Exhibit 2.2
STOCK PURCHASE AGREEMENT
AMONG
VERITEST, INC.,
THE STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HERETO
AND
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
DATED AS OF JANUARY 6, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS...........................................................................................1
1.01. DEFINITIONS................................................................................................1
ARTICLE II - PURCHASE AND SALE....................................................................................3
2.01. PURCHASE AND SALE..........................................................................................3
2.02. CLOSING....................................................................................................5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS...........................................5
3.01. CORPORATE EXISTENCE AND POWER..............................................................................6
3.02. CORPORATE AUTHORIZATION....................................................................................6
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS.......................................................................6
3.04. NON-CONTRAVENTION..........................................................................................6
3.05. CAPITALIZATION.............................................................................................6
3.06. SUBSIDIARIES...............................................................................................7
3.07. FINANCIAL STATEMENTS.......................................................................................7
3.08. ABSENCE OF CERTAIN CHANGES.................................................................................7
3.09. PROPERTY AND EQUIPMENT.....................................................................................8
3.10. NO UNDISCLOSED MATERIAL LIABILITIES........................................................................8
3.11. LITIGATION.................................................................................................9
3.12. MATERIAL CONTRACTS.........................................................................................9
3.13. INSURANCE COVERAGE.........................................................................................9
3.14. COMPLIANCE WITH LAWS; NO DEFAULTS.........................................................................10
3.15. FINDERS FEES..............................................................................................10
3.16. INTELLECTUAL PROPERTY.....................................................................................10
3.17. RECEIVABLES...............................................................................................11
3.18. TAXES.....................................................................................................11
3.19. EMPLOYEES.................................................................................................13
3.20. ENVIRONMENTAL COMPLIANCE..................................................................................13
3.21. CUSTOMERS AND SUPPLIERS...................................................................................13
3.22. TRANSACTIONS WITH AFFILIATES.............................................................................13
3.23. OTHER INFORMATION.........................................................................................14
3.24. INTERCOMPANY ARRANGEMENTS.................................................................................14
3.25. REPRESENTATIONS...........................................................................................14
ARTICLE IV - ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS................................................14
4.01. TITLE TO AND VALIDITY OF SHARES...........................................................................14
4.02. AUTHORITY.................................................................................................14
4.03. POWER TO ACT AS TRUSTEE OR EXECUTOR.......................................................................15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................15
5.01. ORGANIZATION AND EXISTENCE................................................................................15
5.02. CORPORATE AUTHORIZATION...................................................................................15
5.03. GOVERNMENTAL AUTHORIZATION................................................................................15
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5.04. NON-CONTRAVENTION.........................................................................................15
5.05. FINDERS' FEES.............................................................................................15
5.06. PURCHASE FOR INVESTMENT...................................................................................15
5.07. LITIGATION................................................................................................15
ARTICLE VI - COVENANTS OF THE COMPANY AND SELLERS................................................................16
6.01. CONDUCT OF THE COMPANY....................................................................................16
6.02. ACCESS TO INFORMATION.....................................................................................16
6.03. NOTICES OF CERTAIN EVENTS.................................................................................17
6.04. RESIGNATIONS..............................................................................................17
6.05. NO NEGOTIATIONS WITH THIRD PARTIES........................................................................17
6.06. CONFIDENTIALITY...........................................................................................17
6.07. CONTINUING DISCLOSURE.....................................................................................18
6.08 CERTAIN TAX MATTERS.........................................................................................18
ARTICLE VII - COVENANTS OF BUYER.................................................................................18
7.01 CONFIDENTIALITY.............................................................................................18
7.02 SALES AND OTHER RESOURCES...................................................................................19
ARTICLE VIII - COVENANTS OF ALL PARTIES..........................................................................19
8.01. BEST EFFORTS..............................................................................................19
8.02. CERTAIN FILINGS...........................................................................................19
8.03. PUBLIC ANNOUNCEMENTS......................................................................................19
8.04 Taxes......................................................................................................19
ARTICLE IX - EMPLOYEE BENEFITS...................................................................................20
9.01. EMPLOYEE BENEFITS DEFINITIONS.............................................................................20
9.02. ERISA REPRESENTATIONS.....................................................................................20
9.03. NO THIRD PARTY BENEFICIARIES..............................................................................21
ARTICLE X - CONDITIONS TO CLOSING................................................................................22
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY..............................................................22
10.02. CONDITIONS TO OBLIGATION OF BUYER........................................................................22
10.03. CONDITIONS TO OBLIGATION OF SELLERS......................................................................23
ARTICLE XI - SURVIVAL; INDEMNIFICATION...........................................................................23
11.01. SURVIVAL.................................................................................................23
11.02. INDEMNIFICATION..........................................................................................23
11.03. PROCEDURES; NO WAIVER....................................................................................24
ARTICLE XII - TERMINATION........................................................................................25
12.01. GROUNDS FOR TERMINATION..................................................................................25
12.02. EFFECT OF TERMINATION....................................................................................26
ARTICLE XIII - MISCELLANEOUS.....................................................................................26
13.01. NOTICES..................................................................................................26
13.02. AMENDMENTS; NO WAIVERS...................................................................................27
13.03. EXPENSES.................................................................................................27
13.04. SUCCESSORS AND ASSIGNS...................................................................................27
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13.05. FURTHER ASSURANCES.......................................................................................28
13.06. GOVERNING LAW............................................................................................28
13.07. COUNTERPARTS; EFFECTIVENESS..............................................................................28
13.08. ENTIRE AGREEMENT.........................................................................................28
13.09. CAPTIONS.................................................................................................28
13.10. JURISDICTION.............................................................................................28
SCHEDULES
Schedule 2.01 List of Stockholders
Schedule 3.07 Financial Statements
Schedule 3.08 Certain Changes
Schedule 3.10 Liabilities
Schedule 3.12 Material Contracts
Schedule 3.14 Permits
Schedule 3.16 Intellectual Property
Schedule 3.19 Tax Matters
Schedule 3.20 Employees
Schedule 3.22 Environmental Matters
Schedule 8.04 Section 338(h)(10) Election
Schedule 9.02 Employee Plans
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STOCK PURCHASE AGREEMENT
AGREEMENT dated as of January 6, 1999 among VeriTest, Inc. a California
corporation (the "Company"); the shareholders of the Company listed on the
signature pages hereto (collectively "Sellers" and individually a "Seller"); and
Lionbridge Technologies Holdings, Inc. a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, the Company owns and operates a computer products testing,
compliance testing, and developer relations services business (the "Business")
conducted primarily in the United States;
WHEREAS, Buyer wishes to acquire the Company from Sellers by purchasing all
of the outstanding capital stock of the Company from Sellers (the "Shares"),
upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, each Seller desires to sell to Buyer all of the Shares owned by
such Seller;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"ANCILLARY AGREEMENTS" means the Employment Agreement substantially in
the form attached hereto as EXHIBIT A, the Non-Disclosure and Developments
Agreement substantially in the form attached hereto as EXHIBIT B, the
Non-Competition Agreement substantially in the form attached hereto as EXHIBIT
C, each to be entered into by Buyer with each Seller.
"BALANCE SHEET" means the unaudited balance sheet of the Company as of
December 31, 1998 referred to in Section 3.07.
"BALANCE SHEET DATE" means December 31, 1998.
"BUYER STOCK" means the common stock, $.01 par value per share, of
Buyer.
"BUYER'S COUNSEL" means the law firm of Xxxxx, Xxxxxxx & Xxxxxxxxx,
LLP, Boston, Massachusetts.
"CLOSING DATE" means the date of the Closing.
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"COMMON STOCK" means the common stock, no par value per share, of the
Company.
"COMPANY'S PROPRIETARY RIGHTS" means all Proprietary Rights which are
owned or licensed by the Company or any Affiliate of the Company and used or
held for use by the Company.
"FUNCTIONAL LOCALIZATION TESTING" means re-testing of functions after
a computer product has been localized to determine if errors have been
introduced during the localization process.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, restriction or encumbrance of any kind in respect of
such asset.
