1
Exhibit 4.10
STOCK PURCHASE AGREEMENT
ACQUISITION OF THE STOCK OF
CCS TECHNOLOGY, INC.
BY
XXXXXX AUTOMATION, INC.
DATED: JUNE 20, 2001
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TABLE OF CONTENTS
1. DEFINITIONS.......................................................... 1
2. PURCHASE AND SALE OF STOCK........................................... 7
2.1 PURCHASE OF COMPANY SHARES...................................... 7
2.2 TIME AND PLACE OF CLOSING....................................... 7
2.3 DELIVERY OF COMPANY SHARES...................................... 8
2.4 FURTHER ASSURANCES.............................................. 8
2.5 SHAREHOLDER REPRESENTATIVE...................................... 8
2.6 RESTRICTED SECURITIES........................................... 9
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SELLERS................ 9
3.1 ORGANIZATION, QUALIFICATION AND GOOD STANDING................... 10
3.2 AUTHORITY; NO CONFLICT.......................................... 10
3.3 CAPITALIZATION.................................................. 11
3.4 BOOKS, RECORDS AND ACCOUNTS..................................... 12
3.5 FINANCIAL STATEMENTS............................................ 13
3.6 NO UNDISCLOSED LIABILITIES...................................... 13
3.7 NO MATERIAL ADVERSE CHANGE...................................... 13
3.8 TAXES........................................................... 14
3.9 ACCOUNTS RECEIVABLE............................................. 15
3.10 TITLE TO PROPERTIES; ENCUMBRANCES............................... 15
3.11 CONDITION AND SUFFICIENCY OF ASSETS............................. 17
3.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS............... 17
3.13 LEGAL PROCEEDINGS............................................... 17
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS........................... 18
3.15 CONTRACTS; NO DEFAULTS.......................................... 20
3.16 INSURANCE....................................................... 22
3.17 ENVIRONMENTAL MATTERS........................................... 23
3.18 EMPLOYEES....................................................... 24
3.19 EMPLOYEE BENEFITS............................................... 24
3.20 LABOR RELATIONS................................................. 28
3.21 INTELLECTUAL PROPERTY........................................... 29
3.22 CERTAIN PAYMENTS................................................ 31
3.23 RELATIONSHIPS WITH RELATED PERSONS.............................. 32
3.24 BROKERS OR FINDERS.............................................. 32
3.25 CUSTOMER RELATIONSHIPS.......................................... 32
3.26 OUTSTANDING INDEBTEDNESS........................................ 32
3.27 SUPPLIERS; RAW MATERIALS CONTRACTORS............................ 33
3.28 CUSTOMERS....................................................... 33
3.29 PAYABLES........................................................ 33
3.30 PRODUCT WARRANTIES; PRODUCT LIABILITY........................... 33
3.31 FINANCIAL SERVICE RELATIONS AND POWERS OF ATTORNEY.............. 34
3.32 REGULATORY CORRESPONDENCE....................................... 34
3.33 INVESTMENT MATTERS.............................................. 34
3.34 DISCLOSURE...................................................... 35
4. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 35
4.1 ORGANIZATION AND GOOD STANDING.................................. 35
4.2 AUTHORITY; NO CONFLICT.......................................... 35
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4.3 CAPITALIZATION; BUYER SHARES.................................... 36
4.4 FILINGS WITH THE COMMISSION..................................... 36
4.5 LEGAL PROCEEDINGS............................................... 37
4.6 BROKERS OR FINDERS.............................................. 37
4.7 DISCLOSURE...................................................... 37
5. COVENANTS............................................................ 37
5.1 NORMAL COURSE................................................... 37
5.2 CONDUCT OF BUSINESS............................................. 38
5.3 CERTAIN FILINGS................................................. 40
5.4 NOTIFICATION OF CERTAIN MATTERS................................. 40
5.5 NO SOLICITATION................................................. 40
5.6 ACCESS TO INFORMATION; CONFIDENTIALITY.......................... 41
5.7 REASONABLE BEST EFFORTS; FURTHER ACTION......................... 41
6. ADDITIONAL COVENANTS OF BUYER........................................ 42
6.1 CERTAIN FILINGS................................................. 42
6.2 NOTIFICATION OF CERTAIN MATTERS................................. 42
6.3 RESERVED........................................................ 42
6.4 REGISTRATION.................................................... 42
6.5 NASDAQ NATIONAL MARKET LISTING.................................. 45
6.6 ACCRUED COMPENSATION............................................ 45
7. CONDITIONS TO OBLIGATIONS OF BUYER................................... 45
7.1 REPRESENTATIONS AND WARRANTIES.................................. 45
7.2 PERFORMANCE OF COVENANTS........................................ 45
7.3 UPDATE CERTIFICATE.............................................. 45
7.4 NO GOVERNMENTAL OR OTHER PROCEEDING; ILLEGALITY................. 45
7.5 APPROVALS AND CONSENTS.......................................... 46
7.6 OPINION OF COUNSEL.............................................. 46
7.7 STOCK RESTRICTION AGREEMENTS.................................... 46
7.8 ESCROW AGREEMENT................................................ 46
7.9 NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENTS........... 47
7.10 NONSOLICITATION AND PROPRIETARY INFORMATION AGREEMENTS.......... 47
7.11 TERMINATION OF RIGHTS AND VOTING AGREEMENTS..................... 47
7.12 RESIGNATION..................................................... 47
7.13 ADE CONSENT..................................................... 47
7.14 CEI NOTE........................................................ 47
7.15 RIGHTS TO CONVERSION............................................ 48
7.16 SECRETARY'S CERTIFICATE......................................... 48
7.17 OTHER DOCUMENTS................................................. 48
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND SELLERS................. 48
8.1 REPRESENTATIONS AND WARRANTIES.................................. 48
8.2 PERFORMANCE OF COVENANTS........................................ 48
8.3 UPDATE CERTIFICATE.............................................. 49
8.4 NO GOVERNMENTAL OR OTHER PROCEEDING; ILLEGALITY................. 49
8.5 OPINION OF COUNSEL.............................................. 49
8.6 CLOSING EXCHANGE PRICE.......................................... 49
8.7 OFFICER'S CERTIFICATE........................................... 49
9. INDEMNIFICATION...................................................... 49
9.1 DEFINITIONS..................................................... 49
9.2 SURVIVAL........................................................ 50
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9.3 INDEMNIFICATION BY SELLERS...................................... 50
9.4 DEFENSE OF THIRD PARTY ACTIONS.................................. 52
9.5 MISCELLANEOUS................................................... 53
9.6 PAYMENT OF INDEMNIFICATION...................................... 53
9.7 EXCLUSIVE REMEDY................................................ 54
10. TERMINATION OF AGREEMENT.......................................... 54
10.1 TERMINATION..................................................... 54
10.2 TERMINATION BY THE BUYER........................................ 54
10.3 TERMINATION BY THE COMPANY...................................... 55
10.4 PROCEDURE FOR TERMINATION....................................... 55
10.5 EFFECT OF TERMINATION........................................... 55
10.6 RIGHT TO PROCEED................................................ 55
11. GENERAL PROVISIONS................................................ 56
11.1 TERMINATION OF REPRESENTATIONS AND WARRANTIES................... 56
11.2 EXPENSES........................................................ 56
11.3 PUBLIC ANNOUNCEMENTS............................................ 56
11.4 NOTICES......................................................... 56
11.5 JURISDICTION; SERVICE OF PROCESS................................ 58
11.6 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE........... 58
11.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.............. 58
11.8 SEVERABILITY.................................................... 58
11.9 GOVERNING LAW................................................... 59
11.10 COUNTERPARTS................................................. 59
11.11 ENTIRE AGREEMENT AND MODIFICATION............................ 59
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("AGREEMENT") entered into as of June 20, 2001
by and among Xxxxxx Automation, Inc., a Delaware corporation ("BUYER"), CCS
Technology, Inc., a Vermont corporation ("COMPANY"), and each of the persons
listed on EXHIBIT A hereto (collectively the "SELLERS" and each a "SELLER").
RECITALS
WHEREAS, the Sellers collectively own all of the issued and outstanding
capital stock of the Company (the "COMPANY SHARES"), and are willing to sell the
Company Shares to Buyer; and
WHEREAS, Buyer wishes to acquire the Company Shares from the Sellers;
NOW, THEREFORE, in consideration for the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE" - as defined in Section 3.9.
"ACCRUED COMPENSATION" - the amounts of accrued compensation owed to
employees of the Company, as listed in Section 6.6 to the Disclosure Schedule.
"AGREEMENT" - this Agreement, including the Schedules and Exhibits
hereto.
"ANCILLARY AGREEMENT" - as defined in Section 3.2(a).
"ALTERNATIVE ACQUISITION" - as defined in Section 5.5.
"BASE BALANCE SHEET" - as defined in Section 3.5(a).
"BASE BALANCE SHEET DATE" - as defined in Section 3.5(a).
"BUYER" - as defined in the first paragraph of this Agreement.
"BUYER COMMON STOCK" - the Common Stock, $0.01 par value per share, of
Buyer.
"BUYER SEC REPORT" - as defined in Section 4.4.
"BUYER SHARES" - the shares of Buyer Common Stock to be issued to the
Sellers in connection with the transactions contemplates hereunder.
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"BUYER'S INDEMNIFIED PERSONS" - as defined in Section 9.1.
"CEI" - as defined in Section 7.13.
"CLOSING" - as defined in Section 2.2.
"CLOSING DATE" - the date and time as of which the Closing actually
takes place.
"CLOSING EXCHANGE PRICE" - the average closing price of a share of
Buyer Common Stock for the 60 consecutive Trading Days ending on the Trading Day
that is two Trading Days immediately prior to the Closing Date, as reported on
the Nasdaq National Market (subject to appropriate adjustment for any stock
split, reverse split, stock dividend, reorganization, recapitalization or other
like change with respect to the Buyer Common Stock occurring after the date
hereof and prior to the Effective Time).
"CODE" - the Internal Revenue Code of 1986, as amended, or any
successor law.
"COMMISSION" - as the United States Securities and Exchange Commission.
"COMPANY" - as defined in the first paragraph of this Agreement.
"COMPANY CAPITAL STOCK" - the Company Common Stock and Company
Preferred Stock.
"COMPANY COMMON STOCK" - the Class A and Class B common stock, $0.01
par value, of the Company.
"COMPANY SHARES" - all of the issued and outstanding capital stock of
Company, all of which is owned by the Sellers.
"CONFIDENTIALITY AGREEMENT" - Confidentiality and Nondisclosure
Agreement between Buyer and Company, dated January 17, 2001.
"CONTRACT" - any agreement, contract, obligation, promise, commitment
or undertaking (whether written or oral and whether express or implied), other
than those that have been terminated.
"COPYRIGHTS" - as defined in Section 3.21(a).
"CUSTOMERS" - as defined in Section 3.28.
"DGCL" - the Delaware General Corporation Law, as amended..
"DISCLOSURE SCHEDULE" - the disclosure schedule delivered by the
Company to Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYEE BENEFIT PLAN" - as defined in Section 3.19(a).
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"ENCUMBRANCE" - any mortgage, charge, claim, community property
interest, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership; and the verb "Encumber" shall be construed accordingly.
"ENVIRONMENTAL CLAIM" - any accusation, allegation, notice of
violation, action, claim, Encumbrance, Lien, demand, abatement or other Order or
direction (conditional or otherwise) by any Governmental Authority or any Person
for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden accidental or non-accidental Releases) of, or exposure to,
any Hazardous Material or other substance, clinical, material, pollutant,
contaminant, odor, audible noise, or other Release in, into or onto the
environment (including, without limitation, the air soil, soil, surface water or
groundwater) at, in, by, from or related to the Facilities or any activities
conducted thereon; (ii) the environmental aspects of the transportation,
storage, treatment or disposal of Hazardous Materials in connection with the
operation of the Facilities; or (iii) the violation, or alleged violation, of
any Environmental Laws, Orders or Governmental Permits of or from any
Governmental Authority relating to environmental matters connected with the
Facilities.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" - any cost, damage,
expense, liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to: (a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, generation, handling and disposal
of Hazardous Materials, occupational safety and health, and regulation of
chemical and Hazardous Materials); (b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, litigation,
including civil and criminal claims, demands and responses, investigative,
remedial, response or inspection costs and expenses arising under Environmental
Law or Occupational Safety and Health Law; (c) financial responsibility under
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment or
other remediation or response actions required by applicable Environmental Law
or Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative or remedial measures
required under Environmental Law or Occupational Safety and Health Law. The
terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" - any Law concerning the environment, or activities
that might threaten or result in damage to the environment or human health, or
any Law that is concerned in whole or in part with the environment and with
protecting or improving the quality of the environment and human and employee
health and safety and includes, but is not limited to, CERCLA, the Hazardous
Materials Transportation Act (49 U.S.C.ss.1801 et seq.), the Resource
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Conservation and Recovery Act (42 U.S.C.ss.6901 et seq.), the Clean Water Act
(33 U.S.C.ss.1251 et seq.), the Clean Air Act (33 U.S.C.ss.7401 et seq.), the
Toxic Substances Control Act (15 U.S.C.ss.2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.ss.136 et seq.) and the
Occupational Safety and Health Act (29 U.S.C.ss.651 et seq.) ("OSHA"), as such
laws have been amended or supplemented, and the regulations promulgated pursuant
thereto, and any and all analogous state or local statutes, and the regulations
promulgated pursuant thereto.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended, or any successor law.
"ERISA AFFILIATE" - as defined in Section 3.19(b).
"ESCROW AGENT" - as defined in Section 2.1(a)(iv).
"ESCROW AGREEMENT" - as defined in Section 2.1(a)(iv).
"ESCROW SHARES" - as defined in Section 2.1(a)(iv).
"EXCHANGE ACT" - the Securities Exchange Act of 1934, as amended, or
any successor law.
"FACILITIES" - any real property, leaseholds or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures or equipment (including motor vehicles) currently or formerly
owned or operated by the Company.
"FINANCIAL STATEMENTS" - as defined in Section 3.5(a).
"GAAP" - United States generally accepted accounting principles,
practices and methods.
"GOVERNMENTAL AUTHORITY" - any court, tribunal, authority, agency,
commission, bureau, department, official or other instrumentality of the United
States, any foreign country or any domestic, foreign, state, local, county, city
or other political subdivision.
"GOVERNMENTAL PERMIT" - any license, franchise, permit or other
authorization of any Governmental Authority.
"HAZARDOUS MATERIALS" - any substance, material or waste which is
regulated by Environmental Law, including, without limitation, any material or
substance which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste" or "restricted hazardous
waste," "subject waste," "contaminant," "toxic waste" or "toxic substance" under
any provision of Environmental Law, including but not limited to, petroleum
products, asbestos and polychlorinated biphenyls.
"INDEMNIFIED PERSON" - as defined in Section 9.1.
"INDEMNIFYING PERSON" - as defined in Section 9.1.
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"INTELLECTUAL PROPERTY ASSETS" - as defined in Section 3.21(a).
"INTERIM FINANCIAL STATEMENTS" - as defined in Section 3.5(a).
"ISO" - as defined in Section 3.19(i).
"KEY EMPLOYEES" - Messrs. Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxx and Xxxxx
X. Xxxxx.
"LAW" - any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"LIEN" - any lien, pledge, hypothecation, levy, mortgage, deed of
trust, security interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"LOSSES" - as defined in Section 9.1.
"MARKS" - as defined in Section 3.21(a).
"MATERIAL ADVERSE EFFECT" - as defined in Section 3.7.
"MATERIAL PERSONAL PROPERTY" - as defined in Section 3.10.
"NOTE" - as defined in Section 7.14.
"OCCUPATIONAL SAFETY AND HEALTH LAW" - any legal or governmental
requirement or obligation relating to safe and healthful working conditions or
to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
"ORDER" - any order, consent, consent order, injunction, judgment,
decree, consent decree, ruling, writ, assessment or arbitration award.
"ORGANIZATIONAL DOCUMENTS" - (a) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the articles or certificate of formation and
operating agreement of a limited liability company; (e) any charter, trust
certificate or document or similar document adopted or filed in connection with
the creation, formation or organization of a Person; and (e) any and all
currently effective amendments to any of the foregoing.
"PATENTS" - as defined in Section 3.21(a).
"PENSION PLAN" - as defined in Section 3.19(f).
