, and all
other representations and warranties of the Company Stockholders and the Company
set forth in this Agreement shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing as though
made as of the Closing, except to the extent such representations and warranties
are specifically made as of a particular date or as of the date of this
Agreement (in which case such representations and warranties shall be true and
correct as of such date);
(c) the Company Stockholders and the Company shall have
performed or complied with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Closing;
(d) no Legal Proceeding shall be pending or threatened wherein
an unfavorable judgment, order, decree, stipulation or injunction would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) have a Company Material Adverse
Effect, and no such judgment, order, decree, stipulation or injunction shall be
in effect;
(e) the Company Stockholders and the Company shall have
delivered to the Buyer a certificate (the "Company Certificate") to the effect
that each of the conditions specified in clauses (a) through (d) (insofar as
clause (d) relates to Legal Proceedings involving the Company) of this Section
5.2 is satisfied in all respects;
-27-
32
(f) the Buyer shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Company in its jurisdiction of organization and the various foreign
jurisdictions in which it is qualified, certified charter documents,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing.
(g) Xxxxx Xxxx shall have entered into a Non-Competition and
Non-Solicitation Agreement, Invention and Non-Disclosure Agreement and
Employment Agreement substantially in the forms set forth on Exhibit A hereto.
5.2 Conditions to Obligations of the Company and the Company
Stockholders. The obligation of the Company Stockholders and the Company to
consummate the transaction is subject to the satisfaction of the following
additional conditions:
(a) the Buyer shall have effected all of the registrations,
filings and notices referred to in Section 4.2 which are required on the part of
the Buyer, except for any which if not obtained or effected would not have a
Buyer Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement;
(b) the representations and warranties of the Buyer set forth
in the first sentence of Section 3.1 (Organization, Qualification and Corporate
Power) and Section 3.3 (Authorization of Transaction) and any representations
and warranties of the Buyer set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Buyer set forth in this Agreement that are not so qualified (other than
those set forth in Section 3.1 and Section 3.3) shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date or
as of the date of this Agreement (in which case such representations and
warranties shall be true and correct as of such date);
(c) the Buyer shall have performed or complied with in all
material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Closing;
(d) no Legal Proceeding shall be pending or threatened wherein
an unfavorable judgment, order, decree, stipulation or injunction would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions
-28-
33
contemplated by this Agreement to be rescinded following consummation or (iii)
have a Buyer Material Adverse Effect, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(e) the Buyer shall have delivered to the Company a
certificate (the "Buyer Certificate") to the effect that each of the conditions
specified in clauses (a) through (d) (insofar as clause (d) relates to Legal
Proceedings involving the Buyer) of this Section 5.2 is satisfied in all
respects;
(f) the Company shall have received such other certificates
and instruments (including without limitation certificates of good standing of
the Buyer in its jurisdiction of organization, certified charter documents,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company Stockholders. Xxxxx Xxxx (the
"Indemnifying Stockholder") shall indemnify the Buyer in respect of, and hold it
harmless against, any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses and expenses (including without
limitation amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation) ("Damages") incurred or
suffered by the Company or the Buyer or any Affiliate thereof resulting from,
relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company Stockholders or the Company
contained in this Agreement or the Company Certificate;
(b) any failure of any Company Stockholder to have good, valid
and marketable title to the issued and outstanding Common Shares issued in the
name of such Company Stockholder, free and clear of all Security Interests; or
-29-
34
(c) any claim by a stockholder or former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company; (ii) any
rights of a stockholder, including any option, preemptive rights or rights to
notice or to vote; (iii) any rights under the Articles of Incorporation or
By-laws of the Company; or (iv) any claim that his, her or its shares were
wrongfully repurchased by the Company.
6.2 Indemnification by the Buyer. The Buyer shall indemnify the
Indemnifying Stockholder in respect of, and hold him harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholder resulting from,
relating to or constituting any misrepresentation, breach of warranty or failure
to perform any covenant or agreement of the Buyer contained in this Agreement or
the Buyer Certificate.