"LINGUISTIC TESTING" means testing to determine if the task of product
localization has been performed to an acceptable standard and if a translation
is of sufficiently high quality and acceptable to a user fluent in the
particular language for which the product has been localized.
"MATERIAL ADVERSE CHANGE" means a material adverse change in the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Company.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets, condition (financial or otherwise), results, operations or
prospects of the Company.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"NOTE" means a promissory note issued by Buyer to each of the Sellers
in substantially the form of EXHIBIT D attached hereto.
"PERSON" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PROPRIETARY RIGHTS" means all (A) patents, patent applications,
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, re-examination, utility, model, certificate of invention
and design patents, patent applications, registrations and applications for
registrations, (B) trademarks, service marks, trade dress, logos, trade names,
service names and corporate names and registrations and applications for
registration thereof, (C) copyrights and registrations and applications for
registration thereof, (D) mask works and registrations and applications for
registration thereof, (E) computer software, data and documentation, (F) trade
secrets and confidential business information, whether patentable or
nonpatentable and whether or not reduced to practice, know-how, manufacturing
and product 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, (G) other proprietary rights relating to any of the foregoing
(including without limitation associated goodwill and remedies against
infringements thereof and rights of protection of an interest therein under the
laws of all jurisdictions) and (H) copies and tangible embodiments thereof.
"SELLERS' COUNSEL" means the law firm of Xxxxx Xxxx LLP, Santa Monica,
California.
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Phrases such as "TO THE BEST OF SELLERS' KNOWLEDGE" and phrases of
similar import shall mean to the actual knowledge of each of Xxxxxx Xxxxxx and
Xxxx Xxxxxx Xxxxxx.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"TOTAL REVENUES" means the total revenues derived from computer
products testing, compliance testing, and developer relations services provided
by the Company and/or the Buyer and determined in accordance with generally
accepted accounting principles; PROVIDED, HOWEVER, that Total Revenues shall not
include those revenues derived from other Persons acquired by the Buyer
subsequent to the Closing Date unless either Seller devotes in excess of ten
percent (10%) of his employment time to conducting the business of such Person,
nor shall it include revenues derived from the Functional Localization Testing
or Linguistic Testing services conducted by the Buyer.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Benefit Arrangement 9.01
Closing 2.02
Code 3.19
Company Securities 3.05
Damages 11.02
Employee Plans 9.01
ERISA 9.01
ERISA Affiliate 9.01
Financial Statements 3.07
Indemnified Party 11.02
Indemnifying Party 11.02
Multiemployer Plan 9.01
Purchase Price 2.01
Permit 3.14
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. (a) Upon the terms and subject to the conditions
of this Agreement, each Seller, severally but not jointly, shall sell to Buyer,
and Buyer shall purchase from each such Seller, at the Closing, that number of
Shares as is set forth opposite such Seller's name on SCHEDULE 2.01. The
aggregate purchase price (the "Purchase Price") for the Shares is as follows:
(i) $3,260,000 in cash;
(ii) 100,000 shares of Buyer Stock;
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(iii) Notes in the aggregate principal amount of $750,000; and
(iv) the 0000 Xxxx-Xxx Payment and the 2000 Earn-Out Payment (both as
defined below).
The Purchase Price (other than the 1999 Earn-Out Payment, and the 2000 Earn-Out
Payment) shall be paid as provided in Section 2.02.
(b) If Total Revenues for the year ending December 31, 1999 ("Fiscal
1999") exceed $5,000,000, Sellers shall receive a payment calculated as follows
(the "1999 Earn-Out Payment"):
(i) forty-five percent (45%) of the first $1,000,000 of Fiscal 1999
Total Revenues in excess of $5,000,000; plus
(ii) ten percent (10%) of the amount by which Fiscal 1999 Total
Revenues exceed $6,000,000;
PROVIDED, HOWEVER, that the 1999 Earn-Out Payment shall not exceed $500,000.
(c) If Total Revenues for the year ending December 31, 2000 ("Fiscal
2000") exceed $7,500,000, Sellers shall receive a payment (the "2000 Earn-Out
Payment") equal to one-third (1/3) of the amount by which Fiscal 2000 Total
Revenues exceed $7,500,000; PROVIDED, HOWEVER, that the 2000 Earn-Out Payment
shall not exceed $500,000.
(d) Any 1999 Earn-Out Payment and 2000 Earn-Out Payment shall be paid
to Sellers within thirty (30) days after Buyer's independent public accountants
have issued their report on Buyer's audited financial statements for such
period. Each Seller shall receive one-half (1/2) of any such payments made by
Buyer. Within ten (10) days of receiving such report, Buyer shall deliver a copy
of a report to each of the Sellers detailing the calculation of the Fiscal 0000
Xxxx-Xxx Payment or Fiscal 0000 Xxxx-Xxx Payment, as the case may be. Sellers
will have fifteen (15) days from receipt of such report to contest in writing to
Buyer (the "Objection Notice") a calculation of the Fiscal 1999 Earn-Out Payment
or the Fiscal 2000 Earn-Out Payment which they believe in good faith to be
inaccurate. Should Sellers issue an Objection Notice, Buyer shall provide
Sellers with reasonable access to the supporting information for such
calculations. Buyer and Sellers shall use their best efforts to reach agreement
on the disputed amount. If Buyer and Sellers are unable to reach such agreement
within twenty (20) days of receipt of the Objection Notice by Buyer, the parties
agree to cause independent accountants of nationally recognized standing
reasonably satisfactory to Sellers and Buyer (who shall not have a material
relationship with Sellers or Buyer) promptly to review this Agreement and the
disputed amounts. Such independent public accountants shall deliver to Sellers
and Buyer, as promptly as practicable, a reporting setting forth the calculation
of the disputed amount. Such report shall be final and binding upon the parties
hereto. The cost of such review and report shall be borne by Sellers; PROVIDED
HOWEVER, Buyer shall bear all the expenses associated with such review if the
final Fiscal 0000 Xxxx-Xxx Payment or Fiscal 0000 Xxxx-Xxx Payment, as the case
may be, exceeds Buyer's original calculation of such amount by more than five
percent (5%) of such original calculation.
(e) In the event that either of the Sellers is terminated
without Cause (as defined in the
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Employment Agreement) or terminates his employment for Good Reason (as defined
in the Employment Agreement) prior to January 1, 2000, such terminated Seller
shall receive, without regard to Fiscal 1999 Total Revenues or Fiscal 2000 Total
Revenues, $250,000 in full satisfaction of such Seller's rights to receive the
1999 Earn-Out Payment and $250,000 in full satisfaction of such Seller's rights
to receive the 2000 Earn-Out Payment. Each of such payments shall be made upon
the earlier to occur of (a) April 30, 2000 (with respect to the 0000 Xxxx-Xxx
Payment) or April 30, 2001 (with respect to the 2000 Earn-Out Payment) and (b)
thirty (30) days after Buyer's independent public accountants have issued their
report on Buyer's audited financial statements for Fiscal 1999 (with respect to
payment of the 0000 Xxxx-Xxx Payment) or Fiscal 2000 (with respect to payment of
the 2000 Earn-Out Payment), as the case may be.
(f) In the event that either of the Sellers is terminated without
Cause or terminates his employment for Good Reason prior to January 1, 2001 and
after December 31, 1999, such terminated Seller shall receive, without regard to
Fiscal 2000 Total Revenues, $250,000 in full satisfaction of such terminated
Seller's rights to receive the Fiscal 2000 Earn-Out Payment. Such payment shall
be made upon the earlier to occur of (a) April 30, 2001 and (b) thirty (30) days
after Buyer's independent public accountants have issued their report on Buyer's
audited financial statements for Fiscal 2000.
2.02. CLOSING. The closing (the "Closing") of the purchase and sale of the
Shares hereunder shall take place at the offices of Buyer's Counsel in Boston,
Massachusetts on or prior to January 8, 1999, or at such other time or place as
Buyer and Sellers may agree. At the Closing,
(a) Buyer shall deliver to Sellers $3,260,000 by wire transfer to
accounts designated by Sellers written notice to Buyer not later than two
business days prior to the Closing Date.