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"PERSON" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body or Governmental Authority.
"PROCEEDING" - any pending claim, action, investigation, arbitration,
litigation or other judicial, regulatory or administrative proceeding.
"PURCHASE PRICE" - as defined in Section 2.1(a)
"REGISTRATION STATEMENT" - the registration statement on Form S-3 to be
filed by Buyer with the SEC pursuant to Section 6.4.
"REGULATION D" - Regulation D promulgated pursuant to the Securities
Act.
"RELATED PERSON" - as defined in Section 3.23.
"RELEASE" - any release, spill, effluent, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the indoor or outdoor environment of any Hazardous Material through or in the
air, soil, surface water or groundwater.
"REMEDIAL ACTION" - all actions, including, without limitation, any
expenditures, required or voluntarily undertaken to (i) clean up, remove, treat,
or in any other way address any Hazardous Material or other substance in the
indoor or outdoor environment; (ii) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material or other substance so it
does not migrate or endanger or threaten to endanger public health or welfare of
the indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (iv) bring any Facility
into compliance with all Environmental Laws and Environmental Permits.
"RETURNS" - as defined in Section 3.8(b).
"SECURITIES ACT" - the Securities Act of 1933, as amended, or any
successor law.
"SELLERS" - the holders of all of the capital stock of the Company.
"SHAREHOLDER REPRESENTATIVE" - as defined in Section 2.6.
"SUBSIDIARY" - with respect to any Person, any corporation, joint
venture, limited liability company, partnership, association or other business
entity of which more than 50% of the total voting power of stock or other equity
entitled to vote generally in the election of directors or managers or
equivalent persons thereof is owned or controlled, directly or indirectly, by
such Person.
"TAX AUTHORITY" - as defined in Section 3.8(a).
"TAXES" - as defined in Section 3.8(a).
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"THIRD PARTY ACTION" - as defined in Section 9.1.
"TRADE SECRETS" - as defined in Section 3.21(a).
"TRADING DAY" - any day on which the Nasdaq National Market is open for
business.
"VBCA" - the Vermont Business Corporation Act, as amended.
"WARN" - as defined in Section 3.18(d).
2. PURCHASE AND SALE OF STOCK
2.1 PURCHASE OF COMPANY SHARES
(a) Subject to the provisions of this Agreement, each of the Sellers
agrees to sell, and the Buyer agrees to purchase, at the Closing (as defined in
Section 2.2 hereof), the number of Company Shares set forth next to each
Seller's name on EXHIBIT A hereto along with all rights attached to such Company
Shares (including, but not limited to, the rights to dividends accrued thereon
until the Closing) at a price per share of approximately $5.18, for an aggregate
purchase price of $5,350,000, consisting of $1,350,000 in cash and $4,000,000 in
the form of Buyer Shares (the "PURCHASE PRICE"). The Purchase Price shall be
paid as follows:
(i) at the Closing, the aggregate sum of $1,200,000 shall be paid to
the Sellers in cash, pro rata based upon each Seller's respective ownership
level in the Company;
(ii) at the Closing, the aggregate sum of $150,000 shall be paid to the
Key Employees in cash as follows: $68,181.82 to each of Xxxxx X. Xxxxx and Xxxxx
X. Xxxxx and $13,636.36 to Xxxxxxx X. Xxxxxx;
(iii) at the Closing, the aggregate sum of $3,480,000 shall be paid pro
rata to the Sellers in the form of Buyer Shares. The appropriate number of the
Buyer Shares to be delivered to the Sellers at the Closing shall be determined
by dividing $3,480,000 by the Closing Exchange Price; PROVIDED, HOWEVER, that if
the resulting number of Buyer Shares to be delivered to any of the Sellers
includes any fraction of a Buyer Share, then the total number of Buyer Shares
deliverable to any such Seller shall be increased to the next highest whole
number; and
(iv) at the Closing, the Buyer shall deliver to State Street Bank and
Trust Company or any successor escrow agent ("ESCROW AGENT") appointed pursuant
to the escrow agreement (the "ESCROW AGREEMENT"), Buyer Shares based upon the
Closing Exchange Price in an amount equal to $520,000, such shares (the "ESCROW
SHARES") to be applied in accordance with the terms of the Escrow Agreement
substantially in the form attached hereto as EXHIBIT B.
2.2 TIME AND PLACE OF CLOSING
The closing of the purchase and sale provided for in this Agreement
(the "CLOSING") shall be held at the law offices of Brown, Rudnick, Freed &
Gesmer, Xxx Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx within three (3) business
days of the satisfaction or waiver of all
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conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to action that will
be taken at the Closing itself), or at such other place, date or time
as may be fixed by mutual agreement of the parties (the "CLOSING DATE");
provided, however, that in no event shall the Closing Date be extended beyond
June 30, 2001.
2.3 DELIVERY OF COMPANY SHARES
At the Closing, the Sellers shall deliver or cause to be delivered to
Buyer, among other things:
(a) certificates for all the Company Shares owned by each Seller, duly
endorsed in blank for transfer, or with stock powers attached duly executed in
blank, with all signatures notarized or, at the election of the Buyer, medallion
guaranteed;
(b) such other documents as may be required to effect a valid transfer
of the Company Shares by the Sellers, free and clear of any and all Encumbrances
including, without limitation, any Encumbrances under Article 8 of the Uniform
Commercial Code;
(c) general releases by all officers, directors and stockholders of the
Company releasing any liability of the Company to them, or any claim that they
may have against the Company; and
(d) such other documents as may be required elsewhere in this Agreement
or may be reasonably requested by counsel to the Buyer.
2.4 FURTHER ASSURANCES
The Sellers from time to time after the Closing, at the request of the
Buyer and without further consideration, shall execute and deliver further
instruments of transfer and assignment (in addition to those delivered under
Section 2.4) and take such other action as the Buyer may reasonably require to
transfer more effectively the Company Shares to the Buyer.
2.5 SHAREHOLDER REPRESENTATIVE
(a) Each Seller will be deemed to have irrevocably constituted and appointed,
effective as of the Closing, Xxxxx X. Xxxxx (together with his permitted
successors, the "SHAREHOLDER REPRESENTATIVE"), as his true and lawful agent and
attorney-in-fact to enter into any agreement in connection with the transactions
contemplated by this Agreement and any transactions contemplated by the Escrow
Agreement, to exercise all or any of the powers, authority and discretion
conferred on him under any such agreement, to waive any terms and conditions of
any such agreement (other than the Buyer Shares issuable in accordance with
Section 2.1), to give and receive notices on his behalf and to be his exclusive
representative with respect to any matter, suit, claim, action or Proceeding
arising with respect to any transaction contemplated by any such agreement,
including, without limitation, the defense, settlement or compromise of any
claim, action or proceeding for which Buyer or, following the Closing,
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Company may be entitled to indemnification and the Shareholder Representative
agrees to act as, and to undertake the duties and responsibilities of, such
agent and attorney-in-fact. This power of attorney is coupled with an interest
and is irrevocable.
(b) The Shareholder Representative shall not be liable to anyone for
any action taken or not taken by him in good faith or for any mistake of fact or
law for anything that he may do or refrain from doing in connection with his
obligations under this Agreement (i) with the consent of stockholders who, as of
the date of this Agreement, owned a majority in number of the outstanding shares
of Company Common Stock or (ii) in the absence of his own gross negligence or
willful misconduct. Any action taken or not taken pursuant to the advice of
counsel shall be conclusive evidence of such good faith. The Sellers shall,
jointly and severally, indemnify and hold the Shareholder Representative, and
each successor thereof, harmless from any and all liability and expenses
(including, without limitation, counsel fees) that may arise out of any action
taken or omitted by him as Shareholder Representative in accordance with this
Agreement, as the same may be amended, modified or supplemented, except such
liability and expense as may result from the gross negligence or willful
misconduct of the Shareholder Representative.
(c) The Shareholder Representative may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Shareholder Representative shall not be liable for other parties' forgeries,
fraud or false presentations.
(d) The Shareholder Representative shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing his duties and exercising his
rights hereunder, provided that the Shareholder Representative shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
(e) If the Shareholder Representative shall be unable or unwilling to
serve in such capacity, his successor shall be named by those persons holding a
majority of the shares of Company Common Stock outstanding immediately prior to
the Closing, and such successor(s) shall serve and exercise the powers of the
Shareholder Representative hereunder.
2.6 RESTRICTED SECURITIES
The Buyer Shares issued pursuant to this Agreement will be subject to
certain restrictions on resale and all certificates representing such Buyer
Shares shall bear a restrictive legend.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SELLERS
The Company and each of the Sellers hereby jointly and severally
represent and warrant to Buyer that, except as set forth on the disclosure
schedule attached hereto and made a part of this Agreement (the "Disclosure
Schedule"), the statements contained in this Section 3 are true
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and correct. The Disclosure Schedule shall be initialed by the parties and
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Section 3.
3.1 ORGANIZATION, QUALIFICATION AND GOOD STANDING
(a) Section 3.1(a) of the Disclosure Schedule contains a complete and
accurate list of the jurisdictions in which the Company is authorized to do
business. The Company is a corporation duly organized, validly existing and in
good standing under the laws of Vermont, with full corporate power and authority
to conduct its business as it is now being conducted and where it is now being
conducted and to own or use the assets and properties that it purports to own or
use. The Company is not qualified to do business as a foreign corporation under
the Laws of any jurisdiction and is not required to be licensed or qualified in
any other state or jurisdiction by either its ownership or use of assets or
properties, or the nature of the activities conducted by it, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect on the Company, taken as a whole. The Company does not have, and
has never had, any Subsidiaries.
(b) The Company has attached as Section 3.1(b) of the Disclosure
Schedule correct and complete copies of the Organizational Documents of the
Company.
3.2 AUTHORITY; NO CONFLICT
(a) The Company has the full power and authority to execute, deliver
and perform this Agreement and the other agreements to be executed and delivered
pursuant to and in connection with this Agreement (the "ANCILLARY AGREEMENTS");
to perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby. Each of the Sellers has the
unrestricted and absolute power, authority and capacity to execute and deliver
this Agreement and the Ancillary Agreements and to perform his obligations
hereunder and thereunder, and to carry out the transactions contemplated hereby
and thereby. All necessary action, corporate or otherwise, has been taken by
each Seller and the Company to authorize the execution, delivery and performance
of this Agreement and each of the Ancillary Agreements and the transactions
contemplated hereby and thereby. This Agreement has been, and each Ancillary
Agreement will be at the Closing, duly executed and delivered by the Company and
each Seller and this Agreement and each Ancillary Agreement is, or upon the
Closing will be, the legal, valid and binding obligation of the Company and each
Seller, enforceable against the Company and each Seller in accordance with their
terms.
(b) Except as set forth in Section 3.2(b) to the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement or any
Ancillary Agreement nor the performance of the transactions contemplated hereby
or thereby will, directly or indirectly (with or without notice or lapse of time
or both):
(i) contravene, conflict with or result in a violation or breach of (A)
any provision of the Organizational Documents of the Company, (B) any resolution
adopted by the board of directors or the shareholders of the Company, (C) any
legal requirement or any Order, award, decision, settlement or process to which
the Company or any of the assets or properties owned or
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used by the Company may be subject, or (D) any Governmental Permit, which
is held or used by the Company excluding from clauses (C) and (D) any
contravention, conflict, violation or breach that would not, either individually
or in the aggregate materially, adversely affect the Company or materially
impair or preclude the Company's ability to execute, deliver and perform this
Agreement, any Ancillary Agreements and the transactions contemplated hereby and
thereby;
(ii) result in a breach of or constitute a default, give rise to a
right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit, or require the consent, authorization or approval of or
any notice to or filing with any third Person under any Contract or any debt
instrument to which the Company is a party or to which its assets or properties
are bound, or require the consent, authorization or approval of or any notice to
or filing with any Governmental Authority to which the Company or its assets or
properties is subject except for any breaches, defaults, rights of termination,
cancellation or acceleration, entitlements, consents, approvals, notices or
filings that would not, either individually or in the aggregate, materially,
adversely affect the Company or materially impair or preclude the Company's
ability to execute, deliver and perform this Agreement, any Ancillary Agreements
and the transactions contemplated hereby and thereby; or
(iii) result in the imposition or creation of any Encumbrance or Lien
upon or with respect to the Company Shares or to any of the assets or properties
owned or used by the Company.
3.3 CAPITALIZATION
(a) The authorized equity securities of the Company consist of: (i)
10,000,000 shares of Common Stock, $0.01 par value per share, of which 4,000,000
have been designated Class A Common Stock and 6,000,000 have been designated
Class B Common Stock; and (ii) 1,000,000 shares of Preferred Stock, $0.01 par
value per share. As of the date hereof, 930,000 shares of Class A Common Stock,
103,333 shares of Class B Common Stock, and no shares of Preferred Stock were
issued and outstanding. No options, warrants or other rights to acquire Company
capital stock are outstanding.
(b) No equity securities of the Company are held in the treasury of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Section
3.3(b) of the Disclosure Schedule sets forth a complete and correct list of all
of the Sellers and the number of shares of each type of capital stock of the
Company owned, of record and beneficially, by each such Seller. Each Seller is
the record and beneficial owner of the number and type of stock set forth next
to his or her name on Schedule 3.3(b) hereto and is in possession of the
certificates evidencing such ownership. Except as set forth on said Schedule
3.3(b), no Seller owns of record or beneficially any other shares of capital
stock of the Company, or any rights, options, or warrants with respect thereto.
The Company Shares to be delivered by the Sellers to the Buyer hereunder will
be, when delivered pursuant to the terms of this Agreement and upon payment
therefor, duly authorized, validly issued, fully paid and nonassessable, and
will be free of any adverse claim, lien or restriction including, without
limitation, any preemptive rights. Except as set forth in Section
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3.3(b) to the Disclosure Schedule, the Company is subject to no liability
on account of the issuance or sale of any securities including, without
limitation, all outstanding Company Shares. Section 3.3(b) of the
Disclosure Schedule sets forth all outstanding securities of the Company,
including but not limited to securities reserved for any purpose, all debt and
equity securities and Company Common Stock. There are no (i) outstanding or
authorized subscriptions, warrants, options or other rights granted by the
Company or binding upon the Company to purchase or acquire, or preemptive rights
with respect to the issuance or sale of, the capital stock of the Company or
which obligate or may obligate the Company to issue any additional shares of its
capital stock or any securities convertible into or evidencing the right to
subscribe for any shares of its capital stock, (ii) other securities of the
Company directly or indirectly convertible into or exchangeable for shares of
capital stock of the Company, (iii) restrictions on the transfer of the
Company's capital stock (other than restrictions under the Securities Act and
state securities laws), (iv) voting rights with respect to the capital stock of
the Company or (v) stock appreciation, phantom stock or similar rights with
respect to the Company. None of the securities of the Company are subject to
"antidilution" or similar provisions. There are no voting trusts or other
Contracts or understandings to which the Company or any Seller is a party with
respect to the transfer, voting or registration of the capital stock of the
Company. There are no Contracts relating to the issuance, sale or transfer of
any equity securities or other securities of the Company. The Company does not
own, nor does it have any Contract to acquire any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business, except for a Company Subsidiary. No Person has any
preemptive rights with respect to any security of the Company or any of its
subsidiaries.
3.4 BOOKS, RECORDS AND ACCOUNTS
(a) The books of account and other records of the Company, all of which
have been made available to Buyer, are true, complete and correct in all
material respects. The minute books of the Company contain true, accurate and
complete records of all meetings held of, and corporate action taken by, the
shareholders, the board of directors, and committees of the board of directors
of the Company. The stock books of the Company are true, complete and correct.
(b) The Company's books, records and accounts fairly and accurately
reflect transactions and dispositions of assets by the Company, and the system
of internal accounting controls of the Company is sufficient to assure that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(c) At the Closing, all of such books, records and accounts will be in
the possession of the Company.
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3.5 FINANCIAL STATEMENTS
(a) For purposes of this Agreement: "FINANCIAL STATEMENTS" shall mean
(i) the audited balance sheets of the Company as of December 31, 1999 and
December 31, 2000, and the related income statements and statements of cash
flows for the two years ended December 31, 2000, and (ii) the unaudited balance
sheet of the Company (the "BASE BALANCE SHEET") as of May 31, 2001 (the "BASE
BALANCE SHEET DATE") and the related income statement and statement of cash
flows for the five months ended on such date (the "INTERIM FINANCIAL
STATEMENTS"). True and complete copies of such Financial Statements and Interim
Financial Statements are attached as Section 3.5(a) to the Disclosure Schedule.
