Exhibit 2.1
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STOCK PURCHASE AGREEMENT
among:
JAVELIN SYSTEMS, INC.,
a Delaware corporation;
DYNAMIC TECHNOLOGIES, INC.,
a Pennsylvania corporation;
SB HOLDINGS, INC.,
a Pennsylvania corporation;
Xxxx X. Xxxxxx,
as Agent
and
all of the shareholders of Dynamic Technologies, Inc.
and
all of the shareholders of SB Holdings, Inc.
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Dated as of April 23, 1999
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TABLE OF CONTENTS
PAGE
Section 1. Payment for Shares; Related Transactions . . . . . . . . . . . . . . . .1
1.1 Initial Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Quarterly Earnout.. . . . . . . . . . . . . . . . . . . . . . . . . . .2
(a) QUARTERLY CASH EARNOUT.. . . . . . . . . . . . . . . . . . . . .2
1.3 ALLOCATION OF PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . .3
1.4 FRACTIONAL SHARES.. . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5 LEGENDS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.6 INDEMNITY AND ESCROW. . . . . . . . . . . . . . . . . . . . . . . . . .3
1.7 ADJUSTMENT FOR RECLASSIFICATIONS, SPLITS, ETC.. . . . . . . . . . . . .4
1.8 CLOSING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLING
SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC. . . . . . . . . . . . . . . . .5
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. . . . . . . . . . . .6
2.3 CAPITALIZATION, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .7
2.5 ABSENCE OF CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.6 TITLE TO ASSETS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.7 RECEIVABLES; MAJOR CUSTOMERS. . . . . . . . . . . . . . . . . . . . . .9
2.8 EQUIPMENT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.9 REAL PROPERTY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 PROPRIETARY ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 CONTRACTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 LIABILITIES; MAJOR SUPPLIERS. . . . . . . . . . . . . . . . . . . . . 12
2.13 COMPLIANCE WITH LEGAL REQUIREMENTS. . . . . . . . . . . . . . . . . . 13
2.14 GOVERNMENTAL AUTHORIZATIONS.. . . . . . . . . . . . . . . . . . . . . 13
2.15 TAX MATTERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.16 EMPLOYEE AND LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . 16
2.17 BENEFIT PLANS; ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 16
2.18 ENVIRONMENTAL MATTERS.. . . . . . . . . . . . . . . . . . . . . . . . 18
2.19 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.. . . . . . . . . . . . . . 19
2.20 INSURANCE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.21 RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . 21
2.22 CERTAIN PAYMENTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . 21
2.23 PROCEEDINGS; ORDERS.. . . . . . . . . . . . . . . . . . . . . . . . . 21
2.24 AUTHORITY; BINDING NATURE OF AGREEMENTS.. . . . . . . . . . . . . . . 22
2.25 NON-CONTRAVENTION; CONSENTS.. . . . . . . . . . . . . . . . . . . . . 23
2.26 BROKERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.27 SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 24
2.28 FULL DISCLOSURE.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.29 INVESTMENT REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . . . . . 27
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.1 ACQUISITION OF SHARES.. . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. . . . . . . . . . . . . . . . 27
3.3 SEC FILINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4 BROKERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5 INVESTMENT REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . 28
3.6 DUE ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.7 CAPITALIZATION, ETC . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.8 NON-CONTRAVENTION; CONSENTS.. . . . . . . . . . . . . . . . . . . . . 29
3.9 ABSENCE OF CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4. INDEMNIFICATION, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 29
4.2 INDEMNIFICATION BY SELLING SHAREHOLDERS.. . . . . . . . . . . . . . . 30
4.3 NO CONTRIBUTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4 SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.5 EXCLUSIVITY OF INDEMNIFICATION REMEDIES.. . . . . . . . . . . . . . . 31
4.6 DEFENSE OF THIRD PARTY CLAIMS.. . . . . . . . . . . . . . . . . . . . 31
4.7 EXERCISE OF REMEDIES BY INDEMNITIES OTHER THAN PURCHASER. . . . . . . 32
SECTION 5. COVENANT NOT TO COMPETE. . . . . . . . . . . . . . . . . . . . . . . . 32
5.1 COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2 INJUNCTIVE RELIEF.. . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6. PIGGYBACK REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . 33
6.1 DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 PIGGYBACK REGISTRATIONS.. . . . . . . . . . . . . . . . . . . . . . . 33
6.3 EXPENSES OF REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . 34
6.4 OBLIGATIONS OF THE PURCHASER. . . . . . . . . . . . . . . . . . . . . 35
6.5 TERMINATION OF REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . 36
6.6 DELAY OF REGISTRATION; FURNISHING INFORMATION.. . . . . . . . . . . . 36
6.7 INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 ASSIGNMENT OF REGISTRATION RIGHTS.. . . . . . . . . . . . . . . . . . 38
6.9 AMENDMENT OF REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . 38
6.10 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH
INFORMATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.11 RULE 144 REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 39
7.1 SELLING SHAREHOLDERS' AGENT.. . . . . . . . . . . . . . . . . . . . . 39
7.2 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.3 FEES AND EXPENSES.. . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4 ATTORNEYS' FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.5 NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.6 PUBLICITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.7 TIME OF THE ESSENCE.. . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ii
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.9 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.10 GOVERNING LAW; VENUE. . . . . . . . . . . . . . . . . . . . . . . . . 42
7.11 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . 43
7.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE.. . . . . . . . . . . . . . 43
7.13 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.14 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.15 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.16 PARTIES IN INTEREST.. . . . . . . . . . . . . . . . . . . . . . . . . 44
7.17 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.18 CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
iii
EXHIBITS
Exhibit A: Certain Definitions
Exhibit B: Selling Shareholder Table
Exhibit C: Financial Projections
Exhibit D: Purchase Price Allocation
Exhibit E: Form of Escrow Agreement
Exhibit F: Form of opinion letter from Xxxxxxx & Associates, P.C.