(b) Buyer shall deliver to Sellers certificates for the Buyer Stock,
registered in the names of Sellers for the number of shares shown in SCHEDULE
2.01.
(c) Buyer shall deliver to Sellers the Notes in the aggregate
principal amount of $750,000.
(d) Sellers shall deliver to Buyer certificates for the Shares duly
endorsed or accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto.
(e) Buyer and Sellers shall enter into the Ancillary Agreements.
(f) The Company and Sellers shall deliver to Buyer revised schedules,
if any, to this Agreement updating the information shown thereon to the Closing
Date.
(g) The parties shall execute and deliver any other instruments,
documents and certificates that are required to be delivered pursuant to this
Agreement or as may be reasonably requested by any party in order to consummate
the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SELLERS
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The Company and each Seller hereby jointly and severally represent and
warrant to Buyer as of the date hereof and as of the Closing Date that each of
the following statements is true and correct, except as disclosed in any
Schedule hereto. The disclosures in any Schedule hereto shall qualify every
other section of this Agreement to the extent it is reasonably clear from a
reading of such Schedule that the disclosure therein is applicable to such other
sections.
3.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
make such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has heretofore delivered to Buyer true and complete
copies of the corporate charter and bylaws of the Company as currently in
effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company's corporate powers and
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement constitutes a valid and binding agreement of the
Company.
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery and
performance by the Company and Sellers of this Agreement require no action by or
in respect of, or filing with, any governmental body, agency, official or
authority.
(b) Except as set forth on SCHEDULE 3.03(b), no consent, approval,
waiver or other action by any Person (other than any governmental body, agency,
official or authority referred to in Section 3.03(a) above) under any contract,
agreement, indenture, lease, instrument or other document to which the Company
is a party or by which the Company is bound is required or necessary for the
execution, delivery and performance of this Agreement by the Company or the
consummation of the transactions contemplated hereby.
3.04. NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the corporate charter
or bylaws of the Company, (ii) assuming compliance with the matters referred to
in Section 3.03(a), contravene or conflict with or constitute a violation of any
material provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company; (iii) assuming the receipt of all
required consents, constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Company or to a loss of any material benefit to which the Company is entitled
under any provision of any agreement, contract or other instrument binding upon
the Company or any permit held by the Company or (iv), assuming the receipt of
all required consents, result in the creation or imposition of any Lien on any
asset of the Company.
3.05. CAPITALIZATION. The authorized capital stock of the Company consists
of 100,000 shares of common stock, no par value. As of the date hereof, there
were outstanding 10,000 shares of common stock of the Company. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and are owned by Sellers as shown on SCHEDULE 2.01.
Except as set
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forth in this Section 3.05, there are no outstanding (i) shares of capital
stock, other securities or phantom or other equity interests of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or other securities of the Company or (iii) options or other
rights to acquire from the Company any capital stock, other securities or
phantom or other equity interests of the Company (the items in clauses (i), (ii)
and (iii) being referred to collectively as the "Company Securities"). There are
no outstanding obligations of the Company, actual or contingent, to issue or
deliver or to repurchase, redeem or otherwise acquire any Company Securities.
3.06. SUBSIDIARIES. The Company does not have and never has had any
Subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.07. FINANCIAL STATEMENTS. The Company has previously furnished Buyer with
a true and complete copy of (i) the balance sheet of the Company as of December
31, 1998 and (ii) the balance sheet of the Company at December 31, 1997, the
statements of operations, cash flows and changes in stockholders' equity of the
Company for the fiscal year ended December 31, 1997, as reviewed by
Xxxxxxx/Xxxxxxx Associates (collectively, the "Financial Statements" which are
attached hereto as SCHEDULE 3.07). Each of the balance sheets included in the
Financial Statements fairly presents in all material respects the financial
position of the Company as of its date, and the other statements included in the
Financial Statements fairly present in all material respects the results of
operations, cash flows and stockholders' equity, as the case may be, of the
Company for the periods therein set forth.
3.08. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, except as
reflected in the Financial Statements or in SCHEDULE 3.08, the Company has
conducted its business in the ordinary course consistent with past practices and
there has not been:
(a) any Material Adverse Change or any event, occurrence, development
or state of circumstances or facts which could reasonably be expected to result
in a Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any Company Securities or any repurchase,
redemption or other acquisition by the Company of any outstanding shares of
capital stock or other securities of, or other ownership interests in, the
Company;
(c) any amendment of any outstanding security of the Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money (other than in the ordinary course of business
and in amounts and on terms consistent with past practices);
(e) any creation or assumption by the Company of any material Lien on
any asset;
(f) any making of any loan, advance or capital contributions to or
investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
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(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by the Company
of any contract or other right, in either case, material to the Company, other
than transactions and commitments in the ordinary course of business consistent
with past practices and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting practice by
the Company;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company, (iii)
change in benefits payable under existing severance or termination pay policies
or employment agreements or (iv) change in compensation, bonus or other benefits
payable to directors, officers or employees of the Company; or
(k) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representation thereof to
organize any employees of the Company, which employees were not subject to a
collective bargaining agreement at the Balance Sheet Date, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to any
employees of the Company.
3.09. PROPERTY AND EQUIPMENT. (a) The Company has good and valid title to,
or in the case of leased property has valid leasehold interests in, all property
and assets (whether real or personal, tangible or intangible) reflected on the
Balance Sheet or acquired after the Balance Sheet Date. None of such properties
or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet; or
(ii) Liens which do not materially detract from the value of such
property or assets as now used, or materially interfere with any present or
intended use of such property or assets.
(b) There are no developments affecting any of such properties or
assets pending, or to the knowledge of the Company and Sellers, threatened,
which might materially detract from the value of such property or assets,
materially interfere with any present or intended use of any such property or
assets or materially adversely affect the marketability of such property or
assets.
(c) To the best of Sellers' knowledge, the equipment owned by the
Company has no material defects, is in good operating condition and repair
(ordinary wear and tear excepted), and is substantially adequate for the uses to
which it is being put.
(d) The assets owned or leased by the Company, or which it otherwise
has the right to use, constitute all of the assets held for use or used in
connection with the business of the Company and are generally adequate to
conduct such business as currently conducted.
3.10. NO UNDISCLOSED MATERIAL LIABILITIES. There are no material
liabilities of the Company of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and, to the best of Sellers'
knowledge, there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than:
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(i) liabilities disclosed or provided for in the Balance Sheet; and
(ii) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, which in the
aggregate are not material to the Company.
3.11. LITIGATION. Except as set forth in SCHEDULE 3.11, there is no action,
suit, investigation or proceeding pending against, or to the knowledge of the
Sellers, threatened against or affecting, the Company or any of its properties
or the transactions contemplated hereby before any court or arbitrator or any
governmental body, agency, official or authority, nor, to the knowledge of the
Sellers, is there any basis therefor.
3.12. MATERIAL CONTRACTS. (a) Except for agreements, contracts, plans,
leases, arrangements or commitments disclosed in SCHEDULE 3.12 or any other
schedule to this Agreement, the Company is not a party to or subject to:
(i) any lease providing for annual rentals of $10,000 or more;
(ii) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by the
Company of $10,000 or more;
(iii) any sales, distribution or other similar agreement providing for
the sale by the Company of materials, supplies, goods, services, equipment
or other assets providing for annual payments in 1998 or thereafter to the
Company of $25,000 or more;
(iv) any partnership, joint venture or other similar contract,
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset), except contracts relating to indebtedness
incurred in the ordinary course of business in an amount not exceeding
$5,000;
(vi) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by the Company;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any contract or other document that limits the freedom of the
Company to compete in any line of business or with any Person or in any
area or which would so limit the freedom of the Company after the Closing
Date; or
(ix) any other contract or commitment not made in the ordinary course
of business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement and commitment
disclosed in any schedule to this Agreement or required to be disclosed pursuant
to Section 3.12(a) is a valid and binding agreement of the Company and is in
full force and effect, except as may be limited by bankruptcy
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and other laws affecting creditors' rights generally, and by general principles
of equity (whether considered in a proceeding in equity or at law), and neither
the Company nor, to the knowledge of the Company and Sellers, any other party
thereto is in default in any material respect under the terms of any such
agreement, contract, plan, lease, arrangement or commitment.