(b) The Financial Statements and the Interim Financial Statements (i)
have been prepared from the books and records of the Company in accordance with
GAAP consistently applied during the periods covered thereby, (ii) fully reflect
all liabilities and contingent liabilities of the Company required to be
reflected therein on such basis as at the date thereof, and (iii) fairly present
the financial position of the Company as of the date of the balance sheet
included in the Interim Financial Statements and the results of its operations
for the period indicated; provided, however, the Interim Financial Statements
(x) are subject to normal year-end adjustments and (y) do not include footnotes.
The Company has provided all management letters delivered to the Company from
its auditors over the last two years.
3.6 NO UNDISCLOSED LIABILITIES
The Company does not have any material liabilities or obligations of
any nature (whether known or unknown, absolute, accrued, contingent or
otherwise, and whether due or to become due), except for (i) liabilities or
obligations reflected or reserved against in the Financial Statements; (ii)
current liabilities incurred in the ordinary course of business since the date
of the Financial Statements, consistent with past practices, (none of which is a
claim for breach of contract, breach of duty, breach of warranty, tort or
infringement of an intellectual property right), which liabilities, to the
extent outstanding on the Closing Date will be reflected on the Closing Balance
Sheet; or (iii) liabilities disclosed on Section 3.6 to the Disclosure Schedule
hereto. There is no fact that presently materially adversely affects, or in the
future (so far as can now be reasonably foreseen) may materially adversely
affect, the business, properties, operations or conditions, financial or
otherwise, of the Company that has not been specifically disclosed herein or in
the Disclosure Schedule
3.7 NO MATERIAL ADVERSE CHANGE
Since December 31, 2000, except for any changes or effects resulting
from (i) changes in general (national, regional or local) economic, regulatory
or political conditions or changes in the Company's markets generally, or (ii)
satisfaction of the conditions contained in Section 7.14 hereunder, or (iii) the
loss of business of any of the customers listed on Section 3.7 to the Disclosure
Schedule, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, results of operations or condition
(financial or otherwise) (a "MATERIAL ADVERSE EFFECT") of the Company, and no
event has occurred or circumstance exists that could reasonably be expected to
result in a Material Adverse Effect on the Company, taken
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as a whole. To the knowledge of the Company, there is no fact that would
be reasonably likely to result in a Material Adverse Effect on the Company
that has not been specifically disclosed herein or in the Disclosure Schedule.
3.8 TAXES
(a) "TAXES" shall mean all taxes, charges, fees, Encumbrances, Liens,
customs, duties or other assessments, however denominated, including any
interest, penalties, additions to tax or additional taxes that may become
payable in respect thereof, imposed by the United States government, any state,
local or foreign government, or any agency or political subdivision of any such
government (a "TAX AUTHORITY"), which taxes shall include, without limiting the
generality of the foregoing, all income taxes, payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, capital taxes, franchise taxes, gross receipt taxes, occupation taxes,
real and personal property taxes, value added taxes, stamp taxes, transfer
taxes, workers' compensation taxes, taxes relating to benefit plans and other
obligations of the same or similar nature.
(b) (i) The Company has filed or caused to be filed with the
appropriate Taxing Authorities in a timely manner all Tax returns, reports and
forms ("RETURNS") required to be filed by them; (ii) the information on such
Returns is complete and accurate in all material respects; (iii) the Company has
paid in full on a timely basis all Taxes or made adequate provision in the
Financial Statements for all Taxes (whether or not shown on any Return) required
to be paid by them; (iv) there are no Encumbrances or Liens for Taxes upon the
assets or properties of the Company other than for Taxes not yet due and
payable; and (v) no deficiencies for Taxes have been claimed, proposed, or
assessed by any Tax Authority or other Governmental Authority with respect to
the Company, and there are no pending or, to the Company's knowledge, threatened
audits, investigations or claims for or relating to any liability in respect of
Taxes of the Company.
(c) There are no outstanding Contracts or waivers with respect to the
Company extending the statutory period of limitation applicable to any Taxes,
and the Company has not requested any extension of time within which to file any
Return that has not yet been filed.
(d) (i) The Company has made provision for all Taxes payable by it and
such provision is reflected on the Financial Statements with respect to any
period covered thereby as to Taxes that are not payable prior to the date of
such Financial Statements; (ii) the provisions for Taxes with respect to the
Company (on a consolidated basis) for any period prior to the Closing (excluding
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) are adequate to cover all Taxes with respect to such
period; (iii) the Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third Person; (iv) all
material elections with respect to Taxes made by the Company as of the date
hereof are set forth in Section 3.8 of the Disclosure Schedule; (v) there are no
private letter rulings in respect of any Tax pending between the Company and any
Tax Authority, if such ruling would affect the Company; (vi) the Company has
never been a member of an affiliated group
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within the meaning of Section 1504 of the Code, or filed or been included
in a combined, consolidated or unitary return of any Person (other than
with respect to the Company and any of its subsidiaries); (vii) the Company is
not liable for Taxes of any other Person except with respect to sales taxes, and
the Company is not currently under any contractual obligation to indemnify any
Person with respect to Taxes, or a party to any tax sharing agreement or any
other agreement providing for payments by the Company with respect to Taxes;
(viii) the Company is not, nor has it been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code), during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (ix) the
Company is not a "collapsible corporation" under Section 341 of the Code; (x)
the Company is not a personal holding company within the meaning of Section 542
of the Code; (xi) the Company is not a party to any joint venture, partnership
or other arrangement or Contract that could be treated as a partnership for Tax
purposes; (xii) the Company has not agreed to nor is it required, as a result of
a change in method of accounting or otherwise, to include any adjustment under
Section 481 of the Code (or any corresponding provision of state, local or
foreign Law) in taxable income; (xiii) the Company is not a party to any
Contract, arrangement or plan that could result (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; and (xiv) Section 3.8 of the Disclosure Schedule contains a
list of all jurisdictions to which any Tax is properly payable or in which any
Return is required to be filed by the Company, and no written claim has ever
been made by any Tax Authority in any other jurisdiction that the Company is
subject to taxation in such jurisdiction.
3.9 ACCOUNTS RECEIVABLE
All accounts receivable, notes receivable, contracts receivable,
unbilled invoices and other receivables of the Company that are reflected on the
Financial Statements or on the accounts receivable ledger of the Company as of
the Closing Date (collectively, the "ACCOUNTS RECEIVABLE") represent or will
represent valid and enforceable obligations (i) arising from sales actually made
or services actually performed in the ordinary course of business, (ii) arising
out of transactions with unaffiliated parties and (iii) subject to no setoff,
defense or counterclaim. All of the Accounts Receivable are or will be
collectible at the full recorded amount thereof within ninety (90) days of
invoice date through normal means of collection, less any applicable reserves
established in accordance with GAAP. An accurate summary of the aging of the
Accounts Receivable on the Base Balance Sheet Date is attached as Section 3.9 to
the Disclosure Schedule. Since January 1, 2001 there has not been a material
change in the Company's receivables aging practice.
3.10 TITLE TO PROPERTIES; ENCUMBRANCES
(a) The Company does not now own, nor has it ever owned, any real
property. Section 3.10 of the Disclosure Schedule contains a complete and
accurate list of all leaseholds or other interests in real property held by the
Company. Section 3.10 of the Disclosure Schedule sets forth for each such
property, the owner thereof, a brief description thereof (including approximate
square footage), the use made of such property and the approximate annual costs,
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fees and taxes associated with such property. The Company has delivered or made
available to Buyer true, correct and complete copies of the real property leases
to which the Company is party or pursuant to which it uses or occupies any real
property.
(b) Also set forth on Section 3.10 of the Disclosure Schedule is a
listing of the machinery, equipment and other tangible personal property with an
original cost in excess of $25,000 used or owned by the Company and a listing of
all leases under which the Company leases any personal property as of the
Closing Date requiring annual rental payments in excess of $10,000, together
with a description of such property (collectively, the "MATERIAL PERSONAL
PROPERTY"). All Material Personal Property is located at 000 Xxxxx Xxxx, Xxxxx
000, Xxxxxxxxx, Xxxxxxx 00000. Except as set forth on Section 3.10 of the
Disclosure Schedule, all of the assets and properties of the Company are
reflected on the Financial Statements (except to the extent not required to be
so reflected by GAAP). The only intangible assets and properties owned by the
Company or used in the conduct of its business are the Intellectual Property
Assets.
(c) All of the foregoing agreements set forth on Section 3.10 of the
Disclosure Schedule are valid, subsisting and enforceable in accordance with
their terms against the parties thereto. The Company is in compliance with all
terms and conditions of such agreements and no event has occurred nor does any
circumstance exist that (with or without notice or the passage of time or both)
would constitute a material violation or default under any such agreements and
the Company has neither given nor received written notice of any alleged
violation or of any default under any such agreement.
(d) The Company has good and marketable title to all of the assets and
properties, real and personal, tangible and intangible, it owns or purports to
own, or uses in its business, including those reflected on its books and records
and in the Financial Statements (except for accounts receivable collected and
inventories, materials and supplies disposed of in the ordinary course of
business consistent with past practice after the date of the most recent
Financial Statements). The Company has a valid leasehold, license or other
interest in all of the other tangible assets or properties, real or personal,
that are used in the operation of its business. Except as set forth on Section
3.10 of the Disclosure Schedule, all assets and properties owned, leased or used
by the Company are free and clear of all Encumbrances and Liens and other
adverse claims or charges or interests of any kind, except for (a) liens for
current Taxes not yet due, (b) workmen's, common carrier and other similar liens
arising in the ordinary course of business, none of which materially detracts
from the value or impairs the use of the asset or property subject thereto, or
impairs the operations of the Company, and (c) Encumbrances or Liens disclosed
in the Financial Statements.
(e) To the best of the Company's knowledge, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, that would detrimentally affect the use
and operation of the Company's leased real property for its intended purpose.
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3.11 CONDITION AND SUFFICIENCY OF ASSETS
The Facilities and other assets and property owned or used by the
Company are structurally sound, are in good operating condition and repair
(normal wear and tear excepted), and are adequate for the uses to which they are
being put, and none of such Facilities or other property and assets owned or
used by the Company is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost. The
Facilities and other assets and property owned or used by the Company are
sufficient for the continued conduct of its business after the Closing in
substantially the same manner as conducted prior to the Closing.
3.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) The Company is in compliance in all material respects with all
Laws, licenses and Orders affecting the assets or properties owned or used by
the Company or the business or operations of the Company including federal,
state, local and foreign Laws, licenses and Orders. The Company has not been
charged with violating nor, to the knowledge of the Company, has it been
threatened with a charge of violating, nor is the Company under investigation
with respect to a possible violation of, any provision of any federal, state,
local or foreign Law, Order or administrative ruling or license relating to any
of its assets or properties or any aspect of its business.
(b) Section 3.12 of the Disclosure Schedule contains a complete and
accurate list of each Governmental Permit that is held by the Company or that
otherwise relates to the business of, or to any of the assets or properties
owned or used by, the Company. Each Governmental Permit listed or required to be
listed in Section 3.12 of the Disclosure Schedule is valid and in full force and
effect and is not subject to any Proceedings for suspension, modification or
revocation.
3.13 LEGAL PROCEEDINGS
(a) The Company has not received notice of, nor to the knowledge of the
Company does there exist, any Proceeding that has been commenced by or against
the Company, or any of the officers, directors, former officers or directors,
employees, shareholders or agents of the Company (in their capacities as such)
or that otherwise relates to the business of, or any of the assets or properties
owned or used by, the Company.
(b) There is no Proceeding that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
(c) To the knowledge of the Company, no Proceeding has been threatened.
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3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Section 3.14 of the Disclosure Schedule, since
December 31, 2000, the Company has conducted its business only in the ordinary
course, consistent with past practice, and there has not been any:
(a) contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others;
(b) declaration, setting aside, making or payment of any dividend or
other distribution or repurchase or payment in respect of shares of capital
stock;
(c) issuance, sale, disposition or Encumbrance of, or authorization for
issuance, sale, disposition or Encumbrance of, or grant or issue of any options,
warrants or rights to acquire with respect to, any shares of its capital stock
or any other of its securities or any security convertible or exercisable into
or exchangeable for any such shares or securities, or any change in its
outstanding securities or shares of capital stock or its capitalization, whether
by reason of a reclassification, recapitalization, stock split, combination,
exchange or readjustment of shares, stock dividend or otherwise;
(d) obligation or liability incurred by the Company other than
obligations and liabilities incurred in the ordinary course of business
consistent with past practice (none of which is a claim for breach of contract,
breach of duty, breach of warranty, tort or infringement of an intellectual
property right);
(e) encumbrance of its assets or properties;
(f) payment of any bonuses, salaries or other compensation to any
shareholder, director, officer, consultant, agent or sales representative or
(except in the ordinary course of business consistent with past practice)
employee, increase of any bonuses, salaries or other compensation to any
shareholder, director, officer, consultant, agent, sales representative or
employee, or entry into or variation of any employment, severance or similar
Contract with any director, officer or employee;
(g) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees;
(h) damage to or destruction of any asset or property, whether or not
covered by insurance, or loss of any Customer, which could reasonably be
expected to have a Material Adverse Effect on the Company, taken as a whole;
(i) entry into, termination of, or receipt of notice of termination of
any Contract or transaction involving a total remaining commitment by or to the
Company of at least $25,000 including the entry into (i) any document evidencing
any indebtedness; (ii) any capital or other lease; or (iii) any guaranty;
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(j) sale, lease or other disposition (other than in the ordinary course
of business consistent with past practice) of any asset or property;
(k) cancellation, compromise, release or waiver of any debt, claim or
right with a value to the Company in excess of $10,000;
(l) creation, incurrence or assumption of any indebtedness for borrowed
money or guarantee of any obligation in an aggregate amount in excess of
$10,000, except for endorsements of negotiable instruments for collection in the
ordinary course of business;
(m) discharge or satisfaction of any Encumbrance or Lien other than
those which are required to be discharged or satisfied during such period in
accordance with their original terms;
(n) payment, discharge or satisfaction of any material obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, except for any current liabilities, and the current portion of any long
term liabilities, shown on the Financial Statements (or not required as of the
date thereof to be shown thereon in accordance with GAAP) or incurred since the
date of the most recent balance sheet in the ordinary course of business
consistent with past practice;
(o) loan or advance to any Person other than travel and other similar
routine advances in the ordinary course of business consistent with past
practice, or acquisition of any capital stock or other securities of or any
ownership interest in, or a significant portion of the assets of, any other
business enterprise;
(p) capital investment or capital expenditure or capital improvement,
addition or betterment in amounts that exceed $10,000 in the aggregate or lease
or agreement to lease assets with an annual rental that exceeds $10,000 in the
aggregate;
(q) institution or settlement of any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(r) except in the ordinary course of business consistent with past
practice, commitment to provide services or goods for an indefinite period or a
period of more than three (3) months;
(s) change in the method of accounting or the accounting principles or
practices used by the Company in the preparation of the Financial Statements
except as required by GAAP;
(t) entry into other Contracts, except Contracts made in the ordinary
course of business consistent with past practice;
(u) amendment or other modification of any of the Organizational
Documents of the Company;
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(v) transfer or grant of any rights or licenses under, or entry into
any settlement regarding the infringement of, any Intellectual Property Assets,
or entry into any licensing or similar agreements or arrangements;
(w) agreement, whether oral or written, by the Company to do any of the
foregoing;
(x) change in the management or supervisory personnel of the Company;
or
(y) labor trouble or claim of unfair labor practices involving the
Company.