Exhibit G: Form of Employment Agreement
Exhibit H: Form of Option Agreement
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of April 23, 1999, by
and among JAVELIN SYSTEMS, INC., a Delaware corporation (the "Purchaser"),
DYNAMIC TECHNOLOGIES, INC., a Pennsylvania corporation ("DTI"), SB HOLDINGS,
INC., a Pennsylvania corporation ("SB Holdings" and together with DTI, the
"Company"), Xxxx X. Xxxxxx and Xxxxxx Xxxxxx, who constitute all of the
shareholders of DTI (the "DTI Selling Shareholders"), Xxxx X. Xxxxx and Xxxx X.
Xxxxxx, who constitute all the shareholders of SB Holdings (the "SB Holdings
Selling Stockholders" and together with the DTI Selling Shareholders, the
"Selling Shareholders"), and Xxxx X. Xxxxxx as agent ("Agent") for the Selling
Shareholders. Certain capitalized terms used in this Agreement are defined on
Exhibit A.
RECITALS
A. The DTI Selling Shareholders own 1,000 shares of the common stock of
DTI (the "DTI Shares"), which constitute all of the outstanding capital stock of
DTI.
B. The SB Holdings Selling Shareholders own 2,000 shares of common
stock of SB Holdings (the "SB Holdings Shares" and together with the DTI Shares,
the "Shares"), which constitute all of the outstanding capital stock of SB
Holdings.
C. The Selling Shareholders wish to sell the Shares to the Purchaser
and the Purchaser wishes to purchase the Shares from the Selling Shareholders
upon the terms and conditions set forth in this Agreement.
AGREEMENT
The Purchaser, the Company and the Selling Shareholders, intending to
be legally bound, agree as follows:
SECTION 1. PAYMENT FOR SHARES; RELATED TRANSACTIONS
1.1 INITIAL PAYMENT.
(a) INITIAL CASH PAYMENT. Subject to the terms and upon the
conditions set forth in this Agreement, on the Closing Date, by wire transfer of
immediately available funds, Purchaser shall pay to each Selling Shareholder the
amount set forth next to such Selling Shareholder's name on the Schedule of
Shareholders attached hereto as Exhibit B (the "Schedule of Selling
Shareholders"), as consideration for all of the Shares owned by such Selling
Shareholder as indicated on the Schedule of Selling Shareholders.
(b) INITIAL STOCK PAYMENT. Subject to the terms and upon the
conditions set forth in this Agreement, and except as otherwise provided by
Section 1.6, on the Closing Date, Purchaser shall issue to each Selling
Shareholder the number of original issue shares of Purchaser Common Stock set
forth next to such Selling Shareholder's name on the Schedule of Selling
Shareholders as further consideration for all of the Shares owned by such
Selling
1.
Shareholder. Stock certificates representing any shares of Purchaser Common
Stock issued pursuant to this Section 1.1(a) shall be delivered to the Agent for
distribution to the Selling Shareholders.
1.2 QUARTERLY EARNOUT.
(a) QUARTERLY EARNOUT PAYMENT. In addition to the onsideration
described in Section 1.1, Purchaser shall pay to each Selling Shareholder, as
further consideration for all the Shares owned by such Selling Shareholder, on a
quarterly basis, such Selling Shareholder's Pro Rata Percentage, as set forth on
the Schedule of Shareholders, of an aggregate of an additional $750,000 per
quarter (each a "Quarterly Earnout Payment") upon verification by the Purchaser
and the Selling Shareholders that the Company has met 100% of the applicable
quarterly revenue projection set forth on Exhibit C hereto (each a "Quarterly
Projection") for each of the quarters ending July 31, 1999, October 31, 1999,
January 31, 2000 and April 30, 2000 (each a "Projection Period"); PROVIDED,
HOWEVER, that any accounts receivable of the Company arising from April 26, 1999
through July 31, 1999 shall be credited to the quarter ending July 31, 1999. The
Quarterly Earnout Payments are to be made as follows: for the quarter ending
July 31, 1999, the Quarterly Earnout Payment shall be made in cash up to
$750,000. For the quarter ending October 31, 1999, the Quarterly Earnout Payment
shall be made in cash up to $750,000. For the quarter ending January 31, 2000,
the Quarterly Earnout Payment shall be made first in cash up to $500,000 and
thereafter in shares of Purchaser Common Stock having a Value of up to $250,000.
For the quarter ending April 30, 2000, the Quarterly Earnout Payment shall be
made in shares of Purchaser Common Stock having a Value of up to $750,000. In
the event the Company exceeds 100% of a Quarterly Projection in any Projection
Period, the excess revenue over and above 100% may be added to the revenue of
any of the previous Projection Periods or the next Projection Period, at the
election of the Selling Shareholders, and the applicable Quarterly Earnout
Payment will be appropriately adjusted. In the event the Company fails to
achieve 100% of a Quarterly Projection for any Projection Period, the Selling
Shareholders shall be entitled to receive a portion of their respective Pro Rata
Percentage of the Quarterly Earnout Payment that is equal to that percentage of
the Quarterly Projection that the Company actually achieved in the applicable
Projection Period; PROVIDED, FURTHER, HOWEVER, that in no event shall any
Selling Shareholder be entitled to any portion of the Quarterly Earnout Payment
if the Company fails to achieve at least fifty percent (50%) of a Quarterly
Projection in any Projection Period. During any Projection Period, Purchaser
shall not cause the diminution of the Company's revenues or cause or permit the
diversion of the Company's revenues to any subsidiary or affiliate of Purchaser
or any third party. Verification of the achievement of the Quarterly Projections
shall be based upon, and subject to the completion of, the unaudited
consolidated financial statements of Purchaser for the time period in question.
Within thirty (30) business days after verification by Purchaser that a
Quarterly Projection (or percentage thereof) has been achieved, Purchaser shall
deliver a check to each Selling Stockholder in the amount of the Quarterly
Earnout Payment such Selling Stockholder is entitled to under this Section
1.2(a) and/or stock certificates representing the number of shares of Purchaser
Common Stock, if any, such Selling Shareholder is entitled to under this Section
1.2(a) shall be delivered to each Selling Shareholder. The "Value" of the shares
of Purchaser Common Stock shall be the average of the daily reported closing
prices per share of Purchaser Common
2.
