===============================================================================
STOCK PURCHASE AGREEMENT
among:
IMPROVENET, INC.
a Delaware corporation;
THE X.X. XXXXX CORPORATION
a California Corporation;
and
XXXXX X. XXXXX
---------------------------
Dated as of November 1, 1999
---------------------------
===============================================================================
EXHIBITS
Exhibit A - Definitions of Capitalized Terms
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Noncompetition Agreement
Exhibit D - General Release
iv.
TABLE OF CONTENTS
PAGE
SECTION 1.Purchase and Sale.......................................................................................1
1.1 Purchase and Sale...............................................................................1
1.2 Purchase Price..................................................................................1
1.3 Payments to Xxxxx X. Xxxxx......................................................................3
1.4 Cancellation of Indebtedness....................................................................3
1.5 Closing; Effective Time.........................................................................3
1.6 Further Action..................................................................................4
SECTION 2.Representations and Warranties of the Company and the Selling Shareholder...............................4
2.1 Organization and Standing; Directors and Officers...............................................4
2.4 Capitalization, Etc.............................................................................4
2.5 Financial Statements............................................................................5
2.8 Absence of Changes..............................................................................6
2.9 Title to Assets.................................................................................7
2.10 Bank Accounts; Receivables; Inventory...........................................................8
2.11 Equipment; Leasehold............................................................................8
2.12 Proprietary Assets..............................................................................8
2.13 Contracts......................................................................................10
2.14 Liabilities....................................................................................11
2.15 Compliance with Legal Requirements.............................................................11
2.16 Governmental Authorizations....................................................................12
2.17 Tax Matters....................................................................................12
2.18 Employee and Labor Matters; Benefit Plans......................................................13
2.19 Environmental Matters..........................................................................14
2.20 Insurance......................................................................................15
2.21 Related Party Transactions.....................................................................15
2.22 Legal Proceedings; Orders......................................................................15
2.23 Authority; Binding Nature of Agreement.........................................................16
2.24 Contractors....................................................................................16
2.25 Non-Contravention; Consents....................................................................16
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
2.26 Articles of Incorporation and Bylaws...........................................................17
2.27 Brokers........................................................................................17
2.28 Selling Shareholder............................................................................17
2.29 Full Disclosure................................................................................18
SECTION 3.Representations and Warranties of the Purchaser........................................................18
3.1 Organization and Standing......................................................................18
3.2 Authority; Binding Nature of Agreement.........................................................18
3.3 Capitalization, Etc............................................................................19
3.4 Non-Contravention; Consents....................................................................19
3.5 Full Disclosure................................................................................20
3.6 Valid Issuance.................................................................................20
SECTION 4.Conditions Precedent to Obligations of the Purchaser...................................................20
4.1 Accuracy of Representations....................................................................20
4.2 Performance of Covenants.......................................................................20
4.3 Consents.......................................................................................20
4.4 Agreements and Documents.......................................................................20
4.5 No Restraints..................................................................................21
4.6 No Legal Proceedings...........................................................................21
4.7 Cancellation of Indebtedness...................................................................21
SECTION 5.Conditions Precedent to Obligations of the Selling Shareholder.........................................21
5.1 Accuracy of Representations....................................................................21
5.2 Performance of Covenants.......................................................................21
5.3 Documents......................................................................................22
5.4 No Restraints..................................................................................22
SECTION 6.Indemnification, Etc...................................................................................22
6.1 Survival of Representations, Etc...............................................................22
6.2 Indemnification by the Selling Shareholder.....................................................23
6.3 Indemnification by the Purchaser...............................................................23
6.4 Threshold......................................................................................24
6.5 No Contribution................................................................................24
ii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.6 Satisfaction of Indemnification Claim..........................................................24
6.7 Interest.......................................................................................25
6.8 Setoff Rights..................................................................................25
6.9 Defense of Third Party Claims..................................................................25
6.10 Exercise of Remedies by Indemnitees Other Than Purchaser.......................................25
SECTION 7.Miscellaneous Provisions...............................................................................26
7.1 Filings and Consents...........................................................................26
7.2 Further Assurances.............................................................................26
7.3 Fees and Expenses..............................................................................26
7.4 Attorneys' Fees................................................................................26
7.5 Notices........................................................................................26
7.6 Confidentiality................................................................................27
7.7 Time of the Essence............................................................................27
7.8 Headings.......................................................................................27
7.9 Counterparts...................................................................................27
7.10 Governing Law..................................................................................28
7.11 Successors and Assigns.........................................................................28
7.12 Remedies Cumulative; Specific Performance......................................................28
7.13 Waiver.........................................................................................28
7.14 Amendments.....................................................................................28
7.15 Severability...................................................................................28
7.16 Parties in Interest............................................................................29
7.17 Entire Agreement...............................................................................29
7.18 Construction...................................................................................29
iii.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("AGREEMENT") is made and entered into
as of November 1, 1999, by and among: IMPROVENET, INC. a Delaware corporation
("PURCHASER"); THE X.X. XXXXX CORPORATION, a California corporation (the
"COMPANY"); and XXXXX X. XXXXX (the "SELLING SHAREHOLDER"). Certain other
capitalized terms used in this Agreement are defined in EXHIBIT A.
RECITALS
A. WHEREAS, the Selling Shareholder owns all of the issued and
outstanding shares of capital stock of the Company (the SHARES); and
B. WHEREAS, Purchaser desires to purchase from the Selling
Shareholder, and the Selling Shareholder desires to sell to the Purchaser,
the Shares, subject to the terms and conditions of this Agreement (the
"SALE"); and
C. WHEREAS, this Agreement has been approved by the respective
boards of directors of the Purchaser and the Company and by the Selling
Shareholder.
AGREEMENT
The parties to this Agreement hereby agree as follows:
SECTION 1. PURCHASE AND SALE.
1.1 PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, the Selling Shareholder shall
sell, assign, transfer and deliver to the Purchaser, and the Purchaser shall
purchase from the Selling Shareholder, the Shares, free and clear of all
options, pledges, security interests, liens or other encumbrances or
restrictions on voting or transfer ("ENCUMBRANCES"), other than restrictions
imposed by Federal or State securities laws.
1.2 PURCHASE PRICE.
(A) The aggregate purchase price payable by the Purchaser for
the Shares (the "PURCHASE PRICE") shall consist of (i) $248,600 payable in
cash (the "Cash Payment") plus (ii) 48,592 shares of the authorized but
previously unissued common stock of the Purchaser ("PURCHASER COMMON STOCK").
The Purchase Price shall be paid by the Purchaser to the Selling Shareholder
as follows:
(B) (1) At the Closing, the Purchaser shall pay to the Selling
Shareholder the sum of $79,600 in cash, lawful money of the United States, by
wire transfer of immediately available funds to an account to be designated
by the Selling Shareholder or by such other method as the Selling Shareholder
shall deem acceptable. The balance of the Cash Payment (i.e. $100,000) shall
be deposited by the Selling Shareholder and the Purchaser into escrow at the
Closing pursuant to the terms of the Escrow Agreement attached hereto as
EXHIBIT B (the
1
ESCROWED FUNDS). Seventy thousand dollars ($70,000) of the Escrowed Funds
shall be referred to herein as the "First Escrowed Funds". Thirty thousand
dollars ($30,000) of the Escrowed Funds shall be referred to herein s the
"Second Escrowed Funds".
(2) On January 31, 2000, seventy thousand dollars ($70,000)
of the First Escrowed Funds shall be released from escrow and paid to the
Selling Shareholder by wire transfer of immediately available funds to an
account to be designated by the Selling Shareholder or by such other method
as the Selling Shareholder shall deem acceptable provided that (i) the
Purchaser does not have any pending or assertable Indemnities as provided
herein (which Indemnities will not be subject to any Minimum Thresholds), and
(ii) the Company has achieved a level of gross revenues for the fiscal year
1999 of at least two hundred thousand dollars ($200,000) (the "TARGET
AMOUNT"), including revenues from sources introduced to the Company by the
Purchaser prior or subsequent to the Closing Date; provided, further, that if
the Company does not achieve the Target Amount, the First Escrowed Funds
shall nevertheless be paid to the Selling Shareholder but the amount paid
shall be reduced by $1.00 for each $1.00 of gross revenues less than the
Target Amount. Any amounts of the First Escrowed Funds not paid to the
Selling Shareholder pursuant to this subsection shall be paid to the
Purchaser. Achievement of the Target Amount is not a condition subsequent to
the parties' obligations under this Agreement except as specifically set
forth herein and this Agreement shall not terminate or otherwise be rendered
null and void if the Target Amount is not achieved; For purposes of this
Agreement, the Target Amount shall be calculated on a cash basis in
accordance with generally accepted accounting principles applied on a
consistent basis with the immediately preceding annual period.