3.15 CONTRACTS; NO DEFAULTS
(a) Section 3.15(a) of the Disclosure Schedule contains a complete and
accurate list, and the Company has delivered to Buyer true, correct and complete
copies, of:
(i) each Contract involving payments of at least $10,000 that involves
performance of services or delivery of goods or materials by the Company;
(ii) each Contract involving payments of at least $10,000 that involves
performance of services or delivery of goods or materials to the Company;
(iii) each Contract providing for the purchase of all or substantially
all of its requirements of a particular product from a supplier;
(iv) each Contract or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement and the Ancillary Agreements or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(v) each Contract for joint marketing, teaming or development;
(vi) each Contract with any dealer, franchiser, original equipment
manufacturer, value-added reseller, or manufacturer's representative;
(vii) each Contract pertaining to the Company's maintenance or support
of its products, services or supplies;
(viii) each Contract for the sale of its products not made in the
ordinary course of business;
(ix) each Contract with any sales agent or distributor of products of
the Company;
(x) each Contract for a license (other than off-the-shelf, fully paid
up, shrink wrap software licenses) or franchise (as licensor or licensee or
franchisor or franchisee);
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(xi) each Contract involving any arrangement or obligation with respect
to the return of products other than on account of a defect in condition, or
failure to conform to the applicable Contract;
(xii) each Contract with the United States government;
(xiii) each Contract that is material to the assets or business of the
Company;
(xiv) each lease, license and other Contract affecting any leasehold or
other interest in any real or personal property to which the Company is a party;
(xv) each licensing agreement or other Contract to which the Company is
a party with respect to patents, trademarks, copyrights, trade secrets or other
intellectual property, including agreements with current or former employees,
consultants or contractors regarding the use or disclosure of any intellectual
property;
(xvi) each collective bargaining agreement and other Contract to or
with any labor union or other employee representative of a group of employees
involving or affecting the Company;
(xvii) each joint venture, partnership and other Contract involving a
sharing of profits, losses, costs or liabilities by the Company with any other
Person or requiring the Company to make a capital contribution;
(xviii) each Contract to which the Company is a party containing
covenants that in any way purport to restrict the business activity of the
Company or any of the employees of the Company or limit the freedom of the
Company or any of the employees to engage in any line of business or to compete
with any Person or hire any Person;
(xix) each employment or consulting agreement between the Company and
its employees and consultants (other than agreements that are terminable on 30
days notice or less without penalty);
(xx) each agreement between the Company and an officer or director of
the Company or any affiliate of any of the foregoing;
(xxi) each power of attorney granted by the Company that is currently
effective and outstanding;
(xxii) each Contract for capital expenditures by the Company in excess
of $10,000;
(xxiii) each agreement of the Company under which any money has been or
may be borrowed or loaned or any note, bond, factoring agreement, indenture or
other evidence of indebtedness that has been issued or assumed (other than those
under which there remain no ongoing obligations of the Company), and each
guaranty by the Company of any evidence of indebtedness or other obligation, or
of the net worth, of any Person (other than endorsements for the purpose of
collection in the ordinary course of business);
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(xxiv) each agreement of the Company containing restrictions with
respect to the payment of dividends or other distributions in respect of its
capital stock;
(xxv) each stock purchase, merger or other agreement pursuant to which
the Company acquired any material amount of assets (other than capital
expenditures), and all relevant documents and agreements delivered in connection
therewith;
(xxvi) each material agreement to which the Company is a party
containing a change of control provision applicable to this Agreement, any
Ancillary Agreements or any transaction contemplated hereby or thereby;
(xxvii) each other agreement to which the Company is a party having an
indefinite term or a fixed term of more than one (1) year (other than those that
are terminable at will or upon not more than thirty (30) days' notice by the
Company without penalty) or requiring payments by the Company of more than
$25,000 per year; and
(xxviii) each standard form of agreement pursuant to which the Company
provides services or goods to customers.
(b) Each Contract identified or required to be identified in Section
3.15(a) of the Disclosure Schedule is in full force and effect and is valid and
enforceable against the Company and, to the knowledge of the Company, against
the other parties thereto in accordance with its terms;
(c) The Company is in full compliance in all material respects with all
applicable terms and requirements of each Contract under which the Company has
any obligation or liability or by which the Company or any of the assets or
properties owned or used by the Company is or was bound;
(d) To the knowledge of the Company, each other Person that has or had
any obligation or liability under any Contract under which the Company has any
rights is in full compliance with all applicable terms and requirements of such
Contract; and
(e) To the knowledge of the Company, no event has occurred and no
circumstance exists that (with or without notice or lapse of time or both) is
likely to result in a violation or breach of any Contract.
3.16 INSURANCE
(a) Section 3.16 of the Disclosure Schedule sets forth the premium
payments and describes all the insurance policies of the Company (except
policies relating to Employee Benefit Plans listed on Section 3.19 of the
Disclosure Schedule), which policies are now in full force and effect in
accordance with their terms and expire on the dates shown on Section 3.16 of the
Disclosure Schedule. There has been no default in the payment of premiums on any
of such policies that has not been cured, and there is no ground for
cancellation or avoidance of any such policies, or any increase in the premiums
thereof, or for reduction of the coverage provided
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thereby. Such policies shall continue in full force and effect up to the
expiration dates shown in Section 3.16 of the Disclosure Schedule. True,
correct and complete copies of all insurance policies listed in Section 3.16 of
the Disclosure Schedule have been previously furnished to Buyer.
(b) The policies listed on Section 3.16 of the Disclosure Schedule (i)
are sufficient to enable the Company to comply with all requirements of Laws and
all agreements to which it is subject, (ii) will remain in full force and effect
through the respective expiration dates of such policies without payment of
additional premiums, and (iii) will not be adversely affected by, or terminate
or lapse by reason of, the transactions contemplated by this Agreement or any
Ancillary Agreement. Section 3.16 of the Disclosure Schedule also sets forth all
other insurance policies in effect at any time during the period ended May 31,
2001 under which the Company currently may be entitled to give notice or
otherwise assert a claim.
(c) Except for amounts deductible under the policies of insurance
described on Section 3.16 of the Disclosure Schedule or with respect to risks
assumed as a self-insurer and described on such Section, the Company is not, nor
has the Company at any time been, subject to any liability as a self-insurer of
the business or assets of the Company.
(d) Except as set forth on Section 3.16 of the Disclosure Schedule,
there are no claims, by or with respect to the Company, pending under any of
said policies, or disputes with insurers. No notice of cancellation or
termination has been received with respect to any such policy. The Company has
not been refused any insurance with respect to assets or operations, nor has its
coverage been limited by any insurance carrier with which it has applied for any
such insurance or with which it has carried insurance. The Company has no
knowledge of any insurance carrier's insolvency or inability to perform its
obligations or pay any claims pursuant to any of the insurance policies
maintained by the Company.
(e) Except as set forth on Section 3.16 of the Disclosure Schedule, the
Company has no current or prior insurance policy that remains subject to a
retrospective adjustment of the premiums payable thereunder.
3.17 ENVIRONMENTAL MATTERS
(a) The Company is in compliance in all material respects with all
applicable Environmental Laws, which compliance includes, but is not limited to,
the possession by the Company of all Governmental Permits required under
applicable Environmental Laws and compliance with the terms and conditions
thereof. The Company has not received notice of, nor is the Company, nor any
predecessor of it, the subject of any Environmental Claim or Remedial Action.
The Company has no Environmental, Health and Safety Liabilities. There are no
circumstances or conditions related to the Company, the Company's operations or
any of the Company's Facilities that are reasonably likely to prevent or
interfere with such compliance or give rise to an Environmental Claim or
Remedial Action in the future.
(b) There are no Environmental Claims that are pending or, to the
knowledge of the Company, threatened against the Company, the Company's
Facilities or against any Person
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whose liability for any Environmental Claim the Company has retained or assumed
either contractually or by operation of Law.
(c) The Company, and any other Person acting on behalf of the Company
(solely with respect to any such other Person, with the Company's knowledge) has
not (A) disposed of, transported, stored, or arranged for the disposal of any
Hazardous Materials to, at or upon: (i) any location other than a site lawfully
permitted to receive such Hazardous Materials, (ii) any Facilities, or (iii) any
site which, pursuant to CERCLA or any similar state Law, has been placed on the
National Priorities List, CERCLIS or their state equivalents, and (B) there has
not occurred during the period the Company operated or possessed any Facility or
is presently occurring a Release, or threatened Release, of any Hazardous
Materials on, into or beneath the surface of, or adjacent to, any Facilities.
3.18 EMPLOYEES
(a) Section 3.18 of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee of the Company:
name; job title; bonus; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any employee benefit plan of any
nature. True and correct information representing each employee's base salary
has previously been delivered to Buyer, in form and substance reasonably
satisfactory to Buyer.
(b) To the knowledge of the Company, no officer or employee of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such officer or employee and any other Person that could adversely
affect (i) the performance of his or her duties as an officer or employee of the
Company, or (ii) the ability of the Company to conduct its business.
(c) No employee of the Company is bound by any agreement with any other
Person that is violated or breached by such employee performing the services he
or she is performing for the Company.
(d) The Company has not had a "Plant Closing" or a "Mass Layoff" within
the meaning of the federal Workers Adjustment and Retraining Notification Act of
1988 ("WARN").
(e) The Company has delivered to Buyer or its counsel prior to the date
hereof true and complete copies of any employment agreements and any procedures
and policies relating to the employment of employees of the Company and the use
of temporary employees and independent contractors by the Company (including
summaries of any procedures and policies that are unwritten).
3.19 EMPLOYEE BENEFITS
(a) Except for the Employee Benefit Plans listed on Section 3.19 of the
Disclosure Schedule, the Company does not maintain, have an obligation to
contribute to or have any actual
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or contingent liability with respect to any Employee Benefit Plan. "EMPLOYEE
BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3)
of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral) providing compensation or
other benefits (other than ordinary cash compensation) to any current or former
director, officer, employee or consultant (or to any dependent or beneficiary
thereof), of the Company, which are now, or were within the past five years,
maintained by the Company, or under which the Company has or could have any
obligation or liability, whether actual or contingent, including, without
limitation, all incentive, bonus, deferred compensation, vacation, holiday,
cafeteria, medical, disability, stock purchase, stock option, stock
appreciation, phantom stock, restricted stock or other stock-based compensation
plans, policies, programs, practices or arrangements. The Company has delivered
to Buyer or its counsel prior to the date hereof true and complete copies of (i)
plan instruments and amendments thereto for all Employee Benefit Plans (or
written summaries of any Employee Benefit Plans that are unwritten) and related
trust agreements, insurance and other contracts, summary plan descriptions, and
summaries of material modifications, and material communications distributed to
the participants of each Plan, (ii) to the extent annual reports on Form 5500
are required with respect to any Employee Benefit Plan, the two most recent
annual reports and attached schedules for each Employee Benefit Plan as to which
such report is required to be filed, and (iii) where applicable, the most recent
(A) opinion, notification and determination letters, (B) audited financial
statements, (C) actuarial valuation reports, and (D) nondiscrimination tests
performed under the Code (including 401(k) and 401(m) tests) for each Employee
Benefit Plan.
(b) The Company does not have and has never had an ERISA Affiliate.
"ERISA AFFILIATE" means any entity (whether or not incorporated) other than the
Company that, together with the Company is a member of (i) a controlled group of
corporations within the meaning of Section 414(b) of the Code; (ii) a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Code; or (iii) an affiliated service group within the meaning of Section
414(m) of the Code.
(c) The Company does not maintain and has never maintained, nor does it
contribute to or has it ever contributed to, an Employee Benefit Plan subject to
Title IV of ERISA (including a multiemployer plan) and no facts exist under
which the Company could incur any liability under Title IV of ERISA.
(d) With respect to each Employee Benefit Plan, (i) no party in
interest or disqualified person (as defined in Section 3(14) of ERISA and
Section 4975 of the Code, respectively) has at any time engaged in a transaction
that could subject Buyer or the Company directly or indirectly to a tax, penalty
or liability for prohibited transactions imposed by ERISA or the Code and (ii)
no fiduciary (as defined in Section 3(21) of ERISA) with respect to any Employee
Benefit Plan, for whose conduct the Company could have any liability (by reason
of indemnities or otherwise), has breached any of the responsibilities or
obligations imposed upon the fiduciary under Title I of ERISA.
(e) Each Employee Benefit Plan that is a "welfare plan" within the
meaning of Section 3(1) of ERISA and that provides health, disability or death
benefits is fully insured; the
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Company is not obligated to directly pay any such benefits or to reimburse
any third Person payor for the payment of such benefits.
(f) Each Employee Benefit Plan that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "PENSION PLAN") and that is
subject to Sections 201, 301 or 401 of ERISA has received a favorable
determination letter from the Internal Revenue Service covering all amendments
required by the Tax Reform Act of 1986 and prior legislation and there are no
circumstances that are likely to result in revocation of any such favorable
determination letter. Except as noted on Section 3.19 of the Disclosure
Schedule, no Pension Plan has assets other than securities listed on a public
exchange, mutual fund shares registered under federal law, publicly traded debt
or government debt instruments, or participant loans extended in accordance with
Plan Terms. Each Employee Benefit Plan is and has been operated in material
compliance with its terms and all applicable Laws, Orders or governmental rules
and regulations currently in effect with respect thereto, and by its terms can
be amended and/or terminated at any time. As of and including the Closing Date,
the Company (i) shall have performed all material obligations required to be
performed by it under, and shall not be in material default under or in material
violation of any Employee Benefit Plan and (ii) shall have made all
contributions or payments required to be made by it up to and including the
Closing Date with respect to each Employee Benefit Plan, or adequate accruals
(including accruals for 401(k) match, if any) therefor will have been provided
for and will be reflected on the Financial Statements provided to Buyer by the
Company. All notices, filings and disclosures required by ERISA or the Code
(including notices under Section 4980B of the Code and certifications under the
Health Insurance Portability and Accountability Act) have been timely made.
(g) The Company has not received nor is it aware of any Proceeding
(other than routine claims for benefits) pending or, to the knowledge of the
Company, threatened with respect to any Employee Benefit Plan or against any
fiduciary of any Employee Benefit Plan, and there are no facts that could give
rise to any such Proceeding. There has not occurred any circumstances by reason
of which the Company may be liable for an act, or a failure to act, by a
fiduciary with respect to any Employee Benefit Plan.
(h) There are no complaints, charges or claims against the Company
pending or, to the Company's knowledge, threatened to be brought by or filed
with any Governmental Authority and no facts exist as a result of which the
Company could have any liability based on, arising out of, in connection with or
otherwise relating to the classification of any individual by the Company as an
independent contractor or "leased employee" (within the meaning of Section
414(n) of the Code) rather than as an employee.
(i) Section 3.19(i) of the Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company who holds (i) any option to purchase Company Common Stock, together with
the number of shares of Company Common Stock subject to such option, the option
price of such option (to the extent determinable), whether such option is
intended to qualify as an incentive stock option within the meaning of Section
422(b) of the Code (an "ISO"), and the expiration date of such option; (ii) any
shares of Company Common Stock that are restricted as a result of an agreement
with the Company or the
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stock plan of the Company; and (iii) any other right, directly or
indirectly, to receive Company Common Stock or any other compensation based in
whole or in part on the value of Company Common Stock, together with the number
of shares of Company Common Stock subject to such right.
(j) Section 3.19(j) of the Disclosure Schedule sets forth a true and
complete list of (i) all agreements with consultants who are individuals
obligating the Company to make annual cash payments in an amount exceeding
$25,000; and (ii) all agreements with respect to the services of independent
contractors or leased employees who are individuals or individuals doing
business in a corporate form whether or not they participate in any of the
Employee Benefit Plans.
(k) (i) No Employee Benefit Plan is an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in
Company Common Stock; and (ii) the consummation of the transactions contemplated
by this Agreement will not, alone or together with any other event, (A) entitle
any employee or former employee of the Company to any payment, (B) result in an
increase in the amount of compensation or benefits or accelerate the vesting or
timing of payment of any benefits or compensation payable in respect of any
employee or former employee, or (C) result in any parachute payment under
Section 280G of the Code, whether or not such payment is considered reasonable
compensation for services rendered. The Company will take all actions within its
control to ensure that all actions required to be taken by a fiduciary of any
Employee Benefit Plan in order to effectuate the transaction contemplated by
this Agreement shall comply with the terms of such Plan, ERISA and other
applicable Laws.
(l) No Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (through insurance or otherwise) with
respect to any employee or former employee of the Company beyond their
retirement or other termination of service other than (i) coverage mandated by
applicable Law, (ii) retirement or death benefits under any Pension Plan, (iii)
disability benefits under any welfare plan that have been fully provided for by
insurance or otherwise, (iv) deferred compensation benefits accrued as
liabilities on the consolidated books of the Company, or (v) benefits in the
nature of severance pay.
(m) No Employee Benefit Plan is a "multiple employer plan" as described
in Section 3(40) of ERISA or Section 413(c) of the Code.