Stock as reported on the Nasdaq National Market during the ten (10) trading days
immediately preceding the date on which the verification of the achievement of
the Quarterly Projection is completed.
(b) CHANGE OF CONTROL. In the event there is a Change of Control
(as defined below) of the Purchaser prior to April 30, 2000, upon the
consummation of the Change of Control and in full satisfaction of the
Purchaser's obligations under Section 1.2, all Quarterly Earnout Payments,
whether in cash or Value of Purchaser Common Stock, shall be made prior to or
contemporaneous with such Change of Control to the Selling Shareholders in
accordance with their respective Pro Rata Percentage, as set forth on the
Schedule of Shareholders, as if 100% of the Quarterly Projections had been
achieved for all Projection Periods. For the purposes of this Section 1.2(c), a
"Change of Control" of the Purchaser shall be any merger, consolidation,
business combination, sale of all or substantially all of Purchasers' assets or
similar transaction where the Purchaser is not the surviving corporation (other
than any such transaction entered into solely for the purpose of changing the
jurisdiction of incorporation of Purchaser or any transaction in which the
stockholders of the Purchaser immediately prior to the transaction own in excess
of 50% of the voting power of the surviving or purchasing corporation after the
transaction).
1.3 ALLOCATION OF PURCHASE PRICE. The aggregate consideration to be
paid to the Selling Shareholders by the Purchaser for the Shares shall be
allocated between the DTI Shares and the SB Holdings Shares as set forth on
Exhibit D attached hereto.
1.4 FRACTIONAL SHARES. No fractional shares of Purchaser Common Stock
shall be issued in connection with Purchasers obligations under Sections 1.1(b)
and 1.2(a), and no certificates for any such fractional shares shall be issued.
In lieu of such fractional shares, any fractional shares of Purchaser Common
Stock that would otherwise have been issued to any Selling Shareholder (after
aggregating all fractional shares issuable to such Selling Shareholder) shall be
rounded down to the nearest whole share.
1.5 LEGENDS. The shares of Purchaser Common Stock to be issued to the
Selling Shareholders pursuant to this Agreement are being issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and each certificate representing any of such
shares shall bear the following legend or similar legend deemed appropriate by
the Company:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR IN
COMPLIANCE WITH AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS."
3.
1.6 INDEMNITY AND ESCROW. On the Closing Date, Purchaser shall
withhold 125,000 of the shares of Purchaser Common Stock (the "Indemnity
Shares") required to be issued to the Selling Shareholders pursuant to Section
1.1(b). On the Closing Date, the Indemnity Shares shall be delivered to the
Escrow Agent as collateral for the Company's and the Selling Shareholders'
indemnification obligations set forth in Section 4. The Indemnity Shares will be
represented by certificates issued in the names of the Selling Shareholders
according to their respective Pro Rata Percentage, as set forth on the Schedule
of Shareholders, of the Indemnity Shares, and as set forth in Section 4, shall
be held in escrow by the Escrow Agent to satisfy any claims made on or before
the date that is one (1) year after the Closing Date. The administration of the
Indemnity Shares by the Escrow Agent shall be conducted pursuant to the terms of
an escrow agreement in the form of Exhibit E attached hereto among Purchaser,
each of the Selling Shareholders, the Agent and the Escrow Agent.
1.7 ADJUSTMENT FOR RECLASSIFICATIONS, SPLITS, ETC. If prior to April
30, 2000 and/or prior to the issuance and delivery of the shares to the Selling
Shareholders pursuant to Sections 1.1(b) and 1.2(a), the shares of Purchaser
Common Stock are changed into a different number or class of shares by reason of
any stock dividend, subdivision, reclassification, reorganization, stock split,
combination or similar transaction, then the total number of shares of Purchaser
Common Stock to be issued by Purchaser pursuant to Sections 1.1(b) and 1.2(a)
shall be appropriately adjusted, provided that any such adjustment shall in all
events result in each Selling Shareholder receiving such Selling Shareholder's
Pro Rata Percentage, as set forth on the Schedule of Shareholders, of the shares
of Purchaser Common Stock to be issued pursuant to Sections 1.1(b) or 1.2(a)
that would have been received by such shareholder prior to any such adjustment.
1.8 CLOSING.
(a) The closing of the sale of the Shares to the Purchaser (the
"Closing") shall take place at the offices of Xxxxxx Godward LLP at 0000
Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx at 10:00 a.m. California time
on April 23, 1999 or such other place or time as the Purchaser and the Agent may
jointly designate (the "Closing Date").
(b) At the Closing:
(i) each Selling Shareholder shall deliver to the
Purchaser the stock certificate or certificates representing all of the Shares
owned by such Selling Shareholder, duly endorsed (or accompanied by duly
executed stock powers) and the Purchaser shall deliver to the Selling
Shareholder cash as provided for in Section 1.1(a) and stock certificates
representing the shares of Purchaser Common Stock to be issued pursuant to
Section 1.1(b) less the Indemnity Shares;
(ii) the Purchaser shall deliver to the Escrow Agent, to
be held in escrow, stock certificates representing the Indemnity Shares withheld
pursuant to Section 1.6;
4.
(iii) the Purchaser, each Selling Shareholder and the
Escrow Agent shall execute and deliver to the other an Escrow Agreement
substantially in the form of Exhibit E attached hereto (the "Escrow Agreement");
(iv) the Purchaser shall receive an opinion letter from
Company counsel, dated the Closing Date, in the form of Exhibit F.