(3) On the first anniversary of the Closing Date (or on
such earlier date as the Purchaser may elect) and provided the Selling
Shareholder has not voluntarily terminated his employment with the Purchaser,
the Purchaser shall issue and deliver to the Selling Shareholder one or more
certificates representing 24,296 shares of the Purchaser Common Stock, which
shares shall be free and clear of all Encumbrances; provided, however, that
such obligation of the Purchaser shall be subject to any right of setoff
which the Purchaser may be entitled to exercise pursuant to Section 6.7
hereof or otherwise;
(4) On the second anniversary of the Closing Date (or on
such earlier date as the Purchaser may elect) and provided the Selling
Shareholder has not voluntarily terminated his employment with the Purchaser,
the Purchaser shall issue and deliver to the Selling Shareholder one or more
certificates representing 24,296 shares of the Purchaser Common Stock, which
shares shall be free and clear of all Encumbrances; provided, however, that
such obligation of the Purchaser shall be subject to any right of setoff
which the Purchaser may be entitled to exercise pursuant to Section 6.7
hereof or otherwise.
(5) Upon the earlier of (i) the date of receipt by the
Company of a letter from the Internal Revenue Service stating the amount of
the liability for penalties and/or interest, if any, relating to the
Company's federal withholding tax obligations as disclosed in Part 2.14(a) of
the Company and the Selling Shareholder Disclosure Schedule (collectively,
the "PENALTIES"), or (ii) the date of lapsing of the statute of limitations
related thereto, the Second Escrowed Funds shall be released from escrow and
paid to the Selling Shareholder by wire transfer of immediately available
funds to an account to be designated by the Selling Shareholder
2
or by such other method as the Selling Shareholder shall deem acceptable;
PROVIDED, HOWEVER, that if the Company incurs any liability for Penalties,
the Second Escrowed Funds shall nevertheless be paid to the Selling
Shareholder but the amount thereof shall be reduced by $1.00 for each $1.00
of liabilities so incurred. All parties to this Agreement acknowledge and
agree that the disclosures concerning the potential Penalties set forth in
Part 2.14(a) of the Company and the Selling Shareholder Disclosure Schedule
shall not affect the reduction of the payment of the Second Escrowed Funds
payable to the Selling Shareholder. Any portion of the Second Escrowed Funds
not paid to the Selling Shareholder pursuant to this subsection shall be paid
to the Purchaser.
(6) The Purchaser paid $69,000 of the Purchase Price to the
Selling Shareholder on July 14, 1999.
1.3 PAYMENTS TO XXXXX X. XXXXX. On November 15, 1999, the Purchaser
shall pay $41,400 to Xxxxx X. Xxxxx, reduced by all applicable payroll
deductions and required withholdings, as payment of any and all unpaid wages
or salary, if any, earned by Mr. Price for the performance of services for or
on behalf of the Company at any time, including, but not limited to the
period from October 31, 1996 to the date of this Agreement. Mr. Price hereby
agrees and acknowledges that after such payment provided hereunder, he is not
owed any payments or amounts by the Company including, but not limited to,
any compensation, wages, salary, overtime pay, bonuses, commissions, vacation
pay, interest, penalties or expense reimbursements.
1.4 CANCELLATION OF INDEBTEDNESS. At the Closing, the Selling
Shareholder shall forgive $208,077 of indebtedness to the Company.
1.5 CLOSING; EFFECTIVE TIME. The sale and purchase of the Shares
contemplated by this Agreement (the "CLOSING") shall take place at the
offices of Cooley Godward LLP, 0000 Xx Xxxxxx Xxxx, Five Xxxx Xxxx Xxxxxx,
Xxxx Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m. on the date hereof, or at such
other time and date as the Purchaser and the Selling Shareholder shall
mutually agree (the "SCHEDULED CLOSING TIME"). The date on which the Closing
actually takes place is referred to in this Agreement as the "CLOSING DATE."
(A) The shares of Purchaser Common Stock to be issued pursuant
to Sections 1.2(a)(3) and 1.2(a)(4) shall be characterized as "restricted
securities" for purposes of Rule 144 under the Securities Act, and each
certificate representing any of such securities shall bear a legend identical
or similar in effect to the following legend (together with any other legend
or legends required by applicable state securities laws or otherwise):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT OR UNLESS
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS
AVAILABLE."
3
1.6 FURTHER ACTION. If, at any time after the Closing Date, any
further action is determined by the Purchaser to be necessary or desirable to
carry out the purposes of this Agreement or to vest the Purchaser with full
right, title and possession of the Shares and all rights and property of the
Company, the officers and directors of the Purchaser shall be fully
authorized (in the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDER.
Except as set forth on the Company and Selling Shareholder
Disclosure Schedule delivered to Purchaser simultaneously herewith (to which
the Company and the Selling Shareholder also jointly and severally represent
and warrant), the Company and the Selling Shareholder jointly and severally
represent and warrant, to and for the benefit of the Indemnitees, as follows:
2.1 ORGANIZATION AND STANDING; DIRECTORS AND OFFICERS.
(A) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and
has all necessary power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and
use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Company Contracts.
(B) The Company conducts its business only in the State of
California and does not conduct business in any foreign jurisdiction and is
not required to qualify in any foreign jurisdiction.
(C) Part 2.1 of the Company and Selling Shareholder Disclosure
Schedule accurately sets forth (i) the names of the members of the Company's
board of directors, and (ii) the names and titles of the Company's officers.
2.2 SUBSIDIARIES. The Company does not own and has never owned any
controlling interest in any Entity and the Company has never owned,
beneficially or otherwise, any shares or other securities of, or any direct
or indirect equity interest in, any Entity. The Company has not agreed and is
not obligated to make any future investment in or capital contribution to any
Entity.
2.3 OWNERSHIP OF STOCK. The Shares are owned by the Selling
Shareholder free and clear of all Encumbrances, other than restrictions
imposed by federal and state securities laws. Upon the consummation of the
transactions contemplated hereby, the Purchaser will acquire title to the
Shares, free and clear of all Encumbrances, other than restrictions imposed
by federal and state securities laws.
2.4 CAPITALIZATION, ETC.
(A) Immediately prior to the Closing, the authorized capital
stock of the Company consists of 100,000 shares of common stock, no par value
(the "COMPANY COMMON STOCK"), of which 10,000 shares have been issued and are
outstanding;
4
(B) The Company has not authorized or adopted any stock option
plans. There is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of the
Company; (iii) Company Contract under which the Company is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) to the best of the Company's and the Selling
Shareholder's knowledge, any condition or circumstance that may give rise to
or provide a basis for the assertion of a claim by any Person to the effect
that such Person is entitled to acquire or receive any shares of capital
stock or other securities of the Company.
(C) All of the outstanding shares of Company Common Stock have
been duly authorized and validly issued, and are fully paid and
non-assessable. All of the Shares have been issued and granted in compliance
with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Company
Contracts.
2.5 FINANCIAL STATEMENTS.
(A) The Company has delivered to Purchaser the following
financial statements and notes (collectively, the "COMPANY FINANCIAL
STATEMENTS"):
(I) The unaudited balance sheets of the Company as of
December 31, 1996, 1997, and 1998 and the related audited income statements,
statements of shareholders' equity and statements of cash flows of the
Company for the years then ended, together with the notes thereto; and
(II) The unaudited balance sheet of the Company (the
"UNAUDITED INTERIM BALANCE SHEET") as of August 31, 1999 (the "STATEMENT
DATE"), and the related unaudited income statement of the Company for the
eight months then ended.