3.13. INSURANCE COVERAGE. The Company has furnished to Buyer a list of, and
true and complete copies of, all insurance policies and fidelity bonds covering
the assets, business, equipment, properties, operations, employees, officers and
directors of the Company. There is no claim by the Company pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums payable
under all such policies and bonds have been paid and the Company is otherwise in
full compliance with the terms and conditions of all such policies and bonds.
Such policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since January 1,
1997 and remain in full force and effect. The Company and Sellers do not know of
any threatened termination of, or any material premium increase with respect to,
any of such policies or bonds.
3.14. COMPLIANCE WITH LAWS; NO DEFAULTS. (a) The Company is not in
violation of, and has not violated, any applicable provisions of any laws,
statutes, ordinances or regulations.
(b) SCHEDULE 3.14 correctly describes each license and permit (a
"Permit") material to the business of the Company, together with the name of the
governmental agency or entity issuing such license or permit. Such licenses and
permits are valid and in full force and effect, and none of such licenses or
permits will be terminated or impaired or become terminable as a result of the
transactions contemplated hereby.
(c) The Company is not in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, (i) any
mortgage, loan agreement, indenture or evidence of indebtedness for borrowed
money to which the Company is a party or by which the Company or any material
amount of its assets is bound or (ii) any judgment, order or injunction of any
court, arbitrator or governmental body, agency, official or authority.
3.15. FINDERS FEES. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Sellers or the Company who might be entitled to any fee or commission from
Buyer, the Company or any of their respective Affiliates upon consummation of
the transactions contemplated by this Agreement.
3.16. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.16 includes a list of all of
the Company's patents, copyrights, trademarks, trade names and service marks,
and all pending applications for any of the foregoing, including the
jurisdictions by or in which such right has been issued or registered. The
Company does not license any of its Proprietary Rights to any third party and is
not subject to or bound by any agreements providing for the payment of any
royalty. The Company has sufficient right, title, and interest in, or license
to, its Proprietary Rights to conduct its business as presently conducted.
(b)(i) The Company has not been sued or charged in writing with or
been a defendant in any claim, suit, action or proceeding relating to its
business that has not been finally terminated prior to the date hereof and that
involves a claim of infringement of any patents, trademarks, service marks or
copyrights, and (ii) the Company and Sellers have no knowledge of any other
claim or infringement by the Company, and no knowledge of any continuing
infringement by any other Person of any of the
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Company's Proprietary Rights. No Company Proprietary Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company or restricting the licensing thereof by the Company
to any Person. Except in the ordinary course of business or as set forth in
SCHEDULE 3.16(b), the Company has not entered into any agreement to indemnify
any other Person against any charge of infringement of any patent, trademark,
service xxxx or copyright.
(c) None of the processes and formulae, research and development
results and other know-how of the Company, the value of which to the Company is
contingent upon maintenance of the confidentiality thereof, has been disclosed
by the Company to any Person other than Persons that are parties to
confidentiality agreements with the Company.
(d) To the knowledge of the Company and Sellers, no third party has
asserted any claim, or has any reasonable basis to assert any valid claim,
against the Company with respect to (i) the continued employment by, or
association with, the Company of any of the present officers, employees of or
consultants to the Company or (ii) the use by the Company or any of such Persons
in connection with their activities for or on behalf of the Company of any
information which the Company or any of such Persons would be prohibited from
using under any prior agreements or arrangements or any laws applicable to
unfair competition, trade secrets or proprietary information.
3.17. RECEIVABLES. All accounts, notes receivable and other receivables
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable of the Company at the
Closing Date will be, valid and genuine, subject to normal and customary trade
discounts, less any reserves for doubtful accounts recorded on the Balance
Sheet. To the best of Sellers' knowledge, there are no defenses to the
collectibility of any such receivables. All accounts, notes receivable and other
receivables of the Company at the Balance Sheet Date have been included in the
Balance Sheet.
3.18. TAXES. (a) The term "Taxes" as used herein means all federal, state,
local, foreign net income, alternative or add-on minimum tax, estimated, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, capital profits, lease, service, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs, duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
together with all interest, penalties, additions to tax and additional amounts
with respect thereto, and the term "Tax" means any one of the foregoing Taxes.
The term "Tax Returns" as used herein means all returns, declarations, reports,
claims for refund, information statements and other documents relating to Taxes,
including all schedules and attachments thereto, and including all amendments
thereof, and the term "Tax Return" means any one of the foregoing Tax Returns.
The term "Code" means the Internal Revenue Code of 1986, as amended.
(b) The Company has timely filed all Tax Returns required to be filed
and has paid all Taxes owed (whether or not shown as due on such Tax Returns),
including, without limitation, all Taxes which the Company is obligated to
withhold for amounts owing or paid to employees, creditors and third parties.
All Tax Returns filed by the Company were complete and correct in all material
respects, and such Tax Returns appropriately reflected the facts regarding the
income, business, assets, liabilities, operations, activities, status and other
matters of the Company and any other information required to be shown thereon.
None of the Tax Returns filed by the Company or Taxes payable by the Company
have been the subject of an audit, action, suit, proceeding, claim,
- 11 -
examination, deficiency or assessment by any governmental authority, and no such
audit, action, suit, proceeding, claim, examination, deficiency or assessment is
currently pending or, to the knowledge of the Company, threatened. The Company
is not currently the beneficiary of any extension of time within which to file
any Tax Return, and the Company has not waived any statute of limitation with
respect to any Tax or agreed to any extension of time with respect to a Tax
assessment or deficiency. None of the Tax Returns filed by the Company contain a
disclosure statement under former Section 6661 of the Code or Section 6662 of
the Code (or any similar provision of state, local or foreign Tax law). The
Company is not a party to any Tax sharing agreement or similar arrangement. The
Company has never been a member of a group filing a consolidated federal income
Tax Return, and the Company does not have any liability for the Taxes of any
Person (other than the Company) under Treasury Regulation Section 1.1502-6 (or
any corresponding provision of state, local or foreign Tax law), as a transferee
or successor, by contract, or otherwise.
(c) The Company is not a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
the payment of (i) any "excess parachute payments" within the meaning of Section
280G of the Code (without regard to the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for which a deduction
would be disallowed or deferred under Section 162 or Section 404 of the Code.
The Company has not agreed to make any adjustment under Section 481(a) of the
Code (or any corresponding provision of state, local or foreign law) by reason
of a change in accounting method or otherwise. The Company does not have and has
not had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country. No portion of the Purchase Price is subject to the Tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the
Code or of any other provision of law. No claim has ever been made by a Tax
Authority in a jurisdiction where the Company does not file Tax Returns that it
is or may be subject to Tax in that jurisdiction. None of the shares of
outstanding capital stock of the Company are subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code. SCHEDULE 3.18 sets
forth the Company's adjusted Tax basis in each of its assets for which such
adjusted tax basis exceeds $25,000.
(d) There are no liens for Taxes (other than for ad valorem Taxes not
yet due and payable) upon the assets of the Company. The unpaid Taxes of the
Company did not, as of the Balance Sheet Date, exceed the reserve for actual
Taxes (as opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) as shown on the Balance Sheet,
and will not exceed such reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company in
filing their Tax Returns (taking into account any Taxes incurred as a result of
the transactions contemplated by this Agreement). The Company is not a party to
any joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for federal income tax purposes.