6.3 Indemnification Claims.
(a) A party entitled, or seeking to assert rights, to
indemnification under this Article VI (an "Indemnified Party") shall give
written notification to the party from whom indemnification is sought (an
"Indemnifying Party") of the commencement of any suit or proceeding relating to
a third party claim for which indemnification pursuant to this Article VI may be
sought. Such notification shall be given within 20 business days after receipt
by the Indemnified Party of notice of such suit or proceeding, and shall
describe in reasonable detail (to the extent known by the Indemnified Party) the
facts constituting the basis for such suit or proceeding and the amount of the
claimed damages; provided, however, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall relieve the Indemnifying Party
of any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Party in connection with such suit or proceeding constitute Damages for which
the Indemnified Party shall be indemnified pursuant to this Article VI and (B)
the ad damnum is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article VI and (ii) the Indemnifying
Party may not assume control of the defense of a suit or proceeding involving
criminal liability. If the Indemnifying Party does not so assume control of such
defense, the Indemnified Party shall
-30-
35
control such defense. The party not controlling such defense (the
"Non-controlling Party") may participate therein at its own expense; provided
that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such suit or proceeding, the reasonable fees and expenses of
counsel to the Indemnified Party shall be considered "Damages" for purposes of
this Agreement. The party controlling such defense (the "Controlling Party")
shall keep the Non-controlling Party advised of the status of such suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such suit or proceeding (including copies of any
summons, complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) and shall otherwise cooperate with and assist the
Controlling Party in the defense of such suit or proceeding. The Indemnifying
Party shall not agree to any settlement of, or the entry of any judgment arising
from, any such suit or proceeding without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld or delayed. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld or
delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article VI for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages.
(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Claimed Amount, by check or by wire transfer); (ii)
agree that the Indemnified Party is entitled to receive part, but not all, of
the Claimed Amount (the "Agreed Amount") (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party of
the Agreed Amount, by check
-31-
36
or by wire transfer); or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount. If the Indemnifying Party in the Response
disputes its liability for all or part of the Claimed Amount, the Indemnifying
Party and the Indemnified Party shall follow the procedures set forth in Section
6.3(d) for the resolution of such dispute (a "Dispute").
(d) During the 60-day period following the delivery of a
Response that reflects a Dispute, the Indemnifying Party and the Indemnified
Party shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnifying Party and the Indemnified
Party shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.3(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Party and the
Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party.
(e) Notwithstanding the other provisions of this Section 6.3,
if a third party asserts (other than by means of a lawsuit) that an Indemnified
Party is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article VI, and such
-32-
37
Indemnified Party reasonably determines that it has a valid business reason to
fulfill such obligation, then (i) such Indemnified Party shall be entitled to
satisfy such obligation, without prior notice to or consent from the
Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim
for indemnification in accordance with the provisions of this Article VI, and
(iii) such Indemnified Party shall be reimbursed, in accordance with the
provisions of this Article VI, for any such Damages for which it is entitled to
indemnification pursuant to this Article VI (subject to the right of the
Indemnifying Party to dispute the Indemnified Party's entitlement to
indemnification, or the amount for which it is entitled to indemnification,
under the terms of this Article VI).
6.4 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement, the Company Certificate or the Buyer
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of an Indemnified Party and (b) shall expire on the date two
years following the Closing Date, except that (i) the representations and
warranties set forth in Sections 2A.1, 2B.1, 2B.2, 2B.3, 3.1, 3.2 and 3.3 (and
the portion of the Company Certificate or the Buyer Certificate relating
thereto) shall survive the Closing without limitation and (ii) the
representations and warranties set forth in Sections 2B.9 and 2B.20 (and the
portion of the Company Certificate relating thereto) shall survive until 30 days
following expiration of all statutes of limitation applicable to the matters
referred to therein. If an Indemnified Party delivers to an Indemnifying Party,
before expiration of a representation or warranty, either a Claim Notice based
upon a breach of such representation or warranty, or a notice that, as a result
of a legal proceeding instituted by or written claim made by a third party, the
Indemnified Party reasonably expects to incur Damages as a result of a breach of
such representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party.