(n) No Employee Benefit Plan, other than a Pension Plan, is funded
through a trust intended to be exempt from tax pursuant to Section 501 of the
Code.
(o) The Company has not proposed, agreed nor announced any changes to
any Employee Benefit Plan that would cause an increase in benefits under any
such Employee Benefit Plan (or the creation of new benefits or plans) or to
change any employee coverage that would cause an increase in the expense of
maintaining any such plan.
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3.20 LABOR RELATIONS
(a) No condition or state of facts or circumstances exists that could
materially adversely affect the Company's relations with its employees,
including the consummation of the transactions contemplated by this Agreement.
(b) The Company is in compliance in all material respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and is not engaged in any unfair
labor practice.
(c) No collective bargaining agreement with respect to the business of
the Company is currently in effect or being negotiated. The Company has not
encountered any labor union or collective bargaining organizing activity with
respect to its employees. The Company has no obligation to negotiate any such
collective bargaining agreement, and, to the knowledge of the Company, there is
no indication that the employees of the Company desire to be covered by a
collective bargaining agreement.
(d) There are no strikes, slowdowns, work stoppages or other labor
trouble pending or, to the knowledge of the Company, threatened with respect to
the employees of the Company, nor has any of the above occurred or, to the
knowledge of the Company, been threatened.
(e) There is no representation claim or petition pending before the
National Labor Relations Board or any state or local labor agency and, to the
knowledge of the Company, no question concerning representation has been raised
or threatened respecting the employees of the Company.
(f) There are no complaints or charges against the Company pending
before the National Labor Relations Board or any state or local labor agency
and, to the knowledge of the Company, no complaints or charges have been filed
or threatened to be filed against the Company with any such board or agency.
(g) To the knowledge of the Company, no charges with respect to or
relating to the business of the Company are pending before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices.
(h) Section 3.20 of the Disclosure Schedule accurately sets forth all
unpaid severance that, as of the date hereof, is due or claimed, in writing, to
be due from the Company to any Person whose employment with the Company was
terminated.
(i) The Company has not received notice of the intent of any government
body or Governmental Authority responsible for the enforcement of labor or
employment Laws to conduct an investigation of the Company and no such
investigation is in progress.
(j) The Company is not and, to the knowledge of the Company, no
employee of the Company is, in violation in any material respect of any
employment agreement, non-disclosure
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agreement, non-compete agreement nor any other agreement regarding an
employee's employment with the Company.
(k) The Company has paid or accrued all wages that are due and payable
to each of its employees and each of its independent contractors.
(l) Except as set forth in Section 3.20(l) to the Disclosure Schedule,
the Company does not have and will not have at the Closing Date any contingent
liabilities for sick leave, vacation, holiday pay, severance pay, accrued pay or
similar items not set forth in the Financial Statements except for such
obligations incurred in the ordinary course of business and consistent with past
practices.
(m) The execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby will not trigger any severance pay obligation of the Company
under any Contract.
3.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--As used herein, the term
"INTELLECTUAL PROPERTY ASSETS" shall mean all worldwide intellectual property
rights including without limitation: (i) all trademarks, service marks, trade
names, common law trademarks, business names, Internet domain names, trade
dress, slogans, and the goodwill associated therewith, and all registrations or
applications therefor (collectively, "MARKS"); (ii) all patents, patent
applications and inventions and discoveries that may be patentable
(collectively, "PATENTS"); (iii) all copyrights in both published works and
unpublished works, including training manuals, marketing and promotional
materials, internal reports, business plans and any other expressions, mask
works, software programs (source and object code), and videos, whether
registered or unregistered, and all registrations or applications in connection
therewith (collectively, "COPYRIGHTS"); and (iv) all trade secrets, know-how,
confidential information, customer lists, technical information, proprietary
information, technologies, processes and formulae, source code, algorithms,
architecture, structure, display screens and development tools, data, plans,
drawings and blue prints, whether tangible or intangible and whether stored,
compiled, or memorialized physically, electronically, photographically, or
otherwise (collectively, "TRADE SECRETS"); owned, used or licensed by the
Company as licensee or licensor and that are used in or material to the conduct
of the business of the Company as it is currently conducted or as proposed to be
conducted.
(b) Rights--The Company (i) owns all right, title and interest in and
to each of the Intellectual Property Assets, free and clear of all Encumbrances
and Liens, or (ii) licenses or otherwise possesses legally valid and enforceable
rights to use each of the Intellectual Property Assets, and, in each case of
clause (i) or (ii), the Company may transfer such rights as contemplated by this
Agreement. Except as set forth on Section 3.21(b) of the Disclosure Schedule,
the Company has made all necessary filings and recordations to protect and
maintain its interest in the Intellectual Property Assets except where the
failure to so protect or maintain does not relate to a material Intellectual
Property Asset.
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(c) Agreements--Section 3.21(c) of the Disclosure Schedule contains a
true, correct and complete list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound. Other than as set forth on Section 3.21(c) of the Disclosure Schedule,
the Company is not nor will it be as a result of the execution and delivery of
this Agreement and any Ancillary Agreements, as applicable, or the performance
of its obligations hereunder or thereunder, in breach or violation of any
agreement described on Section 3.21(c) of the Disclosure Schedule. Each license
of Intellectual Property Assets listed in Section 3.21(c) is valid, subsisting,
and enforceable, and shall continue in effect on its current terms upon
consummation of the transactions contemplated by this Agreement and any
Ancillary Agreements, as applicable.
(d) Patents--(i) Section 3.21(d) of the Disclosure Schedule contains a
true, correct and complete list of all Patents; (ii) all Patents are valid and
subsisting and all maintenance fees, annuities and the like have been paid;
(iii) to the knowledge of the Company, none of the Patents is infringed; and
(iv) none of the patents has been challenged or threatened in any way by any
Person, and none of the products or technology used, sold, offered for sale or
licensed or proposed for use, sale, offer for sale or license by the Company
infringes or is alleged to infringe any rights of any Person.
(e) Trademarks--(i) Section 3.21(e) of the Disclosure Schedule contains
a true, correct and complete list of all Marks; (ii) all Marks are valid and
subsisting; (iii) to the knowledge of the Company, none of the Marks is
infringed; (iv) none of the Marks has been challenged or threatened in any way
by any Person, and no claims exist against the use by the Company of any
trademarks, service marks, trade names, or trade dress used in the business of
the Company as currently conducted or as proposed to be conducted; (v) all
materials encompassed by the Marks have been marked with appropriate trademark
and registration notices; and (vi) all uses of registered Marks are in
conformance with applicable statutory and common law so as not to compromise the
strength and integrity of the Marks. (f) Copyrights--(i) Section 3.21(f) of the
Disclosure Schedule contains a true, correct and complete list of all
Copyrights; (ii) all the Copyrights owned by the Company, whether or not
registered, are valid and enforceable; (iii) to the knowledge of the Company,
none of the Copyrights is infringed or has been challenged or threatened in any
way; (iv) no claims exist against the use by the Company of any writings or
other expressions used in the business of the Company as currently conducted or
as proposed to be conducted; and (v) all works encompassed by the Copyrights
have been marked with appropriate copyright notices.
(g) Trade Secrets--The Company has taken reasonable precautions to
protect the secrecy, confidentiality and value of its Trade Secrets. To the
knowledge of the Company, the Trade Secrets have not been used, divulged or
appropriated either for the benefit of any Person (other than the Company) or to
the detriment of the Company. None of the Trade Secrets is subject to any
material adverse claim or, to the knowledge of the Company, has been challenged
or threatened in any way. Appropriate policies are in place to ensure the
continued secrecy, confidentiality and value of its Trade Secrets, including but
not limited to appropriate marking of
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Trade Secrets as "proprietary" and/or "confidential;" appropriate limiting
of access to Trade Secrets by employees on a "need-to-know" basis; and
appropriate confidentiality provisions in agreements executed by employees,
contractors, joint venturers and any and all Persons potentially or actually
having access to Trade Secrets.
(h) No Restrictions - No Intellectual Property Asset is subject to any
outstanding Order, Proceeding (other than pending applications for patent,
trademark registration or copyright registration) or stipulation restricting in
any manner the licensing thereof by the Company. The Company has not entered
into any agreement to indemnify any other Person against any charge of
infringement of any Intellectual Property Asset.
(i) Nondisclosure - All employees, contractors, agents and consultants
of the Company have executed a nondisclosure and assignment of inventions
agreement in the form attached hereto as Section 3.21(i) of the Disclosure
Schedule to protect the confidentiality and to vest in the Company exclusive
ownership of such Intellectual Property Assets. To the knowledge of the Company,
no employee, contractor, agent or consultant of the Company has made any
unauthorized use of the Company's Trade Secrets or other confidential
information or used any Trade Secrets or other confidential information of any
other Person in the course of their work for the Company. The Company has no
written or oral agreements with employees, contractors agents or consultants
with respect to the ownership of inventions, trade secrets or other works
created by them as a result of which any such employee, contractor, agent or
consultant may have nonexclusive rights to the portions of the Intellectual
Property Assets so created by such individual.
(j) Agency Conflicts -- To the knowledge of the Company, no officer,
employee, contractor, agent or consultant of the Company is, or is now expected
to be, in violation of any term of any employment contract, patent disclosure
agreement, proprietary information agreement, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or agreement or any restrictive covenant relating to the right of any
such officer, employee, contractor, agent or consultant to be employed or
engaged by the Company because of the nature of the business conducted or to be
conducted by the Company or relating to the use of Trade Secrets or proprietary
information of others and, to the Company's knowledge and belief, the continued
employment or retention of its officers, employees, contractors, agents or
consultants does not subject the Company to any liability with respect to any of
the foregoing matters.
(k) Source Code Escrow - Except as disclosed in Section 3.21(k) to the
Disclosure Schedule, the Company has not deposited, nor is it obligated to
deposit, any source code regarding its products into any source code escrows or
similar arrangements and the Company is not under any contractual nor other
obligation to disclose the source code or any other material proprietary
information included in or relating to its products.
3.22 CERTAIN PAYMENTS
Neither the Company nor any shareholder, director, officer, agent or
employee of the Company nor, to the knowledge of the Company, any other Person
associated with or acting for
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or on behalf of the Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment to any Person, private or public, regardless of form, whether in money,
property or services in violation of the Foreign Corrupt Practices Act or any
similar Law (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, or (iii) to obtain special
concessions, or for special concessions already obtained, for or in respect of
the Company or any affiliate of the Company, or (b) established or maintained
any fund or asset of the Company that has not been recorded in the consolidated
books and records of the Company.
3.23 RELATIONSHIPS WITH RELATED PERSONS
No shareholder, affiliate, officer, director or employee of the
Company, nor any spouse or child of any of them or any Person associated with
any of them ("RELATED PERSON"), has any interest in any assets or properties
used in or pertaining to the business of the Company. Except as set forth in
Section 3.23 to the Disclosure Schedule, none of the shareholders, affiliates,
officers, directors or employees of the Company nor any Related Person owns or
has owned, directly or indirectly, and whether on an individual, joint or other
basis, any equity interest or any other financial or profit interest in a Person
(other than less than two percent (2%) of the outstanding capital stock of a
Person subject to the reporting requirements of the Exchange Act) that has (i)
had business dealings with the Company, or (ii) engaged in competition with the
Company. Except as set forth in Section 3.23 to the Disclosure Schedule, no
shareholder, affiliate, officer, director or employee of the Company nor the
Related Person is a party to any Contract with, or has any claim or right
against, or owes any amounts to, the Company.
3.24 BROKERS OR FINDERS
Except as set forth in Section 3.24 to the Disclosure Schedule, neither
the Company nor its agents have incurred any obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or financial
advisory services or other similar payment in connection with this Agreement or
the Ancillary Agreements or the transactions contemplated hereby or thereby.
3.25 CUSTOMER RELATIONSHIPS
Except as set forth in Section 3.25 to the Disclosure Schedule, to the
knowledge of the Company, there are no facts or circumstances, including the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, that are reasonably likely to result in the loss of any
material customer of the Company or a material change in the relationship of the
Company with such a customer.
3.26 OUTSTANDING INDEBTEDNESS
Section 3.26 of the Disclosure Schedule sets forth as of the Base
Balance Sheet Date (a) the amount of all indebtedness for borrowed money of the
Company then outstanding (including (i) the interest rate applicable thereto,
(ii) any Encumbrances or Liens that relate to such indebtedness, and (iii) the
name of the lender or the other payee of each such indebtedness),
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(b) the amount of all lending and commitments to lend, and (c) the
amount of all guarantees or sureties of the Company with respect to the
obligations of any Person.
3.27 SUPPLIERS; RAW MATERIALS CONTRACTORS
Section 3.27 of the Disclosure Schedule sets forth for the year ended
December 31, 2000 and the five months ended May 31, 2001, (i) the names and
addresses of the ten (10) largest suppliers, contractors and subcontractors of
the Company based on the aggregate value of raw materials, supplies, merchandise
and other goods and services ordered by the Company from such suppliers,
contractors and subcontractors during such period, and (ii) the amount for which
each such supplier, contractor or subcontractor invoiced the Company during such
period. The Company has received no notice and has no reason to believe that
there has been any material adverse change in the price of such raw materials,
supplies, merchandise or other goods or services, or that any such supplier,
contractor or subcontractor will not sell raw materials, supplies, merchandise
and other goods and services to the Company at any time after the Closing Date
on terms and conditions substantially the same as those used in its current
sales to the Company, subject to general and customary price increases.
3.28 CUSTOMERS
Section 3.28 of the Disclosure Schedule sets forth a true, complete and
correct listing of the twenty (20) largest customers (the "CUSTOMERS") of the
Company (based upon the amounts for which each such Customer was invoiced during
the year ended December 31, 2000 and the five months ended May 31, 2001.
3.29 PAYABLES
There has been no material adverse change since the date of the
Financial Statements in the amount or delinquency of accounts payable by the
Company (either individually or in the aggregate).
3.30 PRODUCT WARRANTIES; PRODUCT LIABILITY
Attached to Section 3.30 of the Disclosure Schedule are complete and
correct copies of the standard terms and conditions of sale, license or lease
for each of the products or services of the Company (containing applicable
guaranty, warranty and indemnity provisions). Except as required by Law or as
set forth in such standard terms and conditions, no product manufactured, sold,
licensed, leased, or delivered by, or service rendered by or on behalf of, the
Company is subject to any guaranty, warranty or other indemnity, express or
implied, beyond such standard terms and conditions. Section 3.30 of the
Disclosure Schedule sets forth the aggregate expenses incurred by the Company's
customer support and service center in fulfilling its obligations under its
guaranty, warranty and right of return provisions during the periods covered by
the Financial Statements and the Interim Financial Statements and the Company
knows of no reason why such expenses should materially increase as a percentage
of sales in the future. Except as set forth in Section 3.30 of the Disclosure
Schedule, there are no existing or, to the knowledge of the Company threatened
claims, against the Company for services or merchandise that are defective
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or fail to meet any service or product warranties other than in the
ordinary course of business consistent with past experience. Except as set forth
in Section 3.30 of the Disclosure Schedule, no claim has been asserted against
the Company since its formation for renegotiation or price redetermination of
any completed business transaction. The Company's products are free from known
significant defects and, to the knowledge of the Company, conform in all
material respects to the specifications, documentation and sample demonstration
furnished to the Company's customers and made available to Buyer.
3.31 FINANCIAL SERVICE RELATIONS AND POWERS OF ATTORNEY
All of the arrangements that the Company has with any bank depository
institution or other financial services entity, whether or not in the Company's
name, are completely and accurately described on Section 3.31 of the Disclosure
Schedule, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the current balance as of the date reported, banking
institution and person or persons authorized as signatories in respect thereof.
The Company has no outstanding powers of attorney.
3.32 REGULATORY CORRESPONDENCE
The Company has made available to the Buyer true and correct copies of
any and all material correspondence from and to any federal, governmental or
regulatory agencies or bodies since its formation.
3.33 INVESTMENT MATTERS
(a) The Sellers are acquiring the Buyer Shares for their own account
and not with a view to distribution within the meaning of Section 2(11) of the
Securities Act.
(b) The Sellers acknowledge that the Buyer Shares may not be sold,
transferred or otherwise disposed of in the United States unless in compliance
with the Securities Act and any applicable U.S. state securities laws.