(v) each of Xxxx X. Xxxxx and Xxxx X. Xxxxxx shall
execute and deliver an Employment Agreement substantially in the form of Exhibit
G;
(vi) the Selling Shareholders shall cause to be
delivered to the Purchaser written resignations, effective as of the Closing
Date, indicating that each of the members of the board of directors DTI and SB
Holdings, respectively, have resigned as a member of such board of directors
and, except as contemplated by Section 1.8(b)(v), each officer of the Company
has resigned as an Officer of the Company;
(vii) each of the Selling Shareholders shall execute and
deliver to the Purchaser such other documents as the Purchaser may reasonably
request in order to facilitate the consummation of the transactions contemplated
by this Agreement; and
(viii) the Purchaser shall deliver non-qualified stock
option agreements in the form attached hereto as Exhibit H, to the people and
for the number of shares set forth on Exhibit H hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLING
SHAREHOLDERS
DTI and SB Holdings (referred to herein collectively as the Company)
and the Selling Shareholders (each Selling Shareholder making representations
and warranties as to the entity in which it owns Shares only), jointly and
severally, represent and warrant, to and for the benefit of the Indemnities,
that, except as set forth in the disclosure schedule delivered by the Company
and the Selling Shareholders to the Purchaser on the date of this Agreement (the
"Disclosure Schedule"):
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Pennsylvania and has all
necessary power and authority to conduct its business in the manner in which its
business is currently being conducted and to own and use its assets in the
manner in which its assets are currently owned and used and to perform its
obligations under all Company Contracts.
(b) The Company is not, and has never been, required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.1 of the Disclosure Schedule, except for those jurisdictions where the failure
to be so qualified, authorized, registered or licensed would not
5.
have a material adverse effect on the Company. The Company is in good standing
as a foreign corporation in each of the jurisdictions identified in Part 2.1 of
the Disclosure Schedule.
(c) Part 2.1 of the Disclosure Schedule accurately and completely
sets forth as of the date hereof (i) the names of the members of the Company's
board of directors, (ii) the names of the members of each committee of the
Company's board of directors, and (iii) the names and titles of the Company's
officers.
(d) Neither the Company nor any of its respective shareholders has
ever approved, or commenced any proceeding or made any election contemplating,
the dissolution or liquidation of the Company or the winding up or cessation of
any of the Company's business or affairs.
(e) The Company has no subsidiaries, and the Company has never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest of any nature in, any Entity.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to the Purchaser accurate and complete copies of the Company's
articles of incorporation and bylaws, including all amendments thereto, the
stock records of the Company, and the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. There have been no formal meetings or other proceedings of the
shareholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully reflected
in such minutes or other records. There has not been any violation of any of the
provisions of the Company's articles of incorporation or bylaws or of any
resolution adopted by the Company's board of directors; and no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) constitute or result directly or indirectly in such a
violation. The books of account, stock records, minute books and other records
of the Company are accurate, up-to-date and complete, and have been maintained
in accordance with sound and prudent business practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of DTI consists of 10,000 shares
of common stock, no par value, of which 1,000 shares (constituting all of the
DTI Shares) have been issued and are outstanding. The DTI Selling Shareholders
have, and the Purchaser will acquire at the Closing, good and valid title to the
DTI Shares free and clear of any Encumbrances. Of the DTI Shares, Xxxxxx Xxxxxx
owns, beneficially and of record, 510 shares and Xxxx X. Xxxxxx owns,
beneficially and of record, 490 shares. All of the DTI Shares (i) have been duly
authorized and validly issued, (ii) are fully paid and non-assessable, and (iii)
have been issued in full compliance with all applicable securities laws and
other applicable Legal Requirements.
6.
(b) The authorized capital stock of SB Holdings consists of 10,000
shares of common stock, no par value, of which 2,000 shares (constituting all of
the SB Holdings Shares) have been issued and are outstanding. The SB Holdings
Selling Shareholders have, and the Purchaser will acquire at the Closing, good
and valid title to the SB Holdings Shares free and clear of any Encumbrances. Of
the SB Holdings Shares, Xxxx X. Xxxxx owns, beneficially and of record, 1,000
shares and Xxxx X. Xxxxxx owns, beneficially and of record, 1,000 shares. All of
the SB Holdings Shares (i) have been duly authorized and validly issued, (ii)
are fully paid and non-assessable, and (iii) have been issued in full compliance
with all applicable securities laws and other applicable Legal Requirements.
(c) There is no (i) outstanding subscription, option, call,
warrant or other right (whether or not currently exercisable) to acquire any
shares of the capital stock or other securities of the Company; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of the
Company; (iii) Contract under which the Company is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other securities;
or (iv) condition or circumstance that may directly or indirectly give rise to
or provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company. The Company has never repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities.
2.4 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser
the following financial statements (collectively, the "Company Financial
Statements") which have also been attached as an exhibit to Part 2.4 of the
Disclosure Schedule: the unaudited balance sheet of the Company as of December
31, 1998 and the related unaudited consolidated statement of operations of the
Company for the year then ended, including the notes related thereto; and the
unaudited balance sheet of the Company as of March 31, 1999 (the "Unaudited
Interim Balance Sheet"), and the related unaudited statement of operations of
the Company for the three (3) months then ended. Except as set forth in Part 2.4
of the Disclosure Schedule, the Company Financial Statements accurately and
fairly present the financial condition and assets and liabilities of the Company
as of the respective dates thereof and the results of operations of the Company
for the periods covered thereby.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since March 31, 1999:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations or financial
performance (or in any aspect or portion thereof), and no event has occurred
that would be reasonably expected to have a material adverse effect on the
Company's business, condition, assets, liabilities, operations or financial
performance (or on any aspect or portion thereof);
(b) there has not been any material loss, damage or destruction
to, or any interruption in the use of, any of the Company's assets (whether or
not covered by insurance);
7.