6.5 Limitations.
(a) Notwithstanding anything to the contrary herein, (i)
except with respect to claims based on fraud, the aggregate liability of the
Indemnifying Stockholder, on the one hand, and the Buyer, on the other hand, for
Damages under this Article VI shall not exceed $3,000,000, and (ii) neither the
Indemnifying Stockholder nor the Buyer shall be liable under this Article VI
unless and until the aggregate Damages for which it would otherwise be liable
-33-
38
exceed $100,000 (at which point the Indemnifying Stockholder and the Buyer shall
become liable for the aggregate Damages, and not just amounts in excess of
$100,000); provided that the limitation set forth in clause (ii) above shall not
apply to (A) a claim pursuant to Section 6.1(a) relating to a breach of the
representations and warranties set forth in Sections 2B.1, 2B.2, 2B.3 or 2B.9
(or the portion of the Company Certificate relating thereto) or to a breach of
the covenants set forth in Sections 4.7 or 4.8 or (B) a claim pursuant to
Section 6.2 relating to a breach of the representations and warranties set forth
in Sections 3.1, 3.2 or 3.3 (or the portion of the Buyer Certificate relating
thereto). For purposes solely of this Article VI, the representations and
warranties of the Company and the Company Stockholders in Sections 2B.4, 2B.9,
2B.13, 2B.14 and 2B.21 and the representations and warranties of the Buyer in
Section 3.4 shall be construed as if the term "material" and any reference to
"Company Material Adverse Effect" and "Buyer Material Adverse Effect" (and
variations thereof) were omitted from such representations and warranties.
(b) Except with respect to claims based on fraud, after the
Closing, the rights of the Indemnified Parties under this Article VI shall be
the exclusive remedy of the Indemnified Parties with respect to claims resulting
from or relating to any misrepresentation, breach of warranty or failure to
perform any covenant or agreement contained in this Agreement.
(c) No Indemnifying Stockholder shall have any right of
contribution against the Company with respect to any breach by the Company of
any of its representations, warranties, covenants or agreements.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing, as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company and the Company Stockholders in the event the Company or
the Company Stockholders are in breach of any representation, warranty or
covenant contained in this Agreement, and such breach, individually or in
combination with any other such breach,
-34-
39
(i) would cause the conditions set forth in clauses (b) or (c) of Section 5.1
not to be satisfied and (ii) is not cured within 20 days following delivery by
the Buyer to the Company of written notice of such breach;
(c) the Company may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (b) or (c) of Section 5.2 not to be satisfied and (ii) is not
cured within 20 days following delivery by the Company to the Buyer of written
notice of such breach;
(d) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before
December 31, 1999 by reason of the failure of any condition precedent under
Section 5.1 hereof (unless the failure results primarily from a breach by the
Buyer of any representation, warranty or covenant contained in this Agreement);
(e) the Company may terminate this Agreement by giving written
notice to the Buyer if the Closing shall not have occurred on or before December
31, 1999 by reason of the failure of any condition precedent under Section 5.2
hereof (unless the failure results primarily from a breach by the Company of any
representation, warranty or covenant contained in this Agreement);
7.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 7.1, all obligations, except obligations pursuant to Section
4.5(b), of the Parties hereunder shall terminate without any liability of any
Party to any other Party (except for any liability of any Party for willful
breaches of this Agreement).
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is defined
in the Section of this Agreement indicated below.