(e) The Company has never filed a consent pursuant to Section 341(f)
of the Code, relating to collapsible corporations. The Company and its
shareholders made (i) a valid election for the Company to be treated as an "S
corporation", as that term is defined in Section 1361(a) of the Code, for
federal income tax purposes and (ii) a similar valid election under the laws of
the State of California or any other applicable governmental authority, and all
of such elections will be in effect at the Effective Time. An election under
Section 1362(a) of the Code has been in effect with respect to the Company and
any predecessor corporation (within the meaning of Section 1374(c) of the Code)
for each of its taxable years. SCHEDULE 3.18(e) lists each such election and a
true copy of each such election is attached thereto; to the best knowledge of
the Sellers, there are no grounds for the revocation of any such election and no
such election will be revoked retroactively or otherwise except at the Closing
Date by reason of the
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transactions contemplated by this Agreement. Except as set forth on SCHEDULE
3.18(e), the Company has been an S corporation at all times since its inception
through the date hereof. Neither the Company nor any of its shareholders has
taken any action that would cause, or would result in, the termination of the S
corporation status of the Company, other than pursuant to this Agreement. No Tax
will be imposed under Section 1374 of the Code or any corresponding provisions
of the laws of the State of California or any other applicable governmental
authority as a result of the transactions contemplated by this Agreement.
Immediately prior to the Closing, Sellers will be "S corporation shareholders"
within the meaning of Treasury Regulation Section 1.338(h)(10)-1(d)(iii).
(f) The Company's shareholders have timely filed all Tax Returns with
respect to Taxes required to be paid attributable to items of income, gain,
deductions, losses and credits of the Company, and have timely paid all such
Taxes shown on such Tax Returns. There has not been any audit of any Tax Return
filed by a shareholder of the Company with respect to, or which may relate to,
items of income, gain, deduction, loss or credit of the Company; and no such
audit of any shareholder of the Company is in progress and such shareholders
have not been notified by any taxing authority that any such audit is
contemplated or pending.
3.19. EMPLOYEES. SCHEDULE 3.19 sets forth a true and complete list of (a)
the names, titles, annual salaries and other compensations of all employees of
the Company whose annual base salary exceed $35,000 and (b) the wage rates for
non-salaried employees of the Company (by classification). None of such
employees and no other key employee of the Company has indicated to the Company
or a Seller that he intends to resign or retire as a result of the transactions
contemplated by this Agreement or otherwise.
3.20. ENVIRONMENTAL COMPLIANCE. Except as set forth in SCHEDULE 3.20, and
except in all cases as, in the aggregate, have not had and could not reasonably
be expected to have a Material Adverse Effect, the Company: (i) has obtained all
approvals which are required to be obtained under all applicable federal, state,
foreign or local laws or any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by the Company or its agents ("Environmental Laws"); (ii) is in compliance in
all material respects with all terms and conditions of such required approvals,
and also is in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (iii) as of
the date hereof, is not aware of nor has received notice of any past or present
violations of Environmental Laws or any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise to
any material common law or statutory liability, or otherwise form the basis of
any material claim, action, suit or proceeding, against the Company based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous or toxic
material or waste; and (iv) has taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by the Company (or any of their respective agents) thereunder.
- 13 -
3.21. CUSTOMERS AND SUPPLIERS. Since January 1, 1998, neither the Company
nor the Sellers have received any notice from the sponsor of any of the
Company's current logo or compliance testing programs that such sponsor has
stopped or intends to stop purchasing the Company's products or services, except
that Microsoft has informed the Company that it intends to halt testing in
connection with the discontinuance of MS Office Compatible.
3.22. TRANSACTIONS WITH AFFILIATES. There are no loans, leases, royalty
agreements or other continuing transactions of a similar nature between the
Company and any Seller, any Affiliate of any Seller, or any member of any
Seller's family. To the knowledge of the Company and Sellers, none of the
officers or directors of the Company or Sellers (a) has any material direct or
indirect interest in any entity which does business with the Company; (b) has
any direct or indirect interest in any property, asset or right which is used by
the Company in the conduct of its business; or (c) has any contractual
relationship with the Company other than such relationships which occur from
being an officer, director or stockholder of the Company.
3.23. OTHER INFORMATION. Neither this Agreement nor the Schedules hereto
prepared by Sellers contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading.
3.24. INTERCOMPANY ARRANGEMENTS. The Company does not own any note, bond,
debenture or other indebtedness, or is not otherwise a creditor, of any Seller
or any of its Affiliates. Since the Balance Sheet Date, there has not been any
payment by the Company to any Seller or any of its Affiliates, charge by any
Seller or any of its Affiliates to the Company or other transaction between the
Company and a Seller or any of its Affiliates, except in any such case in the
ordinary course of business of the Company consistent with past practice.
3.25. REPRESENTATIONS. Each of the joint representations and warranties of
the Company and Sellers contained in this Agreement is true and correct in all
material respects.
ARTICLE IV
ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF SELLERS
Each Seller, severally but not jointly, represents and warrants to, and
agrees with, Buyer as follows:
4.01. TITLE TO AND VALIDITY OF SHARES. Such Seller now has, and on the
Closing Date will have, good and valid title to and unrestricted power to vote
and sell (such sale being subject to applicable securities laws) the Shares
designated as owned by such Seller opposite such Seller's name on SCHEDULE 2.01,
free and clear of any Lien and, upon purchase and payment therefor and delivery
to Buyer thereof in accordance with the terms of this Agreement, Buyer will
obtain good and valid title to such Shares free and clear of any Lien. All
Shares owned by such Seller have been duly authorized and validly issued and are
fully paid and non-assessable. All Shares to be sold by such Seller are
registered in the name of such Seller.
- 14 -
4.02. AUTHORITY. Such Seller has the legal power, right and authority to
enter into and perform this Agreement, and to perform each of his obligations
hereunder. The execution, delivery and performance of this Agreement by such
Seller (a) require no action by or in respect of, or filing with, or consent of,
any governmental body, agency or official or any other Person and (b) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of any agreement, judgment, injunction, order, decree or any other
instrument binding upon such Seller. This Agreement has been duly executed and
delivered by such Seller and constitutes a valid and binding obligation of such
Seller, enforceable in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect that affect creditors' rights
generally, and by general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
4.03. POWER TO ACT AS TRUSTEE OR EXECUTOR. If such Seller is serving as
trustee or executor with respect to its Shares, such Seller is duly authorized
and empowered by the instruments creating such trust or trusts or by the will of
which such Seller is acting as executor and under applicable law to enter into
this Agreement with respect to the Shares held by such Seller and to consummate
the transactions contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and Sellers that:
5.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
5.02. CORPORATE AUTHORIZATION. The execution, delivery and performance by
Buyer of this Agreement and the Ancillary Agreements and the consummation by
Buyer of the transactions contemplated hereby are within the corporate powers of
Buyer and have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement constitutes a valid and binding agreement of
Buyer. The Notes, when executed and delivered, will constitute a valid and
binding obligation of Buyer.
5.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement require no action by or in respect of, or filing
with, any governmental body, agency, official or authority.
5.04. NON-CONTRAVENTION. The execution, delivery and performance by Buyer
of this Agreement do not and will not (i) contravene or conflict with the
corporate charter or bylaws of Buyer or (ii) contravene or conflict with any
provision of any law, regulation, judgment, injunction, order or decree binding
upon Buyer.
5.05. FINDERS' FEES. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Buyer who might be entitled to any fee or
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commission from the Company or any or any Affiliate thereof upon consummation of
the transactions contemplated by this Agreement.
5.06. PURCHASE FOR INVESTMENT. Buyer is purchasing the Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof.
5.07. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer, threatened against or affecting,
Buyer before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLERS
The Company and each Seller agree that:
6.01. CONDUCT OF THE COMPANY. From the date hereof until the Closing Date,
the Company shall conduct its business in the ordinary course consistent with
past practices and use its best efforts to preserve intact its business
organization and relationships with third parties and to keep available the
services of its present officers and employees. Without limiting the generality
of the foregoing, from the date hereof until the Closing Date, the Company will
not:
(a) adopt or propose any change in its corporate charter or bylaws;
(b) merge or consolidate with any other Person or acquire a material
amount of assets of any other Person;
(c) sell, lease, license or otherwise dispose of any material assets
or property except (i) pursuant to existing contracts or commitments and (ii) in
the ordinary course consistent with past practices;
(d) effect any direct or indirect redemption, purchase or other
acquisition of any Company Securities, or declare, set aside or pay any dividend
or make any other distribution of assets of any kind whatsoever with respect to
any Company Securities;
(e) issue any securities;
(f) lend to or borrow any money from any Person in excess of $5,000;
(g) make any single capital expenditure in excess of $25,000;
(h) terminate or amend any material contract; or
(i) agree or commit to do any of the foregoing.