(c) the Company has not (i) declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold or otherwise issued any shares of
capital stock or any other securities;
(e) the Company has not purchased or otherwise acquired any asset
from any other Person, except for assets acquired by the Company in the ordinary
course of business and consistent with past practice;
(f) the Company has not leased or licensed any asset from any
other Person;
(g) the Company has not made any capital expenditure in excess of
$20,000;
(h) the Company has not sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
the Company in the ordinary course of business and consistent with past
practice, but in any event not in excess of $25,000;
(i) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness in excess of $10,000;
(j) the Company has not pledged or hypothecated any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance in
excess of $10,000;
(k) the Company has not made any loan or advance to any other
Person in excess of $10,000;
(l) the Company has not (i) established or adopted any Employee
Benefit Plan, or (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees;
(m) the Company has not entered into, and neither the Company nor
any of the assets owned or used by the Company has become bound by, any Contract
that contemplates or involves the payment of cash or other consideration by the
Company in an amount or having a value in excess of $100,000;
(n) no Material Company Contract by which the Company or any of
the assets owned or used by the Company is or was bound, or under which the
Company has or had any rights or interest, has been amended or terminated;
(o) the Company has not incurred, assumed or otherwise become
subject to any Liability, other than accounts payable (of the type required to
be reflected as current
8.
liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred by the Company in the ordinary course of business
and consistent with past practice, but in any event not in excess of $60,000 in
the aggregate;
(p) the Company has not discharged any Encumbrance or discharged
or paid any indebtedness or other Liability, except for accounts payable that
(i) are reflected in the Unaudited Interim Balance Sheet or have been incurred
by the Company since March 31, 1998 in the ordinary course of business and
consistent with past practice, and (ii) have been discharged or paid in the
ordinary course of business and consistent with past practice, but in any event
not in excess of $60,000 in the aggregate;
(q) the Company has not forgiven any debt or otherwise released or
waived any right or claim in excess of $10,000;
(r) the Company has not changed any of its methods of accounting
or accounting practices in any material respect;
(s) the Company has not entered into any transaction or taken any
other action outside the ordinary course of business; and
(t) the Company has not agreed, committed or offered (in writing
or otherwise), and has not attempted, to take any of the actions referred to in
clauses "(c)" through "(s)" above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good and valid title to: (i) all
assets reflected on the Unaudited Interim Balance Sheet (except for inventory
sold by the Company since March 31, 1999 in the ordinary course of business);
(ii) all assets acquired by the Company since March 31, 1999 (except for
inventory sold by the Company since March 31, 1999 in the ordinary course of
business); (iii) all assets referred to in Parts 2.7 and 2.8 of the Disclosure
Schedule and all of the Company's rights under any Contracts to which the
Company is a party; and (iv) all other assets reflected in the Company's books
and records as being owned by the Company. Except as set forth in Part 2.6 of
the Disclosure Schedule, all of said assets are owned by the Company free and
clear of any Encumbrances.
(b) Part 2.6 of the Disclosure Schedule identifies all material
assets that are being leased or licensed to the Company, other than third-party
software licenses that are generally available to other businesses.
2.7 RECEIVABLES; MAJOR CUSTOMERS. Part 2.7 of the Disclosure Schedule
provides an accurate and complete breakdown and aging of all accounts
receivable, notes receivable and other receivables of the Company as of March
31, 1999. Except as set forth in Part 2.7 of the Disclosure Schedule, all
existing accounts receivable of the Company (including those accounts receivable
reflected on the Unaudited Interim Balance Sheet that have not yet been
collected and
9.
those accounts receivable that have arisen since April 1, 1999 and have not yet
been collected): (i) represent valid obligations of customers of the Company
arising from bona fide transactions entered into in the ordinary course of
business; and (ii) are current and will be collected in full (without any
counterclaim or setoff, but net of any allowance for doubtful accounts reflected
on the Unaudited Interim Balance Sheet) on or before April 1, 2000. The
allowance for doubtful accounts reflected in the Unaudited Interim Balance Sheet
is consistent with the Company's prior practice and is a reasonable estimate of
such doubtful accounts. Except as set forth on Part 2.7 of the Disclosure
Schedule, the Company has not received any written notice, or to the Knowledge
of the Selling Shareholders, any other communication (in writing or otherwise),
and has not received any other information, indicating that any material
customer, supplier or other Person would reasonably be expected to cease dealing
with the Company or may otherwise reduce the volume of business transacted by
such Person with the Company below historical levels.
2.8 EQUIPMENT, ETC. Each material asset owned or leased by the
Company: (i) is in good condition and repair (ordinary wear and tear excepted);
(ii) complies in all material respects with, and is being operated and otherwise
used in compliance in all material respects with, all applicable Legal
Requirements, unless the failure to do so would not have a material adverse
effect on the Company; and (iii) to the Knowledge of the Selling Shareholders is
adequate for the uses to which it is being put. Except as set forth on Part 2.8
of the Disclosure Schedule, the assets owned by the Company are adequate for the
conduct of the Company's business in the manner in which such business is
currently being conducted and in the manner in which such business is proposed
to be conducted.
2.9 REAL PROPERTY. The Company does not own any real property or any
interest in real property, except for the leaseholds created under the real
property leases identified in Part 2.9 of the Disclosure Schedule.
2.10 PROPRIETARY ASSETS.
(a) Except as set forth in Part 2.10 of the Disclosure Schedule,
there is no Proprietary Asset that is owned by or licensed to the Company or
that is otherwise used by the Company in the Company's business.
(b) To the Knowledge of the Selling Shareholders, the Company has
taken all measures and precautions reasonably necessary to protect the
confidentiality and value of each Proprietary Asset identified or required to be
identified in Part 2.11 of the Disclosure Schedule. The Company has good and
valid title to all of the Proprietary Assets owned by the Company, free and
clear of all Encumbrances, and has a valid right to use and otherwise exploit,
and to license others to use and otherwise exploit, all Proprietary Assets
licensed to or used by the Company.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule,
the Company is not infringing, and has not at any time infringed, or received
any written notice or to the Knowledge of the Selling Shareholders, any other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement of, any Proprietary Asset owned or used
10.
by any other Person. To the Knowledge of the Selling Shareholders, no other
Person is infringing, and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Proprietary Asset owned or used by or licensed
to the Company.
(d) The material Proprietary Assets identified in Part 2.11 of the
Disclosure Schedule constitute all of the Proprietary Assets necessary to enable
the Company to conduct its business in the manner in which its business is
currently being conducted.