-35-
40
Defined Term Section
------------ -------
ADR Procedure 6.3(d)
ADR Service 6.3(d)
Affiliate 2B.14(a)(vii)
Agreed Amount 6.3(c)
Average Price 1.6(a)(ii)
Buyer Introduction
Buyer Certificate 5.3(e)
Buyer Common Stock 1.6(a)(ii)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Certificates 1.7
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.1
Code 2B.9(d)
Common Shares 1.6(a)
Company Introduction
Company Certificate 5.2(e)
Company Intellectual Property 2B.13(a)
Company Material Adverse Effect 2B.1
Common Shares 1.6(f)
Company Shareholders Meeting 2B.27
Company Stockholders 1.4(f)
Confidential Information 4.5(b)
Controlling Party 6.3(a)
Customer Deliverables 2B.13(a)
Damages 6.3(a)
Disclosing Party 4.5(b)
Disclosure Schedule Article II
Dispute 6.3(c)
Employee Benefit Xxxx 0X.00
XXXXX 0X.00
Xxxxxxxx Xxx 2.14(a)(vii)
Expected Claim Notice 6.4
-36-
41
Financial Statements 2B.6
GAAP 2B.6
Governmental Entity 2B.4
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Indemnifying Stockholder 6.1
Intellectual Property 2B.13(a)
Internal Systems 2B.13(a)
Legal Proceeding 2.18
Most Recent Balance Sheet 2B.8
Most Recent Balance Sheet Date 2B.6
Non-controlling Party 6.3(a)
Ordinary Course of Business 2B.4
Parties Introduction
Xxxxxxx 0X.00
Xxxxxxxx Price 1.2
Purchase Price Securities 2A.4
Reasonable Best Efforts 4.1
Receiving Party 4.5(b)
Response 6.3(c)
SEC 3.5
Securities Act 2A.4(a)
Security Interest 2A.1
Software 2B.13(e)
Tax Returns 2B.9(a)(ii)
Taxes 2B.9(a)(i)
Year 2000 Compliant 2B.13(i)
ARTICLE IX
MISCELLANEOUS
9.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
the Buyer may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which
-37-
42
case Buyer shall use reasonable efforts to advise the Company and provide it
with a copy of the proposed disclosure prior to making the disclosure).
9.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
9.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties.
9.5 Counterparts and Facsimile Signature. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
If to the Company or the
Company Stockholders: Copy to:
Xxxxx Xxxx Xxxxxxx Xxxxxx Xxxxxxx & Xxxxx
-00-
00
000 Xxxxxx Xxxxx 0000 Xxxxxxxxxxx Xxxx
Xxxxx 000 Xxxx Xxxx, XX 00000
Xxx Xxxx, XX 00000 Attn: Xxxxxxxx X. Xxxxx, Esq.
If to the Buyer: Copy to:
SilverStream Software, Inc. Xxxx and Xxxx LLP
One Burlington Xxxxx, Suite 200 60 State Street
Burlington, MA 01803 Xxxxxx, XX 00000
Attn: Chief Financial Officer Attn: Xxxx X. Xxxxx, Esq.
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.9 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing. No amendment of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. No waiver of any right or remedy
hereunder shall be valid unless the same shall be in writing and signed by the
Party giving such waiver. No waiver by any Party with respect to any default,
misrepresentation or breach of warranty or covenant hereunder shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
9.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term
-39-
44
or provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to limit the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
9.11 Construction.
(a) The language used in this Agreement shall be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
-40-
45
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
SILVERSTREAM SOFTWARE, INC.
By: /s/ Xxxxx Xxxxx
--------------------------------
Title:
-----------------------------
COMPANY STOCKHOLDERS
/s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxxx
-----------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx
-41-
46
Schedule I
Cash Purchase Price Shares of Common Stock Owned
------------------- ----------------------------
Xxxxx Xxxx $3,900,000 780,000
Xxxxxx Xxxxxxx $ 150,000 10,000
Xxxxx Xxxxxxx $ 150,000 10,000
---------- -------
$4,200,000 800,000
-42-