The Company will not (i) take or agree or commit to take any action that would
make any representation and warranty of the Company or Sellers under this
Agreement on the date of its execution and delivery
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inaccurate in any respect at, or as of any time prior to, the Closing Date or
(ii) omit or agree or commit to omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any respect at any such
time.
6.02. ACCESS TO INFORMATION. From the date hereof until the Closing Date,
the Company (a) will give, Buyer, its counsel, financial advisors, financing
sources, auditors and other authorized representatives (at reasonable times and
upon reasonable notice) full access to the offices, properties, books and
records of the Company (b) will furnish, and will cause the Company to furnish
Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information relating
to the Company as such Persons may reasonably request and (c) will instruct the
employees, counsel and financial advisors of the Company to cooperate with Buyer
in its investigation of the Company. Buyer acknowledges that it has had adequate
opportunity to review the business and affairs of the Company and to speak with
and ask questions of Sellers and other key employees of the Company. As of the
date hereof, Buyer does not have any knowledge (as defined in Section 11.03(d))
of any breach of representation or warranty of the Company or Sellers contained
herein.
6.03. NOTICES OF CERTAIN EVENTS. The Company will promptly notify Buyer of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving
or otherwise affecting the Company disclosed pursuant to Section 3.11 or
that relate to the consummation of the transactions contemplated by this
Agreement.
6.04. RESIGNATIONS. The Company will deliver to Buyer the resignations of
all officers and directors, other than Sellers, of the Company from their
positions with the Company at or prior to the Closing Date, unless otherwise
specified by Buyer. Sellers will continue to serve as trustees of the Company's
Profit Sharing Plan until receipt of a determination letter from the IRS and
final distribution of the assets of such Profit Sharing Plan.
6.05. NO NEGOTIATIONS WITH THIRD PARTIES. From the date hereof until the
earlier of the Closing Date or the date on which this Agreement is terminated,
neither the Company, nor any of its respective agents or representatives, shall,
directly or indirectly, encourage, solicit or engage in any discussions or
negotiations with, or provide any information to, any Person or group concerning
the possible acquisition by such third party of all or any part of the business
of the Company, whether by purchase of assets, stock, merger or otherwise, other
than as contemplated or permitted by this Agreement. The Company and each Seller
agree promptly to notify Buyer of interest by any Person with respect to any
such possible acquisition.
6.06. CONFIDENTIALITY. The Company, and Sellers and their Affiliates, will
hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel,
- 17 -
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning Buyer furnished to the
Company, or to Sellers or their Affiliates, in connection with the transactions
contemplated by this Agreement, and (after the Closing Date) all confidential
documents and information concerning the Company, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by Sellers, (ii) in the public domain through no fault of Sellers or (iii)
later lawfully acquired by Sellers from sources other than the Company or Buyer;
PROVIDED that Sellers may disclose such information to their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement so
long as such persons are informed by Sellers of the confidential nature of such
information and are directed by Sellers to treat such information
confidentially. The obligation of the Company, and Sellers and their Affiliates,
to hold any such information in confidence shall be satisfied if they exercise
the same care with respect to such information as they would take to preserve
the confidentiality of their own similar information. If this Agreement is
terminated, the Company, and Sellers and their Affiliates, will, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
Buyer, upon request, all documents and other materials, and all copies thereof,
obtained by the Company, or by Sellers or their Affiliates, or on their behalf
from Buyer in connection with this Agreement that are subject to such
confidence.
6.07. CONTINUING DISCLOSURE. Prior to the Closing, the Company and Sellers
shall have the continuing obligation promptly to advise Buyer with respect to
any matter hereafter arising or discovered that, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
a schedule to this Agreement, or that constitutes a breach or prospective breach
of this Agreement by the Company or a Seller. The delivery of any such notice
shall not affect Buyer's remedies hereunder.
6.08 CERTAIN TAX MATTERS. At the Buyer's option, Sellers will join with the
Buyer in making an election under Section 338(h)(10) of the Code, and any
corresponding elections under state, local or foreign tax law (collectively a
"Section 338(h)(10) Election"). The Sellers will cooperate to take all necessary
actions to effect the Section 338(h)(10) Election. Buyer will be responsible for
preparation and delivery of Form 8023 within a reasonable period of time
following the Closing Date for Sellers' signature. Sellers shall provide Buyer
with reasonable access to Tax information necessary to evaluating whether or not
to make a Section 338(h)(10) Election. Buyer shall reimburse Sellers for any
sales or use tax imposed on Sellers by the California State Board of
Equalization as a result of a Section 338(h)(10) Election in connection with
this transaction.
ARTICLE VII
COVENANTS OF BUYER
7.01 CONFIDENTIALITY. Buyer agrees that prior to the Closing Date and after
any termination of this Agreement, Buyer and its Affiliates will hold, and will
use their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company furnished to Buyer or its Affiliates in connection with the transactions
contemplated by this Agreement, except to the extent that
- 18 -
such information can be shown to have been (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later lawfully acquired by Buyer from sources other than the
Company; PROVIDED that Buyer may disclose such information to its officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement and to its
financing sources in connection with obtaining the financing for the
transactions contemplated by this Agreement (unless the Company or Sellers in
their transmittal of such information reasonably expressly identify a narrower
class of recipients, in which case the dissemination of such information shall
be limited to such designated recipients) so long as such Persons are informed
by Buyer of the confidential nature of such information and are directed by
Buyer to treat such information confidentially. The obligation of Buyer and its
Affiliates to hold any such information in confidence shall be satisfied if the
exercise the same care with respect to such information as they would take to
preserve the confidentiality of their own similar information. If this Agreement
is terminated, Buyer and its Affiliates will, and will use their best efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to Sellers, upon
request, all documents and other materials, and all copies thereof, obtained by
Buyer or its Affiliates or on their behalf from a Seller or the Company in
connection with this Agreement that are subject to such confidence.
7.02 SALES AND OTHER RESOURCES. Buyer agrees that through the end of the
year 2000, it will devote sales and other resources that Buyer believes in
Buyer's good faith reasonable discretion is sufficient to support and promote
the Company in the manner generally described in the business plan developed by
Sellers attached hereto as SCHEDULE 7.02.
ARTICLE VIII
COVENANTS OF ALL PARTIES
The parties hereto agree that:
8.01. BEST EFFORTS. Subject to the terms and conditions of this Agreement,
each party will use its best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things reasonably necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Sellers and Buyer each agree, and Sellers, prior
to the Closing, and Buyer, after the Closing, agree to cause the Company, to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be reasonably necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
8.02. CERTAIN FILINGS. The Company, Sellers and Buyer shall cooperate with
each other (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
- 19 -
8.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
8.04 TAXES. (a) Each party to this Agreement shall provide, at the request
of any other party, and upon reasonable prior notice to such other party (at the
expense of such other party) reasonable access to information, books, records
and documents which are reasonably required by such other party in connection
with (i) the preparation of any Tax Return, (ii) any determination of liability
for Taxes or (iii) any audit, examination or other proceeding in respect of
Taxes.
(b) In the event that a Section 338(h)(10) Election is made, Buyer and
Sellers agree (i) to allocate the "modified ADSP" (within the meaning of
Treasury Regulation Section 1.338(h)(10)-1(f)) in accordance with SCHEDULE 8.04
and (ii) to not take any position on any Tax Return, audit, suit or proceeding
inconsistent with such allocation.
ARTICLE IX
EMPLOYEE BENEFITS
9.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used herein,
having the following meanings:
"BENEFIT ARRANGEMENT" means each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
the Company or any of its ERISA Affiliates and (iii) covers any employee or
former employee of the Company.
"EMPLOYEE PLANS" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer plan,
as defined in Section 3(37) of ERISA.
- 20 -
9.02. ERISA REPRESENTATIONS. The Company and each Seller, jointly and
severally, hereby represent and warrant to Buyer that:
(a) SCHEDULE 9.02 lists each Employee Plan that covers any employee of
the Company, copies or descriptions of all of which have previously been made
available or furnished to Buyer. With respect to each Employee Plan, the Company
has provided the most recently filed Form 5500 and an accurate summary
description of such plan. The Company has provided Buyer with complete age,
salary, service and related data as of the most recent practicable date for
employees of the Company.
(b) SCHEDULE 9.02 also includes a list of each Benefit Arrangement of
the Company, copies or descriptions of which have been made available or
furnished previously to Buyer.
(c) None of the Employee Plans or other arrangements listed on
SCHEDULE 9.02 covers any non-United States employee or former employee of the
Company.
(d) No "prohibited transaction", as defined in Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any Employee Plan.
(e) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. The Company and its Affiliates have not incurred,
nor do they reasonably expect to incur, any liability under Title IV ERISA
arising in connection with the termination of any plan covered or previously
covered by Title IV of ERISA.
(f) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to Buyer a
copy of the most recent Internal Revenue Service determination letter with
respect to each such plan. Each Employee Plan has been maintained in material
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such plan.
(g) Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Benefit
Arrangement.
(h) With respect to the employees and former employees of the Company,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code.
(i) Except as disclosed on SCHEDULE 9.02(i), all contributions and
payments accrued under each Employee Plan and Benefit Arrangement, determined in
accordance with prior funding and accrual practices, as adjusted to include
proportional accruals for the period ending on the Closing Date, will be
discharged and paid on or prior to the Closing Date. Except in connection with
termination of the Company's Profit Sharing Plan or as disclosed in writing to
Buyer prior to the date hereof, there has been no amendment to, written
interpretation of or announcement (whether or not written) by the Company or any
of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Plan or Benefit Arrangement that would increase
materially the expense of maintaining such
- 21 -
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(j) No tax under Section 4980B or Section 4980D of the Code has been
incurred in respect of any Employee Plan that is a group health plan, as defined
in Section 5000(b)(1) of the Code.
(k) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
9.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article IX shall
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of the Company in
respect of continued employment (or resumed employment) with the Company and no
provision of this Article IX shall create any such rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under any
Employee Plan or Benefit Arrangement or any plan or arrangement that may be
established by Buyer or any of its Affiliates. No provision of this Agreement
shall constitute a limitation on rights to amend, modify or terminate after the
Closing Date any Employee Plan or Benefit Arrangement.
ARTICLE X
CONDITIONS TO CLOSING
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Buyer, the Company and Sellers to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator, or governmental body, agency, or official and be pending.
(b) Each other party shall have executed and delivered each of the
Ancillary Agreements to be entered into by it at Closing, in each case
substantially in the form attached as an exhibit to this Agreement.
10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) the Company and each Seller shall have performed in all
material respects all of his or its obligations hereunder required to be
performed on or prior to the Closing Date, (ii) the representations and
warranties of the Company and each Seller contained in this Agreement at the
time of its execution and delivery and in any certificate or other writing
delivered by the Company or a Seller pursuant hereto, shall be true at and as of
the Closing Date, as if made at and as of such date with only such additional
exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect and (iii) Buyer shall have received a certificate signed
by the President of the Company and by each Seller to the foregoing effect.
- 22 -
(b) No court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, restraining the effective operation by Buyer of the business of the
Company after the Closing Date, and no proceeding challenging this Agreement or
the transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person before any
court, arbitrator or governmental body, agency or official and be pending.
(c) Buyer shall have received an opinion of Sellers' Counsel, dated
the Closing Date, reasonably satisfactory to the Buyer in form and substance and
including representations as set forth on EXHIBIT 10.02(c). In rendering such
opinion, such counsel may rely upon certificates of public officers, as to
matters governed by the laws of jurisdictions other than California or the
federal laws of the United States of America, upon opinions of counsel
reasonably satisfactory to Buyer, copies of which shall be contemporaneously
delivered to Buyer, and as to matters of fact, upon certificates of officers of
Seller, the Company and the Subsidiaries.
(d) The Company shall have received all consents, authorizations or
approvals from the governmental agencies referred to in Section 3.03(a), in each
case in form and substance reasonably satisfactory to Buyer, and no such
consent, authorization or approval shall have been revoked.
(e) Sellers shall have entered into a Subordination and Intercreditor
Agreement with Silicon Valley Bank and Buyer, and Silicon Valley Bank shall have
consented to the acquisition of the Shares by Buyer.
(f) Buyer shall have received all other closing documents specified in
Section 2.02 of this Agreement and all other closing documents that it may
reasonably request, all in form and substance reasonably satisfactory to Buyer.
10.03. CONDITIONS TO OBLIGATION OF SELLERS. The obligation of Sellers to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date, (ii) the representations and warranties of Buyer contained in this
Agreement at the time of its execution and delivery and in any certificate or
other writing delivered by Buyer pursuant hereto shall be true in all material
respects at and as of the Closing Date, as if made at and as of such date and
(iii) Sellers shall have received a certificate signed by the President of Buyer
to the foregoing effect.
(b) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be pending.
- 23 -
(c) Sellers shall have received all items specified in Section 2.02 of
this Agreement and all other closing documents that they may reasonably request,
all in form and substance reasonably satisfactory to them.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01. SURVIVAL. The covenants, agreements, representations and warranties
of the parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until June 30, 1999, in the case of Section 6.06 and Section 7.01,
indefinitely, and in the case of the covenants, agreements, representations and
warranties contained in Sections 3.18 and Article IX, until expiration of the
applicable statutory period of limitations (giving effect to any waiver,
mitigation or extension thereof), if later. Notwithstanding the preceding
sentence, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought under Section 11.02 shall survive the time at
which it would otherwise terminate pursuant to the preceding sentence, if notice
of the inaccuracy or breach thereof giving rise to such right to indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time.
11.02. INDEMNIFICATION. (a) Each Seller, jointly and severally, hereby
indemnifies Buyer and, effective at the Closing, without duplication, the
Company against and agrees to hold them harmless from any and all damage, loss,
liability and expense (including without limitation reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Buyer and the
Company proximately caused by any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by the Company prior to the
Closing or a Seller pursuant to this Agreement (other than the representations,
warranties and covenants and agreements of Sellers contained in Articles II and
IV); PROVIDED that Sellers shall not be liable under this Section 11.02(a)
unless the aggregate amount of Damages with respect to all matters referred to
in this Section 11.02(a) exceeds $50,000 and then only to the extent of such
excess; PROVIDED, further that the maximum aggregate liability of Sellers under
this Agreement for any misrepresentation, breach of any representation, warranty
or other covenant or any other matter (other than the covenants and agreements
contained in Articles II and IV) shall not exceed $3,000,000.
(b) Each Seller hereby jointly and severally indemnifies Buyer and,
effective at the Closing, without duplication, the Company against and agrees to
hold them harmless from and against all Damages incurred or suffered by Buyer or
the Company arising out of any breach of any covenant or agreement of such
Seller contained in Article II or the inaccuracy or breach of any
representation, warranty, covenant or agreement made by such Seller contained in
Article IV; PROVIDED that the maximum aggregate liability of the Sellers under
this Agreement for any misrepresentation, breach of any representation, warranty
or other covenant contained in Articles II and IV shall be limited to the
Purchase Price.
(c) Buyer hereby indemnifies each Seller against and agrees to hold
him harmless from any and all Damages incurred or suffered by Sellers and
proximately caused by any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by Buyer pursuant to this Agreement (other
than pursuant to Articles II and VIII); PROVIDED that (i) Buyer shall not be
liable under this Section 11.02(c) unless the aggregate amount of Damages with
respect to all matters
- 24 -
referred to in this Section 11.02(c) exceeds $50,000 and then only to the extent
of such excess; PROVIDED FURTHER that the maximum aggregate liability of Buyer
under this Agreement for any breach of any representation, warranty or other
covenant or any other matter (other than the covenants and agreements pursuant
to Articles II and VIII) shall not exceed $3,000,000.
(d) Sellers shall have no right of indemnification, contribution or
subrogation against the Company with respect to any indemnification by any
Seller or Sellers under this Section 11.02 if the transactions contemplated by
this Agreement are consummated. Sellers shall have a right of contribution
against each other with respect to amounts actually paid pursuant to this
Section 11.02, but such right of contribution shall in no way limit or affect
Buyer's and the Company's rights contained in this Article XI. Notwithstanding
the foregoing, each Seller shall have the right to be indemnified by the Company
to the maximum extent permitted by the Company's Articles of Incorporation and
Bylaws and to the fullest extent of California law in connection with any claim,
loss, liability, cost or damage arising out of or in connection with any act or
omission by such Seller in his capacity as an officer or director of the Company
prior to the Closing, except to the extent such claim, loss, liability, cost or
damage has been proximately caused by any breach of any representation,
warranty, covenant or agreement of such Seller contained in this Agreement.
11.03. PROCEDURES; NO WAIVER. (a) The party seeking indemnification under
Section 11.02 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may, and at the request of the Indemnified Party shall, participate in and
control the defense of any third party suit, action or proceeding at its own
expense. The Indemnifying Party shall not be liable under Section 11.02 for any
settlement effected without its consent of any claim, litigation or proceeding
in respect of which indemnity may be sought hereunder.
(b) No waiver of a closing condition by either Buyer or Seller shall
limit its rights under Section 11.02.
(c) After the Closing, this Article XI shall provide the exclusive
remedy (other than injunctive relief) for any misrepresentation or inaccuracy,
breach of warranty, covenant or other agreement or other claims arising out of
this Agreement or the transactions contemplated thereby.
(d) Notwithstanding anything to the contrary contained herein, in any
proceeding in which Buyer is bringing an indemnity claim against Sellers
pursuant to Section 11.02(a) above (a "SECTION 11.02(a) Claim"), it shall be a
defense of Sellers and Sellers shall not be required to provide any
indemnification pursuant to such Section 11.02(a) Claim to the extent Sellers
demonstrate, by a preponderance of the evidence, that Xxxx X. Xxxxx or Xxxxxxx
X. Xxxxxxxx had knowledge as of the date of this Agreement of the
misrepresentation or breach of warranty, covenant or agreement giving rise to
such Section 11.02(a) Claim. For purposes of this Section 11.03(d), Xxxx Xxxxx
or Xxxxxxx Xxxxxxxx shall be deemed to have knowledge of any misrepresentation
or breach of warranty, covenant or agreement if as of the date of this Agreement
(i) he had actual knowledge of such misrepresentation or breach, or (ii) based
upon the information in his possession, a reasonable person under similar
circumstances should have known of such misrepresentation or breach.
(e) Notwithstanding anything to the contrary contained herein, in any
proceeding in which a Seller is bringing an indemnity claim against Buyer
pursuant to Section 11.02(c) above (a
- 25 -
"SECTION 11.02(c) CLAIM"), it shall be a defense of Buyer and Buyer shall not be
required to provide any indemnification pursuant to such Section 11.02(c) Claim
to the extent Buyer demonstrates, by a preponderance of the evidence, that
Xxxxxx Xxxxxx or Xxxx Xxxxxx Xxxxxx had knowledge as of the date of this
Agreement of the misrepresentation or breach of warranty, covenant or agreement
giving rise to such Section 11.02(c) Claim. For purposes of this Section
11.03(e), Xxxxxx Xxxxxx or Xxxx Xxxxxx Xxxxxx shall be deemed to have knowledge
of any misrepresentation or breach of warranty, covenant or agreement if as of
the date of this Agreement (i) he had actual knowledge of such misrepresentation
or breach, or (ii) based upon the information in his possession, a reasonable
person under similar circumstances should have known of such misrepresentation
or breach.
ARTICLE XII
TERMINATION
12.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(i) by written agreement of Sellers and Buyer;
(ii) by either Sellers or Buyer if the Closing shall not have been
consummated on or before January 12, 1999;
(iii) by either Sellers or Buyer in the event of a material breach by
the other of the breaching party's covenants, representations and
warranties contained herein; or
(iv) by either Sellers or Buyer if there shall be any law or
regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses (ii),
(iii), or (iv) shall give notice of such termination to the other parties.
12.02. EFFECT OF TERMINATION. If this Agreement is terminated as permitted
by Section 12.01, such termination shall be without liability of either party
(or any shareholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; PROVIDED
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of another party or to
perform a covenant of this Agreement or from a willful breach by any party to
this Agreement, such party shall be fully liable for any and all Damages
incurred or suffered by the other parties as a result of such failure or breach.
The provisions of Sections 6.06, 7.01 and 13.03 shall survive any termination
hereof pursuant to Section 12.01.
ARTICLE XIII
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MISCELLANEOUS
13.01. NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to Buyer, to:
Xxxx X. Xxxxx
Lionbridge Technologies Holdings, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
if to the Company or a Seller, to each of:
Xxxxxx Xxxxxx
0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Telecopy: (000) 000-0000
and
Xxxx Xxxxxx Xxxxxx
0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxx Xxxx, LLP
000 Xxxxxxxx
Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Telecopy: (000) 000-0000
- 27 -
13.02. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may be
amended or waived prior to the Closing Date if, and only if, such amendment or
waiver is in writing and signed by Buyer, the Company and Sellers.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
13.03. EXPENSES. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense (including
without limitation the fees and expenses of the Company's and Sellers'
financial, legal, and accounting advisors); provided, however, that, if the
Closing shall occur, all such costs and expenses in excess of $36,000 incurred
by the Company, whether or not paid by the Company prior to Closing, shall be
paid or reimbursed by Sellers.
13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of his or its rights or obligations under this Agreement without
the consent of the other parties hereto, except that Buyer may transfer or
assign, in whole or from time to time in part, to one or more of its Affiliates,
the right to purchase all or a portion of the Shares, but no such transfer or
assignment will relieve Buyer of its obligations hereunder, and Buyer may
collaterally assign its rights to receive payments pursuant to Article XI
hereof.
13.05. FURTHER ASSURANCES. From time to time after the Closing, at the
request of Buyer and without further consideration, Sellers will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title to the
Shares.
13.06. GOVERNING LAW. This Agreement and the Ancillary Agreements shall be
construed in accordance with and governed by the law of the Commonwealth of
Massachusetts, without regard to the conflicts of law rules of such state.
13.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
13.08. ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by
either party hereto. Neither this Agreement nor any provision hereof is intended
to confer upon any Person other than the parties hereto any rights or remedies
hereunder.
- 28 -
13.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
13.10. JURISDICTION. Sellers agree that if they bring suit against Buyer to
enforce their rights under this Agreement or the Ancillary Agreements, they
shall file such suit in the courts of the Commonwealth of Massachusetts or any
federal court sitting therein. Buyer agrees that if it brings suit against
Sellers or either of them to enforce its rights under this Agreement or the
Ancillary Documents, it shall file such suit in Los Angeles County in the State
of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 29 -
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By /s/ Xxxx X. Xxxxx
--------------------------------
VERITEST, INC.
By /s/ Xxxxxx Xxxxxx
--------------------------------
Title: President
SELLERS:
/s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
/s/ Xxxx Xxxxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxx Xxxxxx
- 30 -
VERITEST, INC.
STOCK PURCHASE AGREEMENT
Index to Exhibits and Schedules
-------------------------------
Exhibits:
---------
Exhibit A - Form of Employment Agreement
Exhibit B - Form of Employee Non-Disclosure and Developments Agreement
Exhibit C - Form of Non-Competition Agreement
Exhibit D - Form of Promissory Note
Exhibit 10.01(c) - Form of Xxxxx Xxxx Opinion
Schedules:
---------
Schedule 2.01 - List of Stockholders
Schedule 3.07 - Financial Statements
Schedule 3.08 - Certain Changes
Schedule 3.10 - Liabilities
Schedule 3.12 - Material Contracts
Schedule 3.14 - Permits
Schedule 3.16 - Intellectual Property
Schedule 3.19 - Tax Matters
Schedule 3.20 - Employees
Schedule 3.22 - Environmental Matters
Schedule 8.04 - Section 338(h)(10) Election
Schedule 9.02 - Employee Plans