(B) The Company Financial Statements are accurate and complete
in all material respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of operations and
(in the case of the financial statements referred to in Section 2.5(a)(i))
cash flows of the Company for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except that the financial statements referred to in Section
2.5(a)(ii) do not contain footnotes and are subject to normal and recurring
year-end audit adjustments, which will not, individually or in the aggregate,
be material in magnitude).
2.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as disclosed in
Part 2.6 of the Company and Selling Shareholder Disclosure Schedule, neither
the execution, delivery nor performance of this Agreement by the Selling
Shareholder nor the consummation by the Selling Shareholder of the
transactions contemplated hereby will (i) violate any provision of the
articles of incorporation or bylaws or other organizational documents of the
Company; (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default
5
(or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provision of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or the Selling Shareholder is a party or by
which either of them or any of their respective properties or assets may be
bound; (iii) violate any order, writ, judgment, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its
properties or assets or (iv) require on the part of the Company or the
Selling Shareholder any filing or registration with, notification to, or
authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency ("GOVERNMENT ENTITY").
2.7 NO UNDISCLOSED LIABILITIES. Except as disclosed in Part 2.7 of
the Company and Selling Shareholder Disclosure Schedule and except for (a)
liabilities and obligations incurred in the ordinary course of business after
August 31, 1999; (b) liabilities and obligations disclosed in or covered by
the Financial Statements and (c) liabilities and obligations incurred in
connection with the transactions contemplated hereby or otherwise as
contemplated by this Agreement (including any liabilities to be reflected,
accrued, or reserved against in the Purchaser's opening balance sheet as of
the Closing Date), since August 31, 1999, the Company has not incurred any
liabilities or obligations that would be required to be reflected or reserved
against in the Company's balance sheet, prepared in accordance with GAAP as
applied in preparing the unaudited consolidated balance sheet of the Company
as included in the Financial Statements and that would have a Material
Adverse Effect on the Company.
2.8 ABSENCE OF CHANGES. Except as set forth in Part 2.8 of the
Company and Selling Shareholder Disclosure Schedule, since the Statement Date:
(A) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations, financial
performance or prospects, and, to the best of the knowledge of the Company
and the Selling Shareholder, no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on the Company;
(B) there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of the Company's assets
(whether or not covered by insurance);
(C) the Company has not declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of
capital stock, and has not repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities;
(D) the Company has not made any capital expenditure which,
when added to all other capital expenditures made on behalf of the Company
since the Statement Date, exceeds $25,000;
(E) the Company has not (i) entered into or permitted any of
the assets owned or used by it to become bound by any material Company
Contract, or (ii) amended or prematurely terminated, or waived any material
right or remedy under, any such Company Contract;
6
(F) the Company has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise disposed
of, or leased or licensed, any right or other asset to any other Person, or
(iii) waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(G) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable
or other indebtedness;
(H) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of
business and consistent with the Company's past practices;
(I) the Company has not lent money to any Person other than
pursuant to routine travel advances made to employees in the ordinary course
of business and consistent with the Company's past practices;
(J) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its
directors, officers or employees, or (iii) hired any new employee;
(K) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(L) the Company has not made any Tax election;
(M) the Company has not commenced or settled any Legal
Proceeding;
(N) the Company has not entered into any material transaction
or taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(O) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(n)" above.
2.9 TITLE TO ASSETS.
(A) The Company owns, and has good, valid and marketable title
to, all assets purported to be owned by it, including: (i) all assets
reflected on the Unaudited Interim Balance Sheet; (ii) all assets referred to
in Parts 2.10(b) and 2.12 of the Company and Selling Shareholder Disclosure
Schedule and all of the Company's rights under the Company Contracts
identified in Part 2.13 of the Company and Selling Shareholder Disclosure
Schedule; and (iii) all other assets reflected in the Company's books and
records as being owned by the Company. Except as set forth in Part 2.9 of the
Company and Selling Shareholder Disclosure Schedule, all of said assets are
owned by the Company free and clear of any liens or other Encumbrances,
except for (y) any
7
lien for current taxes not yet due and payable, and (z) minor liens that have
arisen in the ordinary course of business and that do not (in any case or in
the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Company.
(B) Part 2.9 of the Company and Selling Shareholder Disclosure
Schedule identifies all assets that are material to the business of the
Company and that are being leased or licensed to the Company, except for (i)
any equipment being leased to the Company under a standard operating lease
requiring annual payments by the Company of less than $25,000, and (ii) any
software being licensed to the Company under any third party software license
generally available to the public at a total cost of less than $25,000.
2.10 BANK ACCOUNTS; RECEIVABLES; INVENTORY.
(A) Part 2.10(a) of the Company and Selling Shareholder
Disclosure Schedule provides accurate information with respect to each
account maintained by or for the benefit of the Company at any bank or other
financial institution.
(B) Part 2.10(b) of the Company and Selling Shareholder
Disclosure Schedule provides an accurate and complete breakdown and aging of
all accounts receivable, notes receivable and other receivables of the
Company as of the Statement Date. Except as set forth in Part 2.10(b) of the
Company and Selling Shareholder Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts receivable reflected on
the Unaudited Interim Balance Sheet that have not yet been collected and
those accounts receivable that have arisen since the Statement Date and have
not yet been collected) (i) represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary
course of business, and (ii) are current and will be collected in full when
due, without any counterclaim or set off (net of an allowance for doubtful
accounts not to exceed $25,000 in the aggregate).
2.11 EQUIPMENT; LEASEHOLD.
(A) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's business in the manner in
which such business is currently being conducted.
(B) The Company does not own any real property or any interest
in real property, except for the leasehold created under the real property
lease identified in Part 2.10 of the Company and Selling Shareholder
Disclosure Schedule.
2.12 PROPRIETARY ASSETS.
(A) Part 2.12(a)(i) of the Company and Selling Shareholder
Disclosure Schedule sets forth, with respect to each Company Proprietary
Asset registered with any Governmental Body or for which an application has
been filed with any Governmental Body, (i) a brief description of such
Proprietary Asset, and (ii) the names of the jurisdictions covered by the
applicable registration or application. Part 2.12(a)(ii) of the Company and
Selling Shareholder Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company.
Part 2.12(a)(iii) of the Company and Selling
8
Shareholder Disclosure Schedule identifies and provides a brief description
of each Proprietary Asset licensed to the Company by any Person (except for
any Proprietary Asset that is licensed to the Company under any third party
software license generally available to the public at a cost of less than
$25,000), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. Except as set forth in Part
2.12(a)(iv) of the Company and Selling Shareholder Disclosure Schedule, the
Company has good, valid and marketable title to all of the Company
Proprietary Assets identified in Parts 2.12(a)(i) and 2.12(a)(ii) of the
Company and Selling Shareholder Disclosure Schedule, free and clear of all
liens and other Encumbrances, and has a valid right to use all Proprietary
Assets identified in Part 2.12(a)(iii) of the Company and Selling Shareholder
Disclosure Schedule. Except as set forth in Part 2.12(a)(v) of the Company
and Selling Shareholder Disclosure Schedule, the Company is not obligated to
make any payment to any Person for the use of any Company Proprietary Asset.
Except as set forth in Part 2.12(a)(vi) of the Company and Selling
Shareholder Disclosure Schedule, the Company has not developed jointly with
any other Person any Company Proprietary Asset with respect to which such
other Person has any rights.
(B) The Company has taken all measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all
Company Proprietary Assets (except Company Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to maintain and
protect the value of all Company Proprietary Assets. Except as set forth in
Part 2.12(b) of the Company and Selling Shareholder Disclosure Schedule, the
Company has not (other than pursuant to license agreements identified in Part
2.12 of the Company and Selling Shareholder Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any
Person of, (i) the source code, or any portion or aspect of the source code,
of any Company Proprietary Asset, or (ii) the object code, or any portion or
aspect of the object code, of any Company Proprietary Asset.
(C) Except as set forth in Part 2.12(c) of the Company and
Selling Shareholder Disclosure Schedule, none of the Company Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. The Company is not infringing, misappropriating or making any
unlawful use of, and the Company has not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of the
Company and the Selling Shareholder, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset
owned or used by any other Person infringes or conflicts with, any Company
Proprietary Asset.