2.11 CONTRACTS.
(a) Part 2.11 of the Disclosure Schedule identifies each Material
Company Contract. The Company has made available to the Purchaser accurate and
complete copies of all Material Company Contracts identified in Part 2.11 of the
Disclosure Schedule, including all amendments thereto.
(b) Each Material Company Contract is valid and in full force and
effect, and is enforceable by the Company in accordance with its terms.
(c) Except as set forth in Part 2.11 of the Disclosure Schedule:
(i) To the Knowledge of the Selling Shareholders, no
Person has violated or breached, or declared or committed any default under, any
Material Company Contract;
(ii) To the Knowledge of the Selling Shareholders, no
event has occurred, and no circumstance or condition exists, that would
reasonably be expected to (with or without notice or lapse of time) (A) result
in a violation or breach of any of the provisions of any Material Company
Contract, (B) give any Person the right to declare a default or exercise any
remedy under any Material Company Contract, (C) give any Person the right to
accelerate the maturity or performance of any Material Company Contract, or (D)
give any Person the right to cancel, terminate or modify any Material Company
Contract;
(iii) the Company has not received any written notice
or, to the Knowledge of the Selling Shareholders, any other communication (in
writing or otherwise) regarding any actual, alleged, possible or potential
violation or breach of, or default under, any Material Company Contract; and
(iv) the Company has not waived any of its rights under
any Material Company Contract.
(d) Except as set forth in Part 2.11 of the Disclosure Schedule,
to the Knowledge of the Selling Shareholders, each Person against which the
Company has or may acquire any rights under any Material Company Contract is
solvent and is able to satisfy all of such Person's current and future monetary
obligations and other obligations and Liabilities to the Company.
11.
(e) Except as set forth in Part 2.11 of the Disclosure Schedule:
(i) the Company has never guaranteed or otherwise agreed
to cause, insure or become liable for, and the Company has never pledged any of
its assets to secure, the performance or payment of any obligation or other
Liability of any other Person; and
(ii) the Company has never been a party to or bound by
(A) any joint venture agreement, partnership agreement, profit-sharing
agreement, cost-sharing agreement, loss-sharing agreement or similar Contract,
or (B) any Contract that creates or grants to any Person, or provides for the
creation or grant of, any stock option, stock appreciation right, phantom stock
right or similar right or interest.
(f) To the Knowledge of the Selling Shareholders, the performance
of the Material Company Contracts will not result in any violation of or failure
to comply with any Legal Requirement.
(g) No Person is renegotiating, or to the Knowledge of the Selling
Shareholders threatening to renegotiate, any amount paid or payable to the
Company under any Material Company Contract or any other term or provision of
any Material Company Contract.
(h) The Material Company Contracts identified in Part 2.11 of the
Disclosure Schedule constitute all of the Contracts necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted.
(i) Part 2.11 of the Disclosure Schedule identifies and provides
an accurate and complete description of each proposed Contract as to which any
bid, offer, written proposal, term sheet or similar document has been submitted
or received by the Company.
2.12 LIABILITIES; MAJOR SUPPLIERS.
(a) The Company has no Liabilities, except for:
(i) liabilities identified on the Unaudited Interim
Balance Sheet and liabilities incurred since March 31, 1999 in the ordinary
course of business and consistent with past practice, but which in any event do
not exceed $60,000 in the aggregate;
(ii) accounts payable (of the type required to be
reflected as current liabilities in the "liabilities" column of a balance sheet
prepared in accordance with GAAP) incurred by the Company in the ordinary course
of business since March 31, 1999, but which in any event do not exceed $60,000
in the aggregate; and
(iii) the Company's obligations under the Material
Company Contracts listed in Part 2.12 of the Disclosure Schedule, to the extent
that the existence of such obligations is ascertainable solely by reference to
such Contracts.
(b) Part 2.12 of the Disclosure Schedule:
12.
(i) provides an accurate and complete breakdown and
aging of the Company's accounts payable as of March 31, 1999;
(ii) provides an accurate and complete breakdown of all
customer deposits and other deposits held by the Company as of the date of this
Agreement; and
(iii) provides an accurate and complete breakdown of the
Company's long-term debt as of the date of this Agreement.
2.13 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) Except as set forth in Part 2.13 of the Disclosure Schedule:
(i) the Company is in compliance in all material
respects with each Legal Requirement that is applicable to it or to the conduct
of its business or the ownership or use of any of its assets, unless the failure
to do so would not have a material adverse effect on the Company or its
financial condition;
(ii) the Company has at all times been in compliance in
all material respects with each Legal Requirement that is or was applicable to
it or to the conduct of its business or the ownership or use of any of its
assets, unless the failure to do so would not have a material adverse effect on
the Company or its financial condition;
(iii) no event has occurred, and no condition or
circumstance exists, that would reasonably be expected to (with or without
notice or lapse of time) constitute or result directly or indirectly in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, unless the failure to do so would not have a
material adverse effect on the Company or its financial condition; and
(iv) the Company has never received, at any time, any
written notice or, to the Knowledge of the Selling Shareholders, any other
communication (in writing or otherwise) from any Governmental Body or any other
Person regarding (i) any actual, alleged, possible or potential violation by the
Company of, or failure to comply with, any Legal Requirement, or (ii) any
actual, alleged, possible or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any cleanup or any
remedial, corrective or response action of any nature.
(b) the Company has made available to the Purchaser an accurate
and complete copy of each report, study, survey or other document to which the
Company has access that addresses or otherwise relates to the compliance of the
Company with, or the applicability to the Company of, any Legal Requirement.
2.14 GOVERNMENTAL AUTHORIZATIONS.
(a) Part 2.14 of the Disclosure Schedule identifies each
Governmental Authorization that is held by the Company. The Company has made
available to the Purchaser
13.
accurate and complete copies of all of the Governmental Authorizations
identified in Part 2.14 of the Disclosure Schedule, including all renewals
thereof and all amendments thereto. Each Governmental Authorization identified
or required to be identified in Part 2.14 of the Disclosure Schedule is valid
and in full force and effect.
(b) Except as set forth in Part 2.14 of the Disclosure Schedule:
(i) the Company and its employees are, and its employees
have at all times been, in substantial compliance with the material terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 2.14 of the Disclosure Schedule;
(ii) to the Knowledge of the Selling Shareholders, no
event has occurred, and no condition or circumstance exists, that would
reasonably expected to (with or without notice or lapse of time) (A) constitute
or result directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization identified or required
to be identified in Part 2.14 of the Disclosure Schedule, or (B) result directly
or indirectly in the revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization identified or
required to be identified in Part 2.14 of the Disclosure Schedule;
(iii) the Company has never received, and, to the
Knowledge of the Selling Shareholders, no employee of the Company has ever
received, any written notice or any other communication (in writing or
otherwise) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (B) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations required to be identified in Part
2.14 of the Disclosure Schedule have been duly filed on a timely basis with the
appropriate Governmental Bodies, or an extension has been timely filed, and each
other notice or filing required to have been given or made with respect to such
Governmental Authorizations has been duly given or made on a timely basis with
the appropriate Governmental Body.
(c) The Governmental Authorizations identified in Part 2.14 of the
Disclosure Schedule constitute all of the material Governmental Authorizations
necessary (i) to enable the Company to conduct its business in the manner in
which its business is currently being conducted, and (ii) to permit the Company
to own and use its assets in the manner in which they are currently owned and
used.
14.
2.15 TAX MATTERS.
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by the Company (whether pursuant to any Tax
Return or otherwise) has been duly paid in full or on a timely basis. Any Tax
required to have been withheld or collected by the Company has been duly
withheld and collected; and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body.
(b) Part 2.15 of the Disclosure Schedule accurately identifies all
Tax Returns required to be filed by or on behalf of the Company with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date ("the Company Returns"). All the Company Returns (i) have been or
will be filed when due, or an appropriate extension timely filed therefor and
(ii) have been, or will be when filed, accurately and completely prepared in
full compliance with all applicable Legal Requirements. All amounts shown on the
Company Returns to be due on or before the Closing Date, and all amounts
otherwise payable in connection with the Company Returns on or before the
Closing Date, have been or will be paid on or before the Closing Date or have
been properly accrued in the Financial Statements or have been set forth on Part
2.15 of the Disclosure Schedule. The Company has delivered to the Purchaser
accurate and complete copies of all the Company Returns filed since December 31,
1995.
(c) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. The Company will establish, in the ordinary
course of business, reserves adequate for the payment of all Taxes for the
period from March 31, 1999 through the Closing Date, and the Company will
disclose the dollar amount of such reserves to the Purchaser on or prior to the
Closing Date.
(d) Each Company Return relating to income Taxes that has been
filed with respect to any period ended on or prior to December 31, 1995 has
either (i) been examined and audited by all relevant Governmental Bodies, or
(ii) by virtue of the expiration of the limitation period under applicable Legal
Requirements, is no longer subject to examination or audit by any Governmental
Body. Part 2.15 of the Disclosure Schedule accurately identifies each
examination or audit of any Company Return that has been conducted since
December 31, 1995. The Company has delivered to the Purchaser accurate and
complete copies of all audit reports and similar documents (to which the Company
has access) relating to the Company Returns. Except as set forth in Part 2.15 of
the Disclosure Schedule, no extension or waiver of the limitation period
applicable to any of the Company Returns has been granted (by the Company or any
other Person), and no such extension or waiver has been requested from the
Company.
(e) Except as set forth in Part 2.15 of the Disclosure Schedule,
no claim or other Proceeding is pending or, to the Knowledge of the Selling
Shareholders, has been threatened against or with respect to the Company in
respect of any Tax. There are no unsatisfied Liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document
15.
received by the Company. The Company has not entered into or has become bound by
any agreement or consent pursuant to Section 341(f) of the Code. The Company has
not been, and the Company will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(f) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, individually or collectively, would
reasonably be expected to give rise directly or indirectly to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162 of
the Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
2.16 EMPLOYEE AND LABOR MATTERS.
(a) Part 2.16 of the Disclosure Schedule accurately sets forth,
with respect to each employee of the Company (including any employee of the
Company who is on a leave of absence or on layoff status): (i) the name of such
employee and the date as of which such employee was originally hired by the
Company; (ii) such employee's title, (iii) the aggregate dollar amount of the
compensation (including wages, salary, commissions, director's fees, fringe
benefits, bonuses, profit-sharing payments and other payments or benefits of any
type) received by such employee from the Company with respect to services
performed in 1998; (iv) such employee's annualized compensation as of the date
of this Agreement; and (v) each Current Benefit Plan in which such employee
participates or is eligible to participate.
(b) Part 2.16 of the Disclosure Schedule accurately identifies
each former employee of the Company who is receiving or is scheduled to receive
(or whose spouse or other dependent is receiving or is scheduled to receive) any
benefits (whether from the Company or otherwise) relating to such former
employee's employment with the Company; and Part 2.16 of the Disclosure Schedule
accurately describes such benefits.
(c) Except as set forth in Part 2.16 of the Disclosure Schedule,
the Company is not a party to or bound by, and the Company has never been a
party to or bound by, any employment agreement or any union contract, collective
bargaining agreement or similar Contract.
(d) Except as set forth in Part 2.16 of the Disclosure Schedule,
the employment of each of the Company's employees is terminable by the Company
at will. The Company has made available to the Purchaser accurate and complete
copies of all employee manuals and handbooks, disclosure materials, policy
statements and other materials relating to the employment of the current and
former employees of each of the Company.
(e) Except as set forth in Part 2.16 of the Disclosure Schedule,
to the Knowledge of the Selling Shareholders: (i) no employee of the Company
intends to terminate
16.
his employment with the Company; (ii) no employee of the Company has received an
offer to join a business that may be competitive with the Company's business;
and (iii) no employee of the Company is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other Contract (with any
Person) that may have an adverse effect on (A) the performance by such employee
of any of his duties or responsibilities as an employee of the Company, or (B)
the Company's business or operations.