(c) The Sellers have sufficient knowledge and expertise in business and
financial matters to have been able to evaluate the risks and merits inherent in
the purchase of Buyer Shares contemplated by this Agreement.
(d) Each Seller has had the opportunity to ask questions of the
officers of Buyer on any matter material to his or her decision to purchase
Buyer Shares hereunder and all such questions were answered to his or her
satisfaction.
(e) None of the Sellers is an accredited investor within the meaning of
Rule 501(a) promulgated under the Securities Act.
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3.34 DISCLOSURE
No representation or warranty of the Company or any of the Sellers in
this Agreement as modified by statements in the Disclosure Schedule is
inaccurate in any material respect or omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company and Sellers as
follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has full corporate power
and authority to conduct its business as it is now being conducted and to own or
use the assets and properties that it purports to own or use. Buyer is duly
qualified to do business as a foreign corporation and is in good standing under
the Laws of each state or other jurisdiction in which either the ownership or
use of the assets or properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect on Buyer and its Subsidiaries, taken as a whole.
4.2 AUTHORITY; NO CONFLICT
(a) Buyer has the right, power, authority and capacity to execute and
deliver this Agreement and the Ancillary Agreements to which Buyer is a party,
to consummate the transactions contemplated hereby and thereby and to perform
its obligations under this Agreement and the Ancillary Agreements to which Buyer
is a party. This Agreement has been duly authorized and approved, executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms. Upon the execution
and delivery by Buyer of the Ancillary Agreements to which Buyer is a party,
such Ancillary Agreements will constitute the legal, valid and binding
obligations of Buyer, enforceable against it in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, and (ii) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
(b) Neither the execution and delivery of this Agreement nor any
Ancillary Agreement by Buyer nor the consummation or performance by Buyer of the
transactions contemplated hereby or thereby, including issuance of the Buyer
Shares pursuant to this Agreement, will, directly or indirectly (with or without
notice or lapse of time or both):
(i) contravene, conflict with, or result in a violation or breach of
(A) any provision of the Organizational Documents of Buyer, (B) any resolution
adopted by the board of directors or the shareholders of Buyer, (C) any legal
requirement or any Order, award, decision, settlement or
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process to which Buyer or any of the assets or properties owned or used by
it may be subject, or (D) any Governmental Permit held by Buyer, excluding
from clauses (C) and (D) any contravention, conflict, violation or breach that
would not, either individually or in the aggregate, have a Material Adverse
Effect or materially impair or preclude the Buyer's ability to consummate the
transactions contemplated hereby;
(ii) result in a breach of or constitute a default, give rise to a
right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit, or require the consent or approval of or any notice to
or filing with any third Person, under any material Contract to which Buyer is a
party or by which its assets or properties are bound, or require the consent or
approval of or any notice to or filing with any Governmental Authority to which
either Buyer or its assets or properties are subject except for any breaches,
defaults, rights of termination, cancellation or acceleration, entitlements,
consents, approvals, notices or filings that would not, either individually or
in the aggregate, have a Material Adverse Effect or materially impair or
preclude the Buyer's ability to consummate the transactions contemplated hereby;
or
(iii) result in the imposition or creation of any Encumbrance or Lien
upon or with respect to any of the assets or properties owned or used by Buyer
except for any imposition or creation that would not, either individually or in
the aggregate, have a Material Adverse Effect or materially impair or preclude
the Buyer's ability to consummate the transactions contemplated hereby.
4.3 CAPITALIZATION; BUYER SHARES
(a) The authorized capital stock of Buyer consists of 1,000,000 shares
of preferred stock, $.01 par value per share, of which as of the date of this
Agreement no shares are issued or outstanding, and 43,000,000 shares of Buyer
Common Stock, of which as of June __, 2001, ________ shares were issued and
outstanding.
(b) The Buyer Shares issuable as a result of this Agreement have been
duly authorized and, upon consummation of the transactions contemplated hereby
will be validly issued, fully paid and nonassessable and approved for listing on
the Nasdaq National Market.
4.4 FILINGS WITH THE COMMISSION
(a) Buyer has delivered or made available to the Company a true,
correct and complete copy of its Annual Report on Form 10-K for the year ended
September 30, 2000 and Quarterly Reports on Form 10-Q for the quarters ended
December 31, 2000 and March 31, 2001 (collectively, the "BUYER SEC REPORT"). The
Buyer SEC Report has been timely filed pursuant to the Exchange Act.
(b) The Buyer SEC Report complied as to form in all material respects
with the requirements of the Exchange Act in effect on the date thereof. The
Buyer SEC Report, when filed pursuant to the Exchange Act, did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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(c) Each of the Buyer financial statements (including the related
notes) included in the Buyer SEC Report presents fairly, in all material
respects, the consolidated financial position and consolidated results of
operations and cash flows of Buyer as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of any unaudited interim financial statements included
therein, to normal year-end adjustments and to absence of complete footnotes.
4.5 LEGAL PROCEEDINGS
There is no pending Proceeding against Buyer that challenges, or that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated hereby, or that otherwise
could reasonably be expected to result in a Material Adverse Effect on Buyer and
its Subsidiaries, taken as whole. To the knowledge of Buyer, no such Proceeding
has been threatened.
4.6 BROKERS OR FINDERS
Neither Buyer nor any of its agents has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or financial advisory services or other similar payment in
connection with this Agreement or the Ancillary Agreements or the transactions
contemplated hereby or thereby.
4.7 DISCLOSURE
No representation or warranty of Buyer in this Agreement is inaccurate
in any material respect or omits to state a material fact necessary to make the
statements herein in light of the circumstances under which they were made, not
misleading.
5. COVENANTS
The parties, as applicable, hereby covenant and agree as follows:
5.1 NORMAL COURSE
From the date hereof until the Closing Date, the Company shall: (a)
maintain its corporate existence in good standing; (b) maintain the general
character of its business; (c) maintain in effect all of its presently existing
insurance coverage (or substantially equivalent insurance coverage); (d)
preserve intact in all material respects its business organization, preserve its
goodwill and the confidentiality of its business know-how, exercise its best
efforts to keep available to the Company the services of its current officers
and employees and preserve its present material business relationships with its
collaborators, licensors, customers, suppliers and other Persons with which the
Company has material business relations; and (e) in all respects conduct its
business only in the usual and ordinary manner consistent with past practice and
perform all Contracts.
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5.2 CONDUCT OF BUSINESS
From the date hereof until the Closing Date, except as set forth in
Section 5.2 to the Disclosure Schedule, the Company shall not and the Sellers
shall not, except as contemplated by this Agreement, permit the Company to,
directly or indirectly do, or propose to do, any of the following without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld:
(a) amend or otherwise modify its Organizational Documents;
(b) issue, sell, dispose of or Encumber or authorize the issuance,
sale, disposition or Encumbrance of, or grant or issue any option, warrant or
other right to acquire or make any agreement of the type referred to in Section
3.3 with respect to any shares of its capital stock or any of its other
securities or any security convertible or exercisable into or exchangeable for
any such shares or securities, or alter any term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
(c) encumber any material assets or properties of the Company;
(d) declare, set aside, make or pay any dividend or other distribution
to any shareholder with respect to its capital stock;
(e) redeem, purchase or otherwise acquire any capital stock or other
securities of the Company;
(f) increase the compensation or other remuneration or benefits payable
or to become payable to any director or officer of the Company, or increase the
compensation or other remuneration or benefits payable or to become payable to
any of its other employees or agents;
(g) adopt or (except as otherwise required by law) amend or make any
unscheduled contribution to any Employee Benefit Plan for or with employees, or
enter into any collective bargaining agreement;
(h) terminate or modify any Contract requiring future payments to or
from the Company, individually or in the aggregate, in excess of $10,000, except
for termination of Contracts upon their expiration during such period in
accordance with their terms;
(i) create, incur, assume or otherwise become liable for any
indebtedness in an aggregate amount in excess of $25,000, except for blanket
inventory purchases where the Company shall not make any payment or commitment
in an aggregate amount in excess of $25,000 (for purposes of this part of
Section 5.2(i), obligations or liabilities that are paid, discharged or
satisfied under Section 5.2(j) shall be included in determining whether the
foregoing basket amounts have been reached), or guarantee or endorse any
obligation or the net
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worth of any Person, except for endorsements of negotiable instruments for
collection in the ordinary course of business;
(j) pay, discharge or satisfy any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, in an aggregate
amount in excess of $25,000, except for liabilities incurred in the ordinary
course of business prior to the date hereof and blanket inventory purchases
where the Company shall not make any payment or commitment in an aggregate
amount in excess of $25,000 (for purposes of this Section 5.2(j), indebtedness
that is created, incurred, assumed or for which the Company is otherwise liable
under Section 5.2(i) shall be included in determining whether the foregoing
basket amounts have been reached);
(k) sell, transfer, lease or otherwise dispose of any of its assets or
properties, except in the ordinary course of business consistent with past
practice and for a cash consideration equal to the fair value thereof at the
time of such sale, transfer, lease or other disposition;
(l) cancel, compromise, release or waive any material debt, claim or
right;
(m) make any loan or advance to any Person other than travel and other
similar routine advances in the ordinary course of business consistent with past
practice, or acquire any capital stock or other securities or any ownership
interest in, or substantially all of the assets of, any other business
enterprise;
(n) make any material capital investment or expenditure or capital
improvement, addition or betterment;
(o) change its method of accounting or the accounting principles or
practices utilized in the preparation of the Financial Statements, other than as
required by GAAP;
(p) institute or settle any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(q) adopt a plan of dissolution or liquidation with respect to the
Company;
(r) enter into any Contract, except Contracts made in the ordinary
course of business consistent with past practice;
(s) make any new election with respect to Taxes or any change in
current elections with respect to Taxes, or settle or compromise any federal,
state, local or foreign Tax liability or agree to an extension of a statute of
limitations;
(t) take or omit to take any action that would constitute a material
violation of or material default under, or waive any rights under, any material
Contract;
(u) enter into any commitment to do any of the foregoing, or any action
that would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect in any material respect (subject
to the knowledge and materiality limitations
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set forth therein) or cause any covenant, condition or agreement of the
Company in this Agreement not to be complied with or satisfied in any material
respect; or
(v) Enter into any contracts or other agreements of any nature
whatsoever that are not by their express terms freely transferable and
assignable to Buyer.
5.3 CERTAIN FILINGS
The Company shall cooperate with Buyer with respect to all filings with
Governmental Authorities that are required to be made by the Company to carry
out the transactions contemplated by this Agreement. The Company shall assist
Buyer in making all such filings, applications and notices as may be necessary
or desirable in order to obtain the authorization, approval or consent of any
Governmental Authority that may be reasonably required or which Buyer may
reasonably request in connection with the consummation of the transactions
contemplated hereby.
5.4 NOTIFICATION OF CERTAIN MATTERS
The Company and/or each of the Sellers shall promptly notify Buyer of
(i) the occurrence or non-occurrence of any fact or event of which the Company
and/or each of the Sellers has knowledge that would be reasonably likely (A) to
cause any representation or warranty of the Company and/or each of the Sellers
contained in this Agreement or any Ancillary Agreements to be untrue or
incorrect in any material respect at any time from the date hereof to the
Closing Date or (B) to cause any covenant, condition or agreement of the Company
and/or each of the Sellers in this Agreement or any Ancillary Agreements not to
be complied with or satisfied in any material respect and (ii) any failure of
the Company and/or each of the Sellers to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder or
thereunder in any material respect; provided, however, that no such notification
shall affect the representations or warranties of the Company and/or each of the
Sellers, or the right of Buyer to rely thereon, or the conditions to the
obligations of Buyer, or the remedies available hereunder or thereunder to
Buyer. The Company and/or each of the Sellers shall give prompt notice to Buyer
of any notice or other communication from any third Person alleging that the
consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement or any Ancillary Agreement.
5.5 NO SOLICITATION
From the date hereof until the earlier of (i) July 1, 2001, unless all
conditions to Closing other than the satisfaction of Section 7.5 shall have been
satisfied by July 1, 2001, in which case the end of the period shall be extended
to August 15, 2001 or (ii) termination of this Agreement by Buyer, the Company
and the Sellers shall not, and shall not permit any, officer, director,
shareholder, employee, investment banker or other agent of the Company to,
directly or indirectly, (A) solicit, engage in discussions or negotiate with any
Person (whether or not such discussions or negotiations are initiated by the
Company), or take any other action intended or designed to facilitate the
efforts of any Person, other than Buyer, relating to the possible acquisition of
the Company (whether by way of merger, purchase of capital stock, purchase of
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assets or otherwise) or any significant portion of its capital stock or assets
(with any such efforts by any such Person to make such an acquisition referred
to as an "ALTERNATIVE ACQUISITION"), (B) provide information with respect to the
Company to any Person, other than Buyer, relating to a possible Alternative
Acquisition by any Person, other than Buyer, (C) enter into an agreement with
any Person, other than Buyer, providing for a possible Alternative Acquisition,
or (D) make or authorize any statement, recommendation or solicitation in
support of any possible Alternative Acquisition by any Person, other than by
Buyer.
5.6 ACCESS TO INFORMATION; CONFIDENTIALITY
Upon reasonable written notice, each party shall permit representatives
of the other to have access (at all reasonable times and in a manner so as not
to interfere with the normal business operations of the other party) to all
premises, properties, financial and accounting records, Contracts, other records
and documents, and personnel of or pertaining to such party, all in accordance
with the terms of the Confidentiality Agreement; provided that the
representative of the Company may have the access to Buyer permitted hereunder
only in order to conduct customary due diligence regarding the completeness of
the Buyer SEC Report, Registration Statement and other information set forth
herein as the Company may reasonably request. No investigation or examination by
either party shall diminish, obviate or constitute a waiver of the enforcement
of any of the representations, warranties, covenants or agreements of the other
party under this Agreement.
5.7 REASONABLE BEST EFFORTS; FURTHER ACTION
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts (exercised diligently and
in good faith) to take, or cause to be taken, all actions and to do, or cause to
be done, all other things reasonably necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, to obtain in a timely manner all necessary
waivers, consents, authorizations and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
Buyer shall not be obligated to divest, abandon, license, dispose of, hold
separate or take similar action with respect to any portion of the business,
assets or properties (tangible or intangible) of Buyer, any of its Subsidiaries
or the Company in connection with seeking to obtain or obtaining any waiver,
consent, authorization or approval of any Person associated with the
consummation of the transactions contemplated hereby or otherwise.
(c) If, at any time after the Closing Date, any such further action is
necessary or desirable to carry out the purposes of this Agreement or any
Ancillary Agreements, each of the Sellers and the officers and directors of the
Company and Buyer are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
or desirable action.
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6. ADDITIONAL COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
6.1 CERTAIN FILINGS
Buyer agrees to make or cause to be made all filings with Governmental
Authorities that are required to be made by Buyer to carry out the transactions
contemplated by this Agreement and the Ancillary Agreements.
6.2 NOTIFICATION OF CERTAIN MATTERS
Buyer shall promptly notify the Company of (i) the occurrence or
non-occurrence of any fact or event of which Buyer has knowledge which would be
reasonably likely (A) to cause any representation or warranty of Buyer contained
in this Agreement and/or the Ancillary Agreements to be untrue or incorrect in
any material respect at any time from the date hereof to the Closing Date or (B)
to cause any covenant, condition or agreement of Buyer in this Agreement and/or
the Ancillary Agreements not to be complied with or satisfied in any material
respect and (ii) any failure of Buyer to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification shall affect the
representations or warranties of Buyer, or the right of the Company to rely
thereon, or the conditions to the obligations of the Company, or the remedies
available hereunder to the Company. Buyer shall give prompt notice to the
Company of any notice or other communication from any third Person alleging that
the consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement.
6.3 RESERVED
6.4 REGISTRATION
(a) Not later than 60 calendar days after the Closing Date, Buyer shall
file with the SEC, the Registration Statement (or any successor short form
registration involving a similar amount of disclosure) for a public offering of
all the Buyer Shares then outstanding to be made on a continuous basis pursuant
to Rule 415 of the Securities Act and will use its commercially reasonable
efforts to cause such registration statement to become effective (subject to
review of such Registration Statement by the SEC) and remain continuously
effective until the earlier of (i) two (2) years from the Closing Date or (ii)
such time as all of the Buyer Shares may be sold pursuant to Rule 144
promulgated under the Securities Act on a single day. The Buyer may, upon
written notice to the selling shareholders listed therein, suspend use of the
Registration Statement for a reasonable period if the Buyer in its reasonable
judgment believes it may possess material nonpublic information the disclosure
of which at that point in time in its reasonable judgment would have a Material
Adverse Effect on the Buyer and its Subsidiaries taken as a whole.