(D) Except as set forth in Part 2.12(d) of the Company and
Selling Shareholder Disclosure Schedule: (i) each Company Proprietary Asset
conforms in all material respects with any specification, documentation,
performance standard, representation or statement made or provided with
respect thereto by or on behalf of the Company; and (ii) there has not been
any claim by any customer or other Person alleging that any Company
Proprietary Asset (including each version thereof that has ever been licensed
or otherwise made available by the Company to any Person) does not conform in
all material respects with any specification, documentation, performance
standard, representation or statement made or provided by or on
9
behalf of the Company, and, to the best of the knowledge of the Company and
the Selling Shareholder, there is no basis for any such claim.
(E) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Company to conduct its business in
the manner in which such business has been and is being conducted. Except as
set forth in Part 2.12(e) of the Company and Selling Shareholder Disclosure
Schedule, (i) the Company has not licensed any of the Company Proprietary
Assets to any Person on an exclusive basis, and (ii) the Company has not
entered into any covenant not to compete or Contract limiting its ability to
exploit fully any of its Proprietary Assets or to transact business in any
market or geographical area or with any Person.
2.13 CONTRACTS.
(A) Part 2.13 of the Company and Selling Shareholder Disclosure
Schedule identifies and provides a complete list of each Company Contract.
Each Company Contract is in full force and effect, and is enforceable by the
Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(B) Except as set forth in Part 2.13 of the Company and Selling
Shareholder Disclosure Schedule:
(I) The Company has not violated or otherwise breached, or
committed any default under, any Company Contract, and to the best knowledge
of the Company and to the actual knowledge of the Selling Shareholder, no
other Person has violated or otherwise breached, or declared or committed any
default under, any Company Contract;
(II) to the best knowledge of the Company and to the actual
knowledge of the Selling Shareholder, no event has occurred, and no
circumstance or condition exists, that is reasonably likely to (with or
without notice or lapse of time) (A) result in a violation or other breach of
any of the provisions of any Company Contract, (B) give any Person the right
to declare a default or exercise any remedy under any Company Contract, (C)
give any Person the right to accelerate the maturity or performance of any
Company Contract, or (D) give any Person the right to cancel, terminate or
modify any Company Contract;
(III) The Company has not received any written notice or
other communication regarding any actual, alleged, possible or potential
violation or breach of, or default under, any Company Contract; and
(IV) Company has not waived any of its rights under any
Company Contract.
(C) Except as set forth in Part 2.13 of the Company and Selling
Shareholder Disclosure Schedule:
(I) The Company has never guaranteed or otherwise agreed to
cause, insure or become liable for, and has never pledged any of its assets
to secure, the performance or payment of any obligation or other liability of
any other Person;
10
(ii) The Company has never been a party to or bound by (A)
any joint venture agreement, partnership agreement, profit-sharing agreement,
cost-sharing agreement, loss-sharing agreement or similar Contract or (B) any
Contract that creates or grants to any Person, or provides for the creation
or grant of, any stock appreciation right, phantom stock right or similar
right or interest;
(iii) The performance of the Company Contracts will not
result in any violation of or failure to comply with any Legal Requirement;
(iv) No Person is renegotiating or, to the best of the
knowledge of Company and to the actual knowledge of the Selling Shareholder,
has the right to renegotiate, any amount paid or payable to the Company under
any Company Contract or any other term or provision of any Company Contract;
(v) The Contracts identified in Part 2.13 of the Company
and Selling Shareholder Disclosure Schedule collectively constitute all of
the Contracts necessary to enable the Company to conduct its business in the
manner in which its business is currently being conducted; and
(vi) Part 2.13 of the Company and Selling Shareholder
Disclosure Schedule identifies and provides an accurate and complete
description of each proposed Contract as to which any bid, offer, written
proposal, term sheet or similar document has been submitted or received by
the Company.
2.14 LIABILITIES.
(a) The Company has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (i)
liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; (ii) accounts payable or accrued salaries that have
been incurred by the Company since the Statement Date in the ordinary course
of business and consistent with the Company's past practices; (iii)
liabilities under the Company Contracts identified in Part 2.13 of the
Company and Selling Shareholder Disclosure Schedule, to the extent the nature
and magnitude of such liabilities can be specifically ascertained by
reference to the text of such Company Contracts; and (d) the liabilities
identified in Part 2.14 of the Company and Selling Shareholder Disclosure
Schedule.
(b) Part 2.14 of the Company and Selling Shareholder Disclosure
Schedule provides an accurate and complete breakdown of (i) the Company's
accounts payable as of the Statement Date; and (ii) the Company's
indebtedness as of the date hereof.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at
all times since inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company.
Except as set forth in Part 2.15 of the Company and Selling Shareholder
Disclosure Schedule, since inception, the Company has not received any notice
or
11
other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
2.16 GOVERNMENTAL AUTHORIZATIONS. Part 2.16 of the Company and
Selling Shareholder Disclosure Schedule identifies each material Governmental
Authorization held by the Company, and the Company has delivered to Purchaser
accurate and complete copies of all Governmental Authorizations identified in
Part 2.16 of the Company and Selling Shareholder Disclosure Schedule. The
Governmental Authorizations identified in Part 2.16 of the Company and
Selling Shareholder Disclosure Schedule are valid and in full force and
effect, and collectively constitute all Governmental Authorizations necessary
to enable the Company to conduct its business in the manner in which its
business is currently being conducted. The Company is, and at all times since
inception has been, in substantial compliance with the terms and requirements
of the respective Governmental Authorizations identified in Part 2.16 of the
Company and Selling Shareholder Disclosure Schedule. Since inception, the
Company has not received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Authorization.
2.17 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending
on or before the Closing Date (the "COMPANY RETURNS") (i) have been or will
be filed on or before the applicable due date (including any extensions of
such due date), and (ii) have been, or will be when filed, accurately and
completely prepared in all material respects in compliance with all
applicable Legal Requirements. All amounts shown on the Company Returns to be
due on or before the Closing Date have been or will be paid on or before the
Closing Date. The Company has delivered to Purchaser accurate and complete
copies of all Company Returns which have been requested by Purchaser.
(b) The Company Financial Statements fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles.
The Company has established, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from the Statement Date through the Closing Date, and
the Company will disclose the dollar amount of such reserves to Purchaser on
or prior to the Closing Date.
(c) Except as disclosed on Part 2.17(c) of the Company and
Selling Shareholder Disclosure Schedule, (i) no Company Return relating to
income Taxes has ever been examined or audited by any Governmental Body, and
(ii) no extension or waiver of the limitation period applicable to any of the
Company Returns has been granted (by the Company or any other Person), and no
such extension or waiver has been requested from the Company.
(d) Except as disclosed on Part 2.17(d) of the Company and
Selling Shareholder Disclosure Schedule, (i) no claim or Legal Proceeding is
pending or has been threatened against or with respect to the Company in
respect of any Tax; (ii) there are no
12
unsatisfied liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to
any notice of deficiency or similar document received by the Company with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good
faith by the Company and with respect to which adequate reserves for payment
have been established); (iii) there are no liens for Taxes upon any of the
assets of the Company except liens for current Taxes not yet due and payable;
(iv) the Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code; or (v) the Company has not
been, and the Company will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section
481 or 263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code. The Company is not, and has never been, a party to or bound
by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
2.18 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.18(a) of the Company and Selling Shareholder
Disclosure Schedule identifies each salary, bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance pay,
termination pay, hospitalization, medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension or retirement
plan, program or agreement (collectively, the "PLANS") sponsored, maintained,
contributed to or required to be contributed to by the Company for the
benefit of any employee of the Company ("EMPLOYEE"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $25,000 in the aggregate.
(b) The Company does not maintain, sponsor or contribute to,
and has never maintained, sponsored or contributed to, any employee pension
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not excluded from
coverage under specific Titles of ERISA) for the benefit of Employees or
former Employees (a "PENSION PLAN").
(c) The Company does not maintain, sponsor or contribute, and
has never maintained, sponsored or contributed to, any employee welfare
benefit plans (as defined in Section 3(1) of ERISA, whether or not excluded
from coverage under specific Titles of ERISA) for the benefit of Employees or
former Employees (a "Welfare Plan").
(d) The Company does not have any plan or commitment to create
any Welfare Plan or any Pension Plan.
13
(e) Except as set forth in Part 2.18(e) of the Company and
Selling Shareholder Disclosure Schedule, neither the execution, delivery or
performance of this Agreement, nor the consummation of the Sale or any of the
other transactions contemplated by this Agreement, will result in any payment
(including any bonus, golden parachute or severance payment) to any current
or former Employee or director of the Company (whether or not under any
Plan), or materially increase the benefits payable under any Plan, or result
in any acceleration of the time of payment or vesting of any such benefits.
(f) The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(g) Part 2.18(g) of the Company and Selling Shareholder
Disclosure Schedule identifies each Employee who is not fully available to
perform work because of disability or other leave and sets forth the basis of
such leave and the anticipated date of return to full service.
(h) The Company complies in all material respects with all
applicable Legal Requirements and Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
(i) Except as set forth in Part 2.18(i) of the Company and
Selling Shareholder Disclosure Schedule, the Company has good labor
relations, and the Selling Shareholder has no reason to believe that (i) the
consummation of the Sale or any of the other transactions contemplated by
this Agreement will have a material adverse effect on the Company's labor
relations, or (ii) any Employee intends to terminate his or her employment
with the Company.
2.19 ENVIRONMENTAL MATTERS. To the best of its knowledge, the
Company is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes the possession by the Company
of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. The Company has not received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that the Company is not in compliance
with any Environmental Law, and, to the best of the knowledge of the Company
and Selling Shareholder, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the best of the knowledge of the Company and the Selling
Shareholder, no current or prior owner of any property leased or controlled
by the Company has received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company is
not in compliance with any Environmental Law. All Governmental Authorizations
currently held by the Company pursuant to Environmental Laws are identified
in Part 2.19 of the Company and Selling Shareholder Disclosure Schedule. (For
purposes of this Section 2.19: (i) "Environmental Law" means any federal,
state, local or foreign Legal Requirement relating to pollution or protection
of human health or the environment (including ambient air, surface water,
ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport
14
or handling of Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance
that is now or hereafter regulated by any Environmental Law or that is
otherwise a danger to health, reproduction or the environment.)
2.20 INSURANCE. Part 2.20 of the Company and Selling Shareholder
Disclosure Schedule identifies all insurance policies maintained by, at the
expense of or for the benefit of the Company and identifies any material
claims made thereunder, and the Company has delivered to the Purchaser
accurate and complete copies of the insurance policies identified on Part
2.20 of the Company and Selling Shareholder Disclosure Schedule. Each of the
insurance policies identified in Part 2.20 of the Company and Selling
Shareholder Disclosure Schedule is in full force and effect. The Company has
not received any notice or other communication regarding any actual or
possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any claim under any insurance policy,
or (c) material adjustment in the amount of the premiums payable with respect
to any insurance policy.
2.21 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.21 of
the Company and Selling Shareholder Disclosure Schedule: (a) no Related Party
has, and no Related Party has any direct or indirect interest in, any
material asset used in or otherwise relating to the business of the Company;
(b) no Related Party is, or has at any time been, indebted to the Company;
(c) no Related Party has entered into, or has had any direct or indirect
financial interest in, any material Contract, transaction or business dealing
involving the Company; (d) no Related Party is competing, or has at any time
since competed, directly or indirectly, with the Company; and (e) no Related
Party has any claim or right against the Company (other than rights to
receive compensation for services performed as an Employee). For purposes of
this Section 2.21, each of the following shall be deemed to be a "Related
Party": (i) the Selling Shareholder; (ii) each individual who is, or who has
at any time been, an officer of the Company; (iii) each member of the
immediate family of each of the individuals referred to in clauses "(i)" and
"(ii)" above; and (iv) any trust or other Entity (other than the Company) in
which any one of the individuals referred to in clauses "(i)", "(ii)" and
"(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary
or equity interest.
2.22 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.22 of the Company and Selling
Shareholder Disclosure Schedule, there is no pending Legal Proceeding, and
(to the best of the knowledge of the Company and the Selling Shareholder) no
Person has threatened to commence any Legal Proceeding: (i) that involves the
Company or any of the assets owned or used by the Company or any Person whose
liability the Company has or may have retained or assumed, either
contractually or by operation of law; or (ii) that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Sale or any of the other transactions contemplated by
this Agreement. To the best of the knowledge of the Company and the Selling
Shareholder, except as set forth in Part 2.22 of the Company and Selling
Shareholder Disclosure Schedule, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that will, or that could
reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
15
(b) Except as set forth in Part 2.22 of the Company and Selling
Shareholder Disclosure Schedule, no Legal Proceeding has ever been commenced
by or has ever been pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. The Selling Shareholder is not subject to any order, writ,
injunction, judgment or decree that relates to the Company's business or to
any of the assets owned or used by the Company. To the best of the knowledge
of the Company and the Selling Shareholder, no officer or other Employee is
subject to any order, writ, injunction, judgment or decree that prohibits
such officer or other Employee from engaging in or continuing any conduct,
activity or practice relating to the Company's business.
2.23 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company and the
Selling Shareholder have the absolute and unrestricted right, power and
authority to enter into and to perform their respective obligations under
this Agreement; and the execution, delivery and performance by the Company of
this Agreement have been duly authorized by all necessary action on the part
of the Company and its board of directors. This Agreement constitutes the
legal, valid and binding obligation of each of the Company and the Selling
Shareholder, enforceable against the Company and the Selling Shareholder in
accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive relief and other equitable
remedies.
2.24 CONTRACTORS. Neither the Company nor the Selling Shareholder
has received any notice or other communication and neither the Company nor
the Selling Shareholder has actual knowledge indicating that (i) there will
be a reduction in the volume of business produced by contractors in the
Company's database which will result in a material adverse effect on the
Company's business or (ii) the number of contractors who cease dealing with
the Company on a day-to-day basis will be inconsistent with past experience
of the Company.
2.25 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.25
of the Company and Selling Shareholder Disclosure Schedule:
(a) The execution, delivery and performance of this Agreement
or any of the other agreements referred to in this Agreement, and the
consummation of the Sale or any of the other transactions contemplated by
this Agreement, will not directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with or result in a violation of
any of the provisions of the Company's Articles of Incorporation or Bylaws or
any resolution adopted by the shareholders or the board of directors of the
Company;
(ii) contravene, conflict with or result in a violation of
or result in a default under, any provision of any material Company Contract,
or give any Person the right to declare a default or exercise any remedy
under any such Company Contract;
16
(iii) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
Company's business or to any of the assets owned or used by the Company; or
(iv) contravene, conflict with or result in a violation of
or result in the imposition or creation of any lien or other Encumbrance upon
or with respect to any asset owned or used by the Company (except for minor
liens that will not, in any case or in the aggregate, materially detract from
the value of the assets subject thereto or materially impair the operations
of the Company); and
(b) the Company is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person
in connection with (i) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, or
(ii) the consummation of the Sale or any of the other transactions
contemplated by this Agreement.
2.26 ARTICLES OF INCORPORATION AND BYLAWS. The Company has delivered
to the Purchaser accurate and complete copies of: (1) the Company's Articles
of Incorporation and Bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. There have been no formal meetings or other proceedings of the
shareholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully
reflected in such minutes or other records. There has not been any violation
of any of the provisions of the Company's Articles of Incorporation or
Bylaws, and the Company has not taken any action that is inconsistent in any
material respect with any resolution adopted by the Company's shareholders,
the Company's board of directors or any committee of the Company's board of
directors. The books of account, stock records, minute books and other
records of the Company are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent business
practices.
2.27 BROKERS. Neither the Company nor the Selling Shareholder has
agreed or become obligated to pay, or has taken any action that might result
in any Person claiming to be entitled to receive, any brokerage commission,
finder's fee or similar commission or fee in connection with the Sale.
2.28 SELLING SHAREHOLDER.
(a) The Selling Shareholder has the capacity and financial
capability to comply with and perform all of such Selling Shareholder's
covenants and obligations under this Agreement and any related agreement to
which such Selling Shareholder is or may become a party in connection with
this transaction.
(b) The Selling Shareholder:
17
(i) has not, at any time, (A) made a general assignment for
the benefit of his creditors, (B) filed, or had filed against the Selling
Shareholder, any bankruptcy petition or similar filing, (C) suffered the
attachment or other judicial seizure of all or a substantial portion of his
assets, (D) admitted in writing his inability to pay his debts as they become
due, or (E) taken or been the subject of any action that may have an adverse
effect on his ability to comply with or perform any of his covenants or
obligations under any Agreement; or
(ii) is not subject to any Order that may have an adverse
effect on his ability to comply with or perform any of his covenants or
obligations under this Agreement.
(c) There is no Legal Proceeding pending, and no Person has
threatened to commence any Legal Proceeding, that may have an adverse effect
on the ability of the Selling Shareholder to comply with or perform any of
his covenants or obligations under this Agreement or any other agreement
contemplated hereby. No event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise
to or serve as a basis for the commencement of any such Legal Proceeding.
2.29 FULL DISCLOSURE. This Agreement (including the Company and
Selling Shareholder Disclosure Schedule) does not, and the Selling
Shareholder's Closing Certificate does not, (i) contain any representation,
warranty or information that is false or misleading with respect to any
material fact, or (ii) omit to state any material fact necessary in order to
make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Except as set forth on the Purchaser Disclosure Schedule delivered
to the Company simultaneously herewith (to which the Purchaser also
represents and warrants), Purchaser represents and warrants to the Company
and the Selling Shareholder as follows:
3.1 ORGANIZATION AND STANDING.
(a) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary power and authority to: (i) conduct its business in the manner
in which its business is currently being conducted; (ii) own and use its
assets in the manner in which its assets are currently owned and used; and
(iii) perform its obligations under all Purchaser Contracts.
(b) The Purchaser is in good standing as a foreign corporation
in each jurisdiction in which it is required to qualify as a foreign
corporation, except where the failure to be so qualified has not had or would
not reasonably be expected to have a Material Adverse Effect on the Purchaser.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. The Purchaser has the
absolute and unrestricted right, power and authority to perform its
obligations under this Agreement; and the execution, delivery and performance
by the Purchaser of this Agreement (including the contemplated issuance of
Purchaser Common Stock in the Sale in accordance with this
18
Agreement) have been duly authorized by all necessary action on the part of
the Purchaser and its board of directors. No vote of the Purchaser's
stockholders is needed to approve the Sale. This Agreement constitutes the
legal, valid and binding obligation of Purchaser, enforceable against it in
accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive relief and other equitable
remedies.
3.3 CAPITALIZATION, ETC.
(a) Immediately prior to the Closing, the authorized capital
stock of the Purchaser consists of:
(i) 31,000,000 shares of Common Stock, $0.001 par value.
(ii) 9,482,935 shares of Preferred Stock, $0.001 par value.
(b) The Purchaser Common Stock has been duly authorized and
reserved for issuance.
3.4 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 3.4 of
the Purchaser Disclosure Schedule,
(A) The execution, delivery or performance of this Agreement or
any of the other agreements referred to in this Agreement, and the
consummation of the Sale or any of the other transactions contemplated by
this Agreement, will not directly or indirectly (with or without notice or
lapse of time):
(i) contravene, conflict with or result in a violation of
any of the provisions of the Certificate of Incorporation or Bylaws of the
Purchaser or any resolution adopted by the shareholders or the board of
directors of the Purchaser;
(ii) contravene, conflict with or result in a violation of
or result in a default under, any provision of any material Purchaser
Contract, or give any Person the right to declare a default or exercise any
remedy under any such Purchaser Contract;
(iii) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Purchaser or that otherwise relates to the
Purchaser's business or to any of the assets owned or used by the Purchaser;
or
(iv) contravene, conflict with or result in a violation of
or result in the imposition or creation of any lien or other Encumbrance upon
or with respect to any asset owned or used by the Purchaser (except for minor
liens that will not, in any case or in the aggregate, materially detract from
the value of the assets subject thereto or materially impair the operations
of the Purchaser); and
19
(b) The Purchaser is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person
in connection with (i) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, or
(ii) the consummation of the Sale or any of the other transactions
contemplated by this Agreement.
3.5 FULL DISCLOSURE. This Agreement (including the Purchaser
Disclosure Schedule) does not (i) contain any representation, warranty or
information that is false or misleading with respect to any material fact, or
(ii) omit to state any material fact or necessary in order to make the
representations, warranties and information contained and to be contained
herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
3.6 VALID ISSUANCE. The Purchaser Common Stock to be issued in the
Sale will, when issued in accordance with the provisions of this Agreement,
be validly issued, fully paid and nonassessable.
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER .
The obligations of the Purchaser to effect the Sale and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
4.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by the Company and the Selling Shareholder in Section 2 hereof shall be
true and correct in all material respects as of the Closing Date (after
giving effect to the Company and Selling Shareholder Disclosure Schedule)
with the same force and effect as if they had been made as of the Closing
Date (or, to the extent such representations and warranties specifically
relate to an earlier date, that such representations and warranties were true
and correct in all material respects on and as of such earlier date).
4.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that the Company and the Selling Shareholder are required to comply with or
to perform at or prior to the Closing shall have been complied with and
performed in all material respects.
4.3 CONSENTS. All Consents required to be obtained in connection
with the Sale and the other transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect.
4.4 AGREEMENTS AND DOCUMENTS. The Purchaser and the Company shall
have received the following agreements and documents, each of which shall be
in full force and effect:
(a) The Noncompetition Agreements in the form of EXHIBIT C
executed by Xxxxx X. Xxxxx;
(b) A General Release in the form of EXHIBIT D, executed by the
Selling Shareholder;
20
(c) The Escrow Agreement in the form of EXHIBIT B, executed by
each of the Selling Shareholder, the Purchaser and the escrow agent;
(d) An estoppel certificate, dated as of a date not more than
five days prior to the Closing Date and satisfactory in form and content to
Purchaser, executed by the Company's landlord(s);
(e) A certificate executed by the Selling Shareholder
containing the Selling Shareholder's representation and warranty that each of
the representations and warranties set forth in Section 2 is accurate in all
respects as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 4.1, 4.2, 4.3 and 4.4 of this Agreement have
been duly satisfied (the "SELLING SHAREHOLDER'S CLOSING CERTIFICATE"); and
(f) The written resignations of all directors and officers of
the Company, effective as of the Scheduled Closing Time.
4.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Sale
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Sale that makes consummation of the Sale illegal.
4.6 NO LEGAL PROCEEDINGS. No Person shall have commenced or
threatened to commence any Legal Proceeding challenging or seeking the
recovery of a material amount of damages in connection with the Sale or
seeking to prohibit or limit the exercise by the Purchaser of any material
right pertaining to its ownership of stock of the Company.
4.7 CANCELLATION OF INDEBTEDNESS. The Selling Shareholder shall
deliver a letter effecting the cancellation of indebtedness set forth in
Section 1.4.
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING SHAREHOLDER.
The obligations of the Selling Shareholder to effect the Sale and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of the following
conditions:
5.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by the Purchaser in Section 3 hereof shall be true and correct in all
material respects as of the Closing Date (after giving effect to the
Purchaser Disclosure Schedule) with the same force and effect as if they had
been made as of the Closing Date (or, to the extent such representations and
warranties specifically relate to an earlier date, that such representations
and warranties were true and correct in all material respects on and as of
such earlier date).
5.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that the Purchaser is required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
21
5.3 DOCUMENTS. The Selling Shareholder shall have received the
following documents:
(a) A copy of the Certificate of Incorporation of the Purchaser,
together with copies of any and all amendments thereto, under the original
certification of the Secretary of State of the State of Delaware certifying
that such document is a true and correct copy of the document on file with
such official;
(b) An original certificate issued by the Secretary of State of
the State of Delaware and dated not earlier than three (3) business days
prior to the Closing Date to the effect that the Purchaser is a corporation
in good standing under the laws of the State of Delaware;
(c) A certificate executed by the Purchaser and containing the
Purchaser's representation and warranty that each of the representations and
warranties set forth in Section 3 of this Agreement is accurate in all
respects as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 5.1 and 5.2 hereof have been duly satisfied
(the "PURCHASER CLOSING CERTIFICATE");
(d) Copies of the resolutions of the Board of Directors of the
Purchaser authorizing the Purchaser to enter into, deliver and perform this
Agreement and each of the transactions and other agreements contemplated
hereby, which resolutions shall be under the original certification of the
Secretary of the Purchaser of a date not earlier than the Closing Date and to
the effect that such resolutions have not been changed, altered or amended
and remain in full force and effect; and
(e) The Escrow Agreement in the form of EXHIBIT B, executed by
each of the Selling Shareholder, the Purchaser and the escrow agent.
5.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Sale
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Sale that makes consummation of the Sale illegal.
SECTION 6. INDEMNIFICATION, ETC.
6.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Selling
Shareholder (including the representations and warranties set forth in
Section 2 and the representations and warranties set forth in the Selling
Shareholder's Closing Certificate) shall survive the Closing and shall expire
on the second anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 2.1, 2.2, 2.3 and 2.4
will remain in full force and effect forever; provided, further, that the
representations and warranties contained in Section 2.17 will remain in full
force and effect for a period equal to the applicable statute of limitations;
and PROVIDED, FURTHER, that such representations and warranties shall survive
any and such period with respect to any accuracy therein or breach thereof,
until such time as such claim is fully and finally resolved, notice of which
shall have been given within such time period (as applicable) in
22
accordance with this Article 6. The representations and warranties made by
the Purchaser (including the representations and warranties set forth in
Section 3 and the representations and warranties set forth in the Purchaser's
Closing Certificate) shall survive the Closing and shall expire on the second
anniversary of the Closing Date.
(b) For purposes of this Agreement, (i) each statement or other
item of information set forth in the Company and Selling Shareholder
Disclosure Schedule shall be deemed to be a representation and warranty made
by the Company and the Selling Shareholder in this Agreement, and (ii) each
statement or other item of information set forth in the Purchaser Disclosure
Schedule shall be deemed to be a representation and warranty made by the
Purchaser in this Agreement.
6.2 INDEMNIFICATION BY THE SELLING SHAREHOLDER.
(a) From and after the Closing Date (but subject to Section
6.1(a)), the Selling Shareholder shall hold harmless and indemnify each of
the Indemnitees from and against, and shall compensate and reimburse each of
the Indemnitees for, any Damages which are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are
directly or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in Section 2 or in the Selling
Shareholder's Closing Certificate (giving effect to the Company and Selling
Shareholder Disclosure Schedule delivered to the Purchaser at the Closing);
(ii) any breach of any covenant or obligation of the Company or the Selling
Shareholder; or (iii) any Legal Proceeding relating to any inaccuracy or
breach of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any
of its rights under this Section 6).
(b) The representations, warranties, covenants and obligations
of the Company and the Selling Shareholder, and the rights and remedies that
may be exercised by the Indemnitees, shall not be limited or otherwise
affected by or as a result of any information furnished to, or any
investigation made by or knowledge of, any of the Indemnitees or any of their
Representatives, other than information disclosed on the Company and Selling
Shareholder Disclosure Schedule.
(c) The Selling Shareholder acknowledges and agrees that, if
the Company suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any
of the rights of the Purchaser as an Indemnitee) the Purchaser shall also be
deemed, by virtue of its ownership of the stock of the Company, to have
incurred Damages as a result of and in connection with such inaccuracy or
breach.
6.3 INDEMNIFICATION BY THE PURCHASER. From and after the Closing
Date (but subject to Section 6.1(a)), the Purchaser shall hold harmless and
indemnify the Selling Shareholder from and against, and shall compensate and
reimburse the Selling Shareholder for, any Damages which are directly or
indirectly suffered or incurred by the Selling Shareholder or to which the
Selling Shareholder may otherwise become subject (regardless of whether or
not such Damages
23
relate to any third-party claim) and which arise from or as a result of, or
are directly or indirectly connected with: (i) any inaccuracy in or breach of
any representation or warranty set forth in Section 3 or in the Purchaser's
Closing Certificate (giving effect to the Purchaser Disclosure Schedule
delivered to the Selling Shareholder at the Closing); (ii) any breach of any
covenant or obligation of the Purchaser; or (iii) any Legal Proceeding
relating to any inaccuracy or breach of the type referred to in clause "(i)"
or "(ii)" above (including any Legal Proceeding commenced by the Selling
Shareholder for the purpose of enforcing any of its rights under this Section
6).
6.4 THRESHOLD. Neither the Selling Shareholder nor the Purchaser
shall be required to make any indemnification payment pursuant to Section
6.2(a) or 6.3, respectively, for any inaccuracy in or breach of any of their
respective representations and warranties set forth in Section 2 or Section
3, respectively, until such time as the total amount of all Damages
(including the Damages arising from such inaccuracy or breach and all other
Damages arising from any other inaccuracies in or breaches of any
representations or warranties) that have been directly or indirectly suffered
or incurred by any one or more persons entitled to indemnification or to
which any one or more of such persons has or have otherwise become subject,
exceeds $25,000 in the aggregate (the "Minimum Threshold"). If the total
amount of such Damages exceeds the Minimum Threshold, then the person or
persons seeking indemnification shall be entitled to be indemnified against
and compensated and reimbursed for the total amount of such Damages (and not
merely the portion of such Damages exceeding the Minimum Threshold).
6.5 NO CONTRIBUTION. The Selling Shareholder waives, and
acknowledges and agrees that he shall not have and shall not exercise or
assert (or attempt to exercise or assert), any right of contribution, right
of indemnity or other right or remedy against the Company in connection with
any indemnification obligation or any other liability to which he may become
subject under or in connection with this Agreement or the Selling
Shareholder's Closing Certificate. Notwithstanding the foregoing, the Selling
Shareholder does not waive, and shall retain, any and all rights to
contribution, indemnification or other remedy to which he is entitled under
the California Corporations Code as a director, officer or shareholder of the
Company arising under or relating to any claims bought against the Selling
Shareholder which are unrelated to this Agreement or the Selling
Shareholder's Closing Certificate.
6.6 SATISFACTION OF INDEMNIFICATION CLAIM.
(a) In the event the Selling Shareholder shall have any
liability (for indemnification or otherwise) to any Indemnitee under this
Section 6, the Selling Shareholder may satisfy such liability by delivering
to such Indemnitee, at the option of the Selling Shareholder, either (a)
payment of cash, or (b) cancellation of that number of shares of Purchaser
Common Stock (as adjusted as appropriate to reflect any stock split, reverse
stock split, stock dividend, recapitalization or other similar transaction
effected by Purchaser) with a value equal to the amount of such claim (with
such fair market value determined in accordance with the terms of the Escrow
Agreement).
(b) In the event the Purchaser shall have any liability
(for indemnification or otherwise) to the Selling Shareholder under this
Section 6, the Purchaser may satisfy such liability by delivering to the
Selling Shareholder, at the option of the Purchaser, either (a) payment of
cash, or (b) additional shares of Purchaser Common Stock (as adjusted as
24
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by the Purchaser) with
a value equal to the amount of such claim (with such fair market value
determined in accordance with the terms of the Escrow Agreement).
6.7 INTEREST. Any Person who is required to hold harmless,
indemnify, compensate or reimburse any other Person pursuant to this Section
6 with respect to any Damages shall also be liable to such indemnified Person
for interest on the amount of such Damages (for the period commencing as of
the date on which such indemnifying Person first received notice of a claim
for recovery by such indemnified Person and ending on the date on which the
liability of such indemnifying Person to such indemnified Person is fully
satisfied at a floating rate equal to the rate of interest publicly announced
by Bank of America, N.T. & S.A. from time to time as its prime, base or
reference rate.
6.8 SETOFF RIGHTS. In addition to any rights of setoff or other
rights that the Purchaser or any of the Indemnitees may have at common law or
otherwise, the Purchaser shall have the right to set off any amount that may
be owed to any Indemnitee under this Section 6 against any amount otherwise
payable by any Indemnitee to the Selling Shareholder.
6.9 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Company, against Purchaser or against any other Person) with respect to
which any of the Selling Shareholder may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 6,
Purchaser shall have the right, at its election, to proceed with the defense
of such claim or Legal Proceeding on its own. If Purchaser so proceeds with
the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by the Selling
Shareholder;
(b) each Selling Shareholder shall make available to Purchaser
any documents and materials in his possession or control that may be
necessary to the defense of such claim or Legal Proceeding; and
(c) Purchaser shall have the right to settle, adjust or
compromise such claim or Legal Proceeding only with the consent of the
Selling Shareholder; PROVIDED, HOWEVER, that such consent shall not be
unreasonably withheld.
Purchaser shall give the Selling Shareholder prompt notice of the
commencement of any such Legal Proceeding against Purchaser or the Company;
PROVIDED, HOWEVER, that any failure on the part of Purchaser to so notify the
Selling Shareholder shall not limit any of the obligations of the Selling
Shareholder under this Section 6 (except to the extent such failure
materially prejudices the defense of such Legal Proceeding).
6.10 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PURCHASER. No
Indemnitee (other than the Purchaser or any successor thereto or assign
thereof) shall be permitted to assert any indemnification claim or exercise
any other remedy under this Agreement unless the Purchaser (or any successor
thereto or assign thereof) shall have consented to the assertion of such
indemnification claim or the exercise of such other remedy.
25
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Sale and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to
any applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Sale and the other transactions contemplated by this
Agreement.
7.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
7.3 FEES AND EXPENSES. Each party to this Agreement shall bear and
pay all fees, costs and expenses (including legal fees and accounting fees)
that have been incurred or that are incurred by such party in connection with
the transactions contemplated by this Agreement, including all fees, costs
and expenses incurred by such party in connection with or by virtue of (a)
the investigation and review conducted by Purchaser and its Representatives
with respect to the Company's business (and the furnishing of information to
Purchaser and its Representatives in connection with such investigation and
review), (a) the investigation and review conducted by the Company and its
Representatives with respect to Purchaser's business (and the furnishing of
information to the Company and its Representatives in connection with such
investigation and review), (b) the negotiation, preparation and review of
this Agreement (including the respective Disclosure Schedules) and all
agreements, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the transactions contemplated
by this Agreement, (c) the preparation and submission of any filing or notice
required to be made or given in connection with any of the transactions
contemplated by this Agreement, and the obtaining of any Consent required to
be obtained in connection with any of such transactions, and (d) the
consummation of the Sale; PROVIDED, HOWEVER, that, to the extent the total
amount of all such fees, costs and expenses incurred by or for the benefit of
the Company (including all such fees, costs and expenses incurred prior to
the date of this Agreement and including the amount of all special bonuses
and other amounts that may become payable to any officers of the Company or
other Persons in connection with the consummation of the transactions
contemplated by this Agreement) exceeds $25,000 in the aggregate, such fees,
costs and expenses shall be borne and paid by the Selling Shareholder and not
by the Company.
7.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
7.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath
26
the name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other parties hereto):
IF TO PURCHASER: ImproveNet, Inc.
000 Xxx Xxxx
Xxxxx 000
Xxxxxxx Xxxx,
XX 00000
ATTN: Chief Executive Officer ??
with a copy to: Xxxxxx Godward LLP
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
ATTN: Xxxx X. Xxxxxxx
IF TO THE COMPANY: The X.X. Xxxxx Corporation
0000 Xxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
IF TO THE SELLING
SHAREHOLDER: Xxxxx X. Xxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
with a copy to: Xxxxxx & Wolen LLP
000 X. Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
ATTN: Xxxx X. XxXxxxxxx
7.6 CONFIDENTIALITY. On and at all times after the Closing Date, the
Selling Shareholder shall keep confidential, and shall not use or disclose to
any other Person, any non-public document or other non-public information in
such Selling Shareholder's possession that relates to the business of the
Company or the Purchaser unless required or compelled to do so by Legal
Requirements or an order of any court or Governmental Entity.
7.7 TIME OF THE ESSENCE. Time is of the essence to the performance
of this Agreement.
7.8 HEADINGS. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
27
7.10 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
7.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
the Company and its successors and assigns (if any), the Selling Shareholder
and his personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any), and the Purchaser and its successors and
assigns (if any). This Agreement shall inure to the benefit of: the Company;
the Company's shareholders; the Purchaser; the other Indemnitees (subject to
Section 6.8); and the respective successors and assigns (if any) of the
foregoing. Purchaser may freely assign any or all of its rights under this
Agreement (including its indemnification rights under Section 6), in whole or
in part, to any other Person without obtaining the consent or approval of any
other party hereto or of any other Person.
7.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or
threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other
party to this Agreement, such other party shall be entitled (in addition to
any other remedy that may be available to it) to (a) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.
7.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have
any effect except in the specific instance in which it is given.
7.14 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.
7.15 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is
28
determined to be invalid, unlawful, void or unenforceable, shall not be
impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
7.16 PARTIES IN INTEREST. None of the provisions of this Agreement
is intended to provide any rights or remedies to any Person other than the
parties hereto and their respective successors and assigns (if any).
7.17 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
7.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
29
IN WITNESS WHEREOF, the parties hereto have caused this STOCK
PURCHASE AGREEMENT to be executed and delivered as of the date set forth in
the first paragraph hereof.
PURCHASER: IMPROVENET, INC.,
a Delaware corporation
By: /s/ Xxx Xxxxxx
------------------------------------------
Xxx Xxxxxx
Chief Executive Officer
COMPANY: THE X.X. XXXXX CORPORATION,
a California Corporation
By: /s/ Xxxxx X. Xxxxx
------------------------------------------
Xxxxx X. Xxxxx
Chief Executive Officer
/s/ Xxxxx X. Xxxxx
SELLING SHAREHOLDER: ---------------------------------------------
XXXXX X. XXXXX
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
AGREEMENT. "Agreement" shall mean the Stock Purchase Agreement to
which this EXHIBIT A is attached (including the Company and Selling
Shareholder Disclosure Schedule and the Purchaser Disclosure Schedule), as it
may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets
is or may become bound or under which the Company has, or may become subject
to, any obligation; or (c) under which the Company has or may acquire any
right or interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
COMPANY AND SELLING SHAREHOLDER DISCLOSURE SCHEDULE. "Company and
Selling Shareholder Disclosure Schedule" shall mean the schedule (dated as of
the date of the Agreement) delivered to Purchaser on behalf of the Company and
the Selling Shareholder.
PURCHASER DISCLOSURE SCHEDULE. "Purchaser Disclosure Schedule" shall
mean the schedule (dated as of the date of the Agreement) delivered to the
Company and Selling Shareholder on behalf of Purchaser.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust,
EXHIBIT A-1
STOCK PURCHASE AGREEMENT
company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with
any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal).
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a)
Purchaser; (b) Purchaser's current and future affiliates (including the
Surviving Corporation); (c) the respective Representatives of the Persons
referred to in clauses "(a)" and "(b)" above; and (d) the respective
successors and assigns of the Persons referred to in clauses "(a)", "(b)" and
"(c)" above; PROVIDED, HOWEVER, that the Selling Shareholder shall not be
deemed to be "Indemnitees."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or
any arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal,
state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed
to have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
or in the Selling Shareholder' Closing Certificate but for the presence of
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the Company's business, condition, assets, liabilities,
operations, financial performance or prospects.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application,
EXHIBIT A-2
STOCK PURCHASE AGREEMENT
copyright (whether registered or unregistered), copyright application,
maskwork, maskwork application, trade secret, know-how, customer list,
franchise, system, computer software, computer program, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right
to use or exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property
tax, business tax, withholding tax or payroll tax), levy, assessment, tariff,
duty (including any customs duty), deficiency or fee, and any related charge
or amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
EXHIBIT A-3
STOCK PURCHASE AGREEMENT