2.17 BENEFIT PLANS; ERISA.
(a) Part 2.17 of the Disclosure Schedule identifies and provides
an accurate and complete description of each Current Benefit Plan and each Past
Benefit Plan. The Company has never established, adopted, maintained, sponsored,
contributed to, participated in or incurred any Liability with respect to any
Employee Benefit Plan, except for the Company Plans identified in Part 2.17 of
the Disclosure Schedule.
(b) No Company Plan: (i) provides or provided any benefit
guaranteed by the Pension Benefit Guaranty Corporation; (ii) is or was a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA; or (iii) is or
was subject to the minimum funding standards of Section 412 of the Code or
Section 302 of ERISA.
There is no Person that (by reason of common control or otherwise) is or has at
any time been treated together with the Company as a single employer within the
meaning of Section 414 of the Code.
(c) The Company has made available to the Purchaser, with respect
to each Company Plan: (i) an accurate and complete copy of such Company Plan and
all amendments thereto (including any amendment that is scheduled to take effect
in the future); (ii) an accurate and complete copy of each Contract (including
any trust agreement, funding agreement, service provider agreement, insurance
agreement, investment management agreement or recordkeeping agreement) relating
to such Company Plan; (iii) an accurate and complete copy of any description,
summary, notification, report or other document that has been furnished to any
employee of the Company with respect to such Company Plan; (iv) an accurate and
complete copy of any form, report, registration statement or other document that
has been filed with or submitted to any Governmental Body with respect to such
Company Plan; and (v) an accurate and complete copy of any determination letter,
notice or other document that has been issued by, or that has been received by
the Company from, any Governmental Body with respect to such Company Plan.
(d) Each Current Benefit Plan is being operated and administered
in all material respects with the provisions thereof, and each Company Plan has
at all times been operated and administered in full compliance with the
provisions thereof. Each contribution or other payment that is required to have
been accrued or made under or with respect to any Company Plan has been duly
accrued and made on a timely basis.
17.
(e) Each Current Benefit Plan complies and is being operated and
administered in all material respects with, and each Company Plan has at all
times complied and been operated and administered in all material respects with,
all applicable reporting, disclosure and other requirements of ERISA and the
Code and all other applicable Legal Requirements. The Company has never incurred
any material Liability to the Internal Revenue Service or any other Governmental
Body with respect to any Company Plan; and to the Knowledge of the Selling
Shareholders, no event has occurred, and no condition or circumstance exists,
that would reasonably be expected to (with or without notice or lapse of time)
give rise directly or indirectly to any such Liability. To the Knowledge of the
Selling Shareholders, neither the Company nor any Person that is or was an
administrator or fiduciary of any Company Plan (or that acts or has acted as an
agent of the Company or any such administrator or fiduciary), has engaged in any
transaction or has otherwise acted or failed to act in a manner that has
subjected or may subject the Company to any Liability for breach of any
fiduciary duty or any other duty. No Company Plan, and no Person that is or was
an administrator or fiduciary of any Company Plan (or that acts or has acted as
an agent of any such administrator or fiduciary): (i) has engaged in a
non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Code; (ii) has failed to perform any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA;
or (iii) has taken any action that (A) may subject such Company Plan or such
Person to any material Tax, penalty or Liability relating to any "prohibited
transaction," or (B) may directly or indirectly give rise to or serve as a basis
for the assertion (by any employee or by any other Person) of any claim under,
on behalf of or with respect to such Company Plan.
(f) No inaccurate or misleading representation, statement or other
communication has been made or directed (in writing or otherwise) to any current
or former employee of the Company (i) with respect to such employee's
participation, eligibility for benefits, vesting, benefit accrual or coverage
under any Company Plan or with respect to any other matter relating to any
Company Plan, or (ii) with respect to any proposal or intention on the part of
the Company to establish or sponsor any Employee Benefit Plan or to provide or
make available any fringe benefit or other benefit of any nature.
(g) Except as set forth in Part 2.18 of the Disclosure Schedule,
the Company has not advised any of its employees (in writing or otherwise) that
it intends or expects to establish or sponsor any Employee Benefit Plan or to
provide or make available any fringe benefit or other benefit of any nature in
the future.
2.18 ENVIRONMENTAL MATTERS.
(a) The Company is not liable or potentially liable for any
response cost or natural resource damages under Section 107(a) of CERCLA, or
under any other so-called "superfund" or "superlien" law or similar Legal
Requirement, at or with respect to any site.
(b) The Company has never received any written notice or to the
Knowledge of the Selling Shareholders, any other communication (in writing or
otherwise) from any Governmental Body or other Person regarding any actual,
alleged, possible or potential Liability
18.
arising from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage, discharge, release, emission or disposal of any Hazardous Material. No
Person has ever commenced, or to the Knowledge of the Selling Shareholders,
threatened to commence any contribution action or other Proceeding against the
Company in connection with any such actual, alleged, possible or potential
Liability; and no event has occurred, and no condition or circumstance exists,
that may directly or indirectly give rise to, or result in the Company becoming
subject to, any such Liability.
(c) Except as set forth in Part 2.18 of the Disclosure Schedule,
the Company has never generated, manufactured, produced, transported, imported,
used, treated, refined, processed, handled, stored, discharged, released or
disposed of any Hazardous Material (whether lawfully or unlawfully). Except as
set forth in Part 2.18 of the Disclosure Schedule, the Company has never
permitted (knowingly or otherwise) any Hazardous Material to be generated,
manufactured, produced, used, treated, refined, processed, handled, stored,
discharged, released or disposed of (whether lawfully or unlawfully):
(i) on or beneath the surface of any real property that
is, or that has at any time been, owned by, leased to, controlled by or used by
the Company;
(ii) in or into any surface water, groundwater, soil or
air associated with or adjacent to any such real property; or
(iii) in or into any well, pit, pond, lagoon,
impoundment, ditch, landfill, building, structure, facility, improvement,
installation, equipment, pipe, pipeline, vehicle or storage container that is or
was located on or beneath the surface of any such real property or that is or
has at any time been owned by, leased to, controlled