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(b) The Company and each of the Sellers covenant and agree that they
shall provide to Buyer on a timely basis such consents, representations and
information and executed such documents as may reasonably be required by Buyer
in connection with such Registration Statement.
(c) Buyer shall pay all expenses of registration of the Buyer Shares
pursuant to Section 6.4(a), except brokerage commissions, legal expenses and
such other expenses as may be required by law to be paid by the Sellers.
(d) To the extent permitted by law, the Buyer will indemnify and hold
harmless each of the Sellers, their respective officers and directors and each
person, if any, who controls the Sellers within the meaning of the Securities
Act, against any costs or expenses (including attorney's fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement, joint
or several, to which any of them may become subject under the Securities Act or
otherwise, insofar as such costs or expenses (including attorney's fees),
judgments, fines, losses, claims, damages liabilities or amounts paid in
settlement (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained or expressly
incorporated by reference in any such Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
of the Sellers and their respective officers and directors and each such
controlling person for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, however, that the indemnity agreement contained
in this Section 6.4(d) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Buyer (which consent shall not be unreasonably withheld) nor
shall the Buyer be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such Registration Statement, preliminary prospectus,
final prospectus or amendment or supplement thereto in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Sellers or any person controlling the Sellers.
(e) To the extent permitted by law, the Sellers will, severally and not
jointly, indemnify and hold harmless Buyer, its directors, its officers who have
signed such Registration Statement and each person, if any, who controls the
Buyer within the meaning of the Securities Act against any losses, claims,
damages or liabilities to which the Buyer or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained or expressly incorporated by reference in such
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendment or supplement thereto, or arise out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but
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only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by the Sellers expressly for use in connection with such registration; and the
Sellers will reimburse any legal or other expenses reasonably incurred by the
Buyer or any such director, officer and controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action. It
is agreed that the indemnity agreement contained in this Section 6.4(e) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
indemnifying party (which consent shall not be unreasonably withheld).
(f) If the indemnification provided for in Sections 6.4(d) and (e)
hereof is unavailable to a person entitled to indemnification hereunder, then
each person that would have been an indemnifying party hereunder will, in lieu
of indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified person for which indemnification is provided herein in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and such indemnified party, respectively, in connection with the
statements or omissions which resulted in the costs or expenses (including
attorney's fees), judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement underlying such indemnification obligations. Relative
fault will be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or such indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Buyer and the Sellers agree that it would not be just
and equitable if contribution pursuant to this Section 6.4(f) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to above in this Section
6.4(f). No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(g) Promptly after receipt by a party indemnified under this Section
6.4 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 6.4, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however that if the defendants
in any such action include both the indemnified party and the indemnifying party
and, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of the indemnified party and the
indemnifying party exists, the indemnified party or parties shall have the right
to select one separate law firm, at the indemnifying party's or parties'
expense, to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. The
failure to notify any indemnifying party promptly of the commencement of any
such action, shall not relieve such indemnifying party of any liability to the
indemnified
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party under this Section 6.4, except to the extent that such indemnifying party
is actually prejudiced thereby.
6.5 NASDAQ NATIONAL MARKET LISTING
Buyer agrees to authorize for listing on the Nasdaq National Market the
Buyer Shares issuable, and those required to be reserved for issuance, in
connection with the transactions contemplated hereby, upon official notice of
issuance.
6.6 ACCRUED COMPENSATION
Buyer agrees to pay the Accrued Compensation listed in Section 6.6 to
the Disclosure Schedule to the parties identified therein as soon as possible
following the Closing, but in no event more than thirty (30) days after the
Closing Date.
7. CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement and the Ancillary
Agreements to consummate the transactions contemplated hereby and thereby shall
be subject to the satisfaction, at or prior to the Closing Date, of each of the
following conditions:
7.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company and each of the
Sellers contained in this Agreement or in the Disclosure Schedule or any
certificate delivered pursuant hereto shall be complete and correct as of the
date when made, shall be deemed repeated at and as of the Closing Date as if
made on the Closing Date, and shall then be complete and correct.
7.2 PERFORMANCE OF COVENANTS
The Company and each of the Sellers shall have taken all necessary
corporate or other actions to consummate the transactions contemplated hereby
and shall have performed and complied in all respects with each covenant,
agreement and condition required by this Agreement and the Ancillary Agreements
to be performed or complied with by them at or prior to the Closing Date.
7.3 UPDATE CERTIFICATE
Buyer shall have received a certificate or certificates, dated the
Closing Date, signed by the Company and each of the Sellers as to the matters
set forth in Sections 7.1 and 7.2.
7.4 NO GOVERNMENTAL OR OTHER PROCEEDING; ILLEGALITY
No Order of any Governmental Authority shall be in effect that
restrains or prohibits any transaction contemplated hereby or that would limit
or affect Buyer's ownership or operation of the business or assets of the
Company; no suit, action, investigation, inquiry or Proceeding by any
Governmental Authority shall be pending or threatened against Buyer or the
Company or
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any director or officer of either, as such, that challenges the validity
or legality, or that restrains or seeks to restrain the consummation, of
the transactions contemplated hereby, or that limits or otherwise affects or
seeks to limit or otherwise affect Buyer's right to own or operate the business
or assets of the Company or that compels or seeks to compel Buyer or any of its
Subsidiaries to divest, abandon, license, dispose of, hold separate or take
similar action with respect to any portion of the business, assets or properties
(tangible or intangible) of Buyer or any of its Subsidiaries or the Company; and
no written advice shall have been received by Buyer or the Company or by any of
their respective counsel from any Governmental Authority, and remain in effect,
stating that an action or Proceeding will, if the transactions contemplated
hereby are consummated or sought to be consummated, be filed seeking to
invalidate or restrain any such transaction or limit or otherwise affect Buyer's
ownership or operation of the business or assets of the Company. No Law or Order
shall be enacted, entered, enforced or deemed applicable to the transactions
contemplated hereby that makes the consummation of any such transaction illegal.
7.5 APPROVALS AND CONSENTS
All material waivers, approvals, authorizations or Orders required to
be obtained, and all filings required to be made by the Company for the
authorization, execution and delivery of this Agreement, the consummation by it
of the transactions contemplated hereby and the continuation in full force and
effect of any and all material rights, documents, instruments or Contracts of
the Company shall have been obtained and made, including without limitation all
consents or approvals of any Person that may be required under any lease for
real property to which the Company is a party or which are required to be
disclosed in Section 3.2 to the Disclosure Schedule. The Company shall use
commercially reasonable efforts to obtain landlord consents and estoppel
certificates reasonably satisfactory in form and substance to Buyer from the
lessors/owners of the real property leased by the Company in Williston, Vermont.
7.6 OPINION OF COUNSEL
The Company shall have delivered to Buyer an opinion of Xxxxxxx &
Xxxxxxx, dated the Closing Date and addressed to Buyer, as to the matters set
forth on EXHIBIT C hereto.
7.7 STOCK RESTRICTION AGREEMENTS
Buyer shall have received executed Stock Restriction Agreements
substantially in the form of EXHIBIT D from each of the Key Employees.
7.8 ESCROW AGREEMENT
There shall have been executed and delivered to Buyer the Escrow
Agreement with such modifications thereto as may be required by the Escrow Agent
and agreed to by the parties hereto.
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7.9 NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENTS
Buyer shall have received executed Noncompetition and Proprietary
Information Agreements substantially in the form of EXHIBIT E from each of the
Key Employees.
7.10 NONSOLICITATION AND PROPRIETARY INFORMATION AGREEMENTS
Buyer shall have received executed Nonsolicitation and Proprietary
Information Agreements substantially in the form of EXHIBIT F from each of the
employees listed in Section 7.10 to the Disclosure Schedule.
7.11 TERMINATION OF RIGHTS AND VOTING AGREEMENTS
All agreements among the Company and any of its security holders, or
among any of the Company security holders, providing for registration rights,
rights of first refusal, rights of co-sale, relating to the voting of the
Company securities or requiring the Company to obtain the consent or approval of
any such security holders prior to taking or failing to take any action, shall
have been, as of or prior to the Closing Date, terminated in their entirety.
7.12 RESIGNATION
Buyer shall have received the written resignations, dated as of the
Closing Date, of each of the directors and corporate and executive officers of
Company.
7.13 ADE CONSENT
The Company shall have delivered to Buyer a copy of the written consent
that was granted by ADE Corporation in connection with the assignment by
ConneXsys Engineering, Inc. ("CEI") of that certain License and Assignment
Agreement, dated August 31, 1998, between ADE Corporation and Chemical Design
Company (now known as CEI) to the Company pursuant to the Asset Purchase
Agreement, dated March 31, 1999, by and between CEI and the Company. Such
consent shall be in form and substance reasonably satisfactory to Buyer.
7.14 CEI NOTE
Buyer shall have received evidence that, with regard to the Company's
Senior Subordinated Convertible Note, dated March 31, 1999, in favor of CEI (the
"Note"), either: (i) the entire unpaid principal amount of such Note, together
with any interest thereon, accrued through the date of prepayment, shall have
been paid in full; or (ii) CEI shall have validly exercised its option to
convert its right to payment of the entire unpaid principal amount of the Note,
together with all accrued interest thereon, into fully paid and nonassessable
shares of Company Common Stock. This condition shall not be satisfied if, with
respect to clause (i) of this Section 7.14, any amounts exceeding the sum of (A)
the entire unpaid principal amount of the Note, plus (B) any interest thereon
accrued through the date of prepayment, are paid or caused to be paid by the
Company. Such evidence shall be in form and substance reasonably satisfactory to
Buyer.
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7.15 RIGHTS TO CONVERSION
Buyer shall have received evidence that any and all options, warrants
or rights of the Sellers and any other Persons, outstanding prior to Closing, to
acquire Company Capital Stock, whether by contract, law or otherwise, including
but not limited to (i) any anti-dilution rights and (ii) any rights to convert
the right to receive unpaid wages into shares of Company Capital Stock have,
prior to Closing, been waived, extinguished, or duly exercised or converted as
the case may be, such that at the Closing Date no such options, warrants or
rights whatsoever shall be exercisable by any Person or outstanding in any form.
Such evidence shall be in form and substance reasonably satisfactory to Buyer.
7.16 SECRETARY'S CERTIFICATE
At the Closing, Buyer shall receive from the Company a Secretary's or
an Assistant Secretary's Certificate certifying (i) the bylaws of the Company,
(ii) incumbency of the officers of the Company, and (iii) resolutions of the
Board of Directors of the Company approving the transactions contemplated
hereby. Such Certificate shall be in form and substance reasonably satisfactory
to Buyer.
7.17 OTHER DOCUMENTS
At the Closing, Buyer shall receive such other certificates and
documents as the Buyer shall have reasonably requested.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND SELLERS
The obligations of the Company and the Sellers, as applicable, under
this Agreement to consummate the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing Date, of each of the
following conditions:
8.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of Buyer contained in this Agreement
or in the Disclosure Schedule or any certificate delivered pursuant hereto shall
be complete and correct as of the date when made, shall be deemed repeated at
and as of the Closing Date as if made on the Closing Date, and shall then be
complete and correct.
8.2 PERFORMANCE OF COVENANTS
Buyer shall have taken all necessary corporate actions to consummate
the transactions contemplated hereby and shall have performed and complied in
all respects with each covenant, agreement and condition required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
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8.3 UPDATE CERTIFICATE
The Company and the Sellers shall have received a certificate or
certificates, dated the Closing Date, signed by Buyer as to the matters set
forth in Sections 8.1 and 8.2.
8.4 NO GOVERNMENTAL OR OTHER PROCEEDING; ILLEGALITY
No Order of any Governmental Authority shall be in effect that
restrains or prohibits any transaction contemplated hereby; and no written
advice shall have been received by Buyer, Company or by any of their respective
counsel from any Governmental Authority, and remain in effect, stating that an
action or Proceeding will, if the transactions contemplated hereby are
consummated or sought to be consummated, be filed seeking to invalidate or
restrain any such transaction. No Law or Order shall be enacted, entered,
enforced or deemed applicable to the transactions contemplated hereby that makes
the consummation of any such transaction illegal.
8.5 OPINION OF COUNSEL
Buyer shall have delivered to the Company and Sellers an opinion of
Brown, Rudnick, Freed & Gesmer, dated the Closing Date and addressed to the
Company, as to the matters set forth on EXHIBIT G hereto.
8.6 CLOSING EXCHANGE PRICE
The Closing Exchange Price shall be greater than $5.00 per share.
8.7 OFFICER'S CERTIFICATE
At the Closing, Sellers shall receive from Buyer an Officer's
Certificate certifying (i) the bylaws of Buyer, (ii) incumbency of the officers
of Buyer, and (iii) resolutions of the Board of Directors of Buyer approving the
transactions contemplated hereby. Such Certificate shall be in form and
substance reasonably satisfactory to the Sellers.
9. INDEMNIFICATION.
9.1 DEFINITIONS
For purposes of this Article 9:
"LOSSES" means all losses, damages (including, without limitation,
consequential damages), fines, penalties, liabilities, payments and obligations,
and all expenses related thereto. Losses shall include any reasonable legal fees
and costs incurred by any of the Indemnified Persons subsequent to the Closing
in defense of or in connection with any alleged or asserted liability, payment
or obligation, whether or not any liability or payment, obligation or judgment
is ultimately imposed against the Indemnified Persons and whether or not the
Indemnified Persons are made or become parties to any such action.
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"BUYER'S INDEMNIFIED PERSONS" means the Buyer, its subsidiary and
affiliated corporations, their respective directors, officers, employees,
stockholders and agents, the Company after the Closing, and any person serving
as a director, officer, employee or agent of the Company at Buyer's request
after the Closing.
"INDEMNIFIED PERSON" means any person entitled to be indemnified under
this Article 9.
"INDEMNIFYING PERSON" means any person obligated to indemnify another
person under this Article 9.
"THIRD PARTY ACTION" means any written assertion of a claim, or the
commencement of any action, suit, or proceeding, by a third party as to which
any person believes it may be an Indemnified Person hereunder.
9.2 SURVIVAL
The representations and warranties made by the parties in or pursuant
to this Agreement shall survive the Closing.
9.3 INDEMNIFICATION BY SELLERS
(a) Subject to the limitations in paragraphs (b), (c), (d), and (e)
below, each of the Sellers, jointly and severally agrees to defend, indemnify
and hold harmless Buyer's Indemnified Persons from and against all Losses
directly or indirectly incurred by or sought to be imposed upon any of them:
(i) resulting from or arising out of any breach of any of the
representations or warranties (other than those in Sections 3.1, 3.2, 3.3, 3.8,
3.13, 3.21 and, solely to the extent relating to title, Section 3.10) made by
the Company, Sellers or any of them in or pursuant to this Agreement or in any
agreement, document or instrument executed and delivered pursuant hereto or in
connection with the Closing;
(ii) resulting from or arising out of any breach of any of the
representations or warranties made by the Sellers pursuant to Sections 3.1 and
3.2;
(iii) resulting from or arising out of any breach of any of the
representations or warranties made by the Sellers pursuant to Sections 3.3, 3.21
and, solely to the extent related to title, Section 3.10;
(iv) resulting from or arising out of any breach of any covenant or
agreement made by Sellers or any of them in or pursuant to this Agreement;
(v) in respect of any liability or obligation of the Company that any
Seller has expressly assumed or for which any Seller has expressly agreed to be
responsible;
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(vi) resulting from or arising out of any liability, payment or
obligation arising out of any litigation or similar matter required to be
described on Section 3.13 to the Disclosure Schedule, except to the extent of
reserves with respect thereto on the Base Balance Sheet;
(vii) resulting from or arising out of the intentional
misrepresentation or intentional breach of warranty of the Company or any Seller
or any intentional failure of the Company or any Seller to perform or comply
with any covenant or agreement of the Company or any Seller, respectively;
(viii) resulting from or arising out of any breach of any of the
representations or warranties made by the Sellers pursuant to Section 3.8 and
resulting from or arising out of any liability, payment or obligation in respect
of any Taxes owing by the Company, Sellers or Buyer, as successor to the
Company, of any kind or description (including interest and penalties with
respect thereto) for all periods, or portions thereof, up to and including the
Closing Date, except to the extent of reserves with respect thereto on the Base
Balance Sheet;
(ix) resulting from or arising out of any third party action, whether
by a governmental authority or other third party for damages, including fines or
penalties, or clean-up costs or other compliance costs under any Environmental
Law or from the violation of any Environmental Law arising out of the operations
of the Company or its former parent corporation on or before the Closing Date;
(x) resulting from or arising out of any Benefit Plan (as defined in
Section 3.19); or
(xi) resulting from or arising out of any Third Party Action (including
a binding arbitration or an audit by any taxing authority), that it is
instituted or threatened against any of Buyer's Indemnified Persons.
(b) The Sellers shall have no liability under paragraph (a) unless one
or more of the Buyer's Indemnified Persons gives written notice to the Sellers
asserting a claim for Losses, including reasonably detailed facts and
circumstances pertaining thereto, before the expiration of the period set forth
below:
(i) for claims under clauses (i) and (xi) (insofar as a claim under
clause (xi) relates to any matter included under clause (i)) of paragraph (a)
above, a period of one (1) year from the Closing Date;
(ii) for claims under clauses (vi), (viii), (ix), (x) and (xi) (insofar
as a claim under clause (xi) relates to any matter included under clause (vi),
(viii), (ix), or (x)) of paragraph (a) above, for so long as any claim may be
made in respect of such matters under any applicable statute of limitations, as
it may be extended; and
(iii) for claims under clauses (ii), (iii), (iv), (v), (vii) and (xi)
(insofar as a claim under clause (x) relates to any matter included under clause
(ii), (iii), (iv), (v) or (vii)) of paragraph (a) above, without limitation as
to time; except that, for any claim based upon a covenant or
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undertaking which by its terms is to be performed after the Closing, then
the period above shall commence on the date when such covenant or agreement
should have been performed.
(c) Indemnification for claims under paragraphs (a)(i) and (xi)
(insofar as the claim relates to any matter included under clause (i)) shall be
payable by Sellers only if the aggregate amount of all Losses hereunder by
Buyer's Indemnified Persons shall exceed $50,000 (the "Basket"), at which point
Sellers shall be responsible for all Losses, including the Basket.
(d) The gross amount with respect to a claim for indemnification for
which the Sellers may be liable to a Buyer's Indemnified Person pursuant to this
Article 9 shall be reduced by any insurance proceeds actually recovered by or on
behalf of the Indemnified Person on account of the indemnifiable Loss.
(e) The maximum amount for which Sellers shall be liable to Buyer's
Indemnified Persons:
(i) shall be unlimited for indemnification claims under paragraphs
(a)(iii), (v), (vii), (viii), and (xi) (insofar as a claim under clause (xi)
relates to any matter included under clause (iii), (v), (vii), or (viii)); and
(ii) shall be $5,200,000 for all other indemnification claims under
paragraph (a).
(f) Solely for the purpose of calculating Losses under this Section
9.3, any qualification of representations and warranties by reference to the
materiality of matters stated therein, and any limitations of such
representations and warranties as being "to the knowledge of" or "known to" or
words of similar effect, shall be disregarded.
9.4 DEFENSE OF THIRD PARTY ACTIONS
(a) Promptly after receipt of notice of any Third Party Action, any
person who believes he, she or it may be an Indemnified Person will give notice
to the potential Indemnifying Person of such action. The omission to give such
notice to the Indemnifying Person will not relieve the Indemnifying Person of
any liability hereunder unless it was prejudiced thereby, nor will it relieve it
of any liability which it may have other than under this Article 9.
(b) Upon receipt of a notice of a Third Party Action, the Indemnifying
Person shall have the right, at its option and at its own expense, to
participate in and be present at the defense of such Third Party Action, but not
to control the defense, negotiation or settlement thereof, which control shall
remain with the Indemnified Person, unless the Indemnifying Person makes the
election provided in paragraph (c) below.
(c) By written notice within forty-five (45) days after receipt of a
notice of a Third Party Action, an Indemnifying Person may elect to assume
control of the defense, negotiation and settlement thereof, with counsel
reasonably satisfactory to the Indemnified Person; provided, however, that the
Indemnifying Person agrees (i) to promptly indemnify the Indemnified Person
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for its expenses to date, and (ii) to hold the Indemnified Person harmless
from and against any and all Losses caused by or arising out of any
settlement of the Third Party Action approved by the Indemnifying Person or any
judgment in connection with that Third Party Action. The Indemnifying Persons
shall not in the defense of the Third Party Action enter into any settlement
that does not include as a term thereof the giving by the third party claimant
of an unconditional release of the Indemnified Person, or consent to entry of
any judgment except with the consent of the Indemnified Person.
(d) Upon assumption of control of the defense of a Third Party Action
under paragraph (c) above, the Indemnifying Person will not be liable to the
Indemnified Person hereunder for any legal or other expenses subsequently
incurred in connection with the defense of the Third Party Action, other than
reasonable expenses of investigation.
(e) If the Indemnifying Person does not elect to control the defense of
a Third Party Action under paragraph (c), the Indemnifying Person shall promptly
reimburse the Indemnified Person for expenses incurred by the Indemnified Person
in connection with defense of such Third Party Action, as and when the same
shall be incurred by the Indemnified Person.
(f) Any person who has not assumed control of the defense of any Third
Party Action shall have the duty to cooperate with the party that assumed such
defense.
9.5 MISCELLANEOUS
(a) Buyer's Indemnified Persons shall be entitled to indemnification
under Section 9.3(a) regardless of whether the matter giving rise to the
applicable liability, payment, obligation or expense may have been previously
disclosed to any such person, unless expressly disclosed in the Disclosure
Schedule.
(b) If any Loss is recoverable under more than one provision hereof,
the Indemnified Person shall be entitled to assert a claim for such Loss until
the expiration of the longest period of time within which to assert a claim for
Loss under any of the provisions which are applicable.
(c) Buyer may, at its option, recover any amount owing by the Sellers
for indemnification hereunder by setoff against any amounts that may otherwise
be due from the Buyer or the Company to the Sellers, or any of them, whether
hereunder or otherwise; provided that Buyer shall not be required to recover
such claims in such manner and may proceed against the Indemnified Party at any
time or times for recovery of indemnification claims.
9.6 PAYMENT OF INDEMNIFICATION
Claims for indemnification under this Article 9 shall be paid or
otherwise satisfied by Indemnifying Persons within thirty (30) days after notice
thereof is given by the Indemnified Person. Any amount which may become due and
payable to any of the Buyer's Indemnified Persons under Section 9.3(a) shall
first be paid or otherwise satisfied out of the Escrow Shares until the same has
been exhausted. Any claims in excess of the Escrow Shares may be satisfied by
whatever remedy is available at law or equity.
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9.7 EXCLUSIVE REMEDY
Buyer's Indemnified Persons hereby acknowledge and agree that from and
after the Closing their sole and exclusive remedy with respect to any and all
claims relating to this Agreement, except for claims relating to Section
9.3(a)(vii) hereunder, shall be pursuant to the indemnification provisions set
forth in this Article 9. In furtherance of the foregoing, Buyer's Indemnified
Persons waive, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action relating to the subject matter of this
Agreement that they may have against the Sellers arising under or based upon any
law (including, without limitation, any such rights, claims or causes of action
arising under or based upon common law or otherwise), except as any such rights,
claims or causes of action may relate to Section 9.3(a)(vii) hereunder.
10. TERMINATION OF AGREEMENT
10.1 TERMINATION
This Agreement shall not be terminated, except in accordance with the
provisions of this Article 10, strictly construed against the party seeking such
termination. This Agreement may be terminated any time prior to the Closing
Date: (a) by mutual written consent of the parties;
(b) by either the Buyer or the Company, if, without fault of such
terminating party, the transactions contemplated by this Agreement shall not
have been consummated on or before June 30, 2001, unless such failure shall be
due to a material breach of any representation or warranty, or the
nonfulfillment in a material respect, and failure to cure such nonfulfillment,
of any covenant or agreement contained herein on the part of the party or
parties seeking to terminate; and
(c) by Buyer or the Company if a Governmental Authority shall have
issued a nonappealable final Order or taken any other action having the effect
of permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement (provided that the right to terminate this
Agreement under this Section 10.1 shall not be available to any party who has
not complied with its obligations under this Agreement if such noncompliance
materially contributed to the issuance of any such Order or the taking of such
action).
10.2 TERMINATION BY THE BUYER
This Agreement may be terminated by Buyer, at any time prior to the
Closing Date, if:
(a) the Company or the Sellers shall have failed to comply with any of
the covenants or agreements contained in this Agreement such that the closing
condition set forth in Section 7.2 would not be satisfied; provided, however,
that if such breach or breaches are capable of being cured prior to the Closing
Date, such breach or breaches shall not have been cured within 15 days of
delivery to the Company or the Sellers of written notice of such breach;
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59
(b) there exists a breach of any representation or warranty of the
Company or the Sellers contained in this Agreement such that the closing
condition set forth in Section 7.1 would not be satisfied; provided, however,
that if such failure or failures are capable of being cured prior to the Closing
Date, such failure or failures shall not have been cured within 15 days of
delivery to the Company or the Sellers of written notice of such failure; or
(c) the Company or the Sellers engage in any conduct or takes any
action concerning an Alternative Acquisition as provided in Section 5.5 hereof.
10.3 TERMINATION BY THE COMPANY
This Agreement may be terminated at any time prior to the Closing Date
by action of the Board of Directors of the Company, if:
(a) the Buyer shall have failed to comply with any of the covenants or
agreements contained in this Agreement such that the closing condition set forth
in Section 8.2 would not be satisfied; provided however, that if such failure or
failures are capable of being cured prior to the Closing Date, such failure or
failures shall not have been cured within 15 days of delivery to the Buyer of
written notice of such failure; or
(b) there exists a breach or breaches of any representation or warranty
of the Buyer contained in this Agreement such that the closing condition set
forth in Section 8.1 would not be satisfied; provided however, that if such
breach or breaches are capable of being cured prior to the Closing Date, such
breach or breaches shall not have been cured within 15 days of delivery to the
Buyer of written notice of such breach.
10.4 PROCEDURE FOR TERMINATION
In the event of termination by the Buyer or the Company pursuant to
this Article 10, written notice thereof shall forthwith be given to the other
party.
10.5 EFFECT OF TERMINATION
In the event of termination of this Agreement in accordance with the
provisions of this Article 10, this Agreement shall forthwith become void and no
party to this Agreement shall have any liability or further obligation to any
other party, except as provided in the Confidentiality Agreement and in Sections
11.2 and 11.3 of this Agreement, which provisions shall survive such
termination, and except that nothing herein shall relieve any party from
liability for any breach of this Agreement.
10.6 RIGHT TO PROCEED
Anything in this Agreement to the contrary notwithstanding, if any of
the conditions specified in Article 7 hereof have not been satisfied, Buyer
shall have the right to waive the satisfaction of any such condition as provided
in Article 7 and to proceed with the transactions contemplated hereby, however,
it shall be deemed to have waived any claim for indemnification
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60
arising out of any condition which has been so waived. If any of the
conditions specified in Article 8 hereof has not been satisfied, the Shareholder
Representative shall have the right to waive the satisfaction of any such
condition as provided in Article 8 and to proceed with the transactions
contemplated hereby.
11. GENERAL PROVISIONS
11.1 TERMINATION OF REPRESENTATIONS AND WARRANTIES
The Buyer's representations warranties and covenants in this Agreement
or in any document or instrument delivered pursuant to this Agreement shall
survive until the one year anniversary of the Closing Date.
11.2 EXPENSES
Each of the parties will bear its own expenses in connection with the
negotiation and the consummation of the transactions contemplated by this
Agreement, and no expenses of the Sellers or the Company relating in any way to
the purchase and sale of the Company Shares hereunder shall be included in any
account of the Company as of the Closing or shall be charged to or paid by
Buyer. The expenses of the Sellers shall be borne by the Sellers in such
proportions as they may agree.
11.3 PUBLIC ANNOUNCEMENTS
Unless required by law, any public announcement or similar publicity
with respect to this Agreement, the Closing, or the other transactions
contemplated hereby will be issued, if at all, at such time and in such manner
as Buyer determines with the concurrence of the Company, which concurrence shall
not be unreasonably withheld or delayed by the Company. Unless disclosure is
consented to by Buyer in advance or required by law or disclosure has otherwise
already been made, the Company shall keep this Agreement and the transactions
contemplated hereby strictly confidential and may not make any disclosure of
this Agreement or such transactions to any Person other than its or their
directors, officers, employees or agents who need to know such information to
enable the Company to comply with this Agreement, provided that each such
director, officer, employee or agent shall agree, for the benefit of Buyer, to
maintain the confidentiality of such information as provided in this Section
11.3. The Company and Buyer will consult with each other concerning the means by
which the Company's employees, customers and suppliers and other Persons having
dealings with the Company will be informed of this Agreement, the Closing, and
the other transactions contemplated hereby, and representatives of Buyer may at
its option be present for any such communication.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by fax (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee,
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61
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses or fax numbers set forth
below (or to such other address, person's attention or fax number as a party may
designate by notice to the other parties given in accordance with this Section
11.4):
(a) If to Buyer:
Xxxxxx Automation, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
With a copy to:
Brown, Rudnick, Freed & Gesmer
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
(b) If to the Company:
CCS Technology, Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx
With a copy to:
Xxxxxxx & Xxxxxxx
00 Xxxx Xxxxxx, Xxxxx 000
P.O. Box 5839
Xxxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: H. Xxxxxxx Xxxxxxx, Xx., Esquire
(c) If to the Sellers:
Xxxxx X. Xxxxx
c/o CCS Technology, Inc.
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000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
11.5 JURISDICTION; SERVICE OF PROCESS
Any Proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Delaware or any United States District Court of
the State of Delaware, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such Proceeding and
waives any objection to venue laid therein. Service of process or any other
papers in any such Proceeding may be made by registered or certified mail,
return receipt requested, pursuant to the provisions of Section 11.4.
11.6 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
11.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without the
prior written consent of the other parties except that Buyer may assign any of
its rights, but not its obligations, under this Agreement to any direct
wholly-owned Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy or
claim under or with respect to this Agreement or any provision of this
Agreement.
11.8 SEVERABILITY
If any provision of this Agreement or the application of any such
provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to such party
or circumstances other than those to which it is so determined to be invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
enforced to the fullest extent permitted by law. If the final judgment of a
court of competent jurisdiction declares that any item or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have
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the power, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases and to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
11.9 GOVERNING LAW
This Agreement will be governed by the internal laws of the State of
Delaware without regard to principles of conflict of laws.
11.10 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
11.11 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements (other than the
Confidentiality Agreement), whether written or oral, between or among the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) the entire agreement among the parties
with respect to its subject matter. This Agreement may not be amended except by
a written agreement executed by each party hereto.
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IN WITNESS WHEREOF, a duly authorized representative of the parties has
executed and delivered this Agreement as of the date first written above.
BUYER:
XXXXXX AUTOMATION, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
COMPANY:
CCS TECHNOLOGY, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
SELLERS:
CONNEXSYS ENGINEERING, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
---------------------------------------------
Xxxxx X. Xxxxx
---------------------------------------------
Xxxxx X. Xxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxx
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65
---------------------------------------------
Xxxxxx X. Xxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxxxx
---------------------------------------------
Xxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxx
---------------------------------------------
Xxx X. Xxxxx
---------------------------------------------
Xxxxx X. Xxxx
XXXXXXX & XXXXXXX, LLP
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
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66
LIST OF EXHIBITS
Exhibit A List of Sellers (Section 2.1(a))
Exhibit B Escrow Agreement (Section 2.1(a)(iv))
Exhibit C Form of Company's Counsel's Legal Opinion (Section 7.6)
Exhibit D Form of Stock Restriction Agreement (Section 7.7)
Exhibit E Form of Executive Noncompetition and
Proprietary Information Agreement (Section 7.9)
Exhibit F Form of Employee Nonsolicitation and
Proprietary Information Agreement (Section 7.10)
Exhibit G Form of Buyer's Counsel's Legal Opinion (Section 8.5)
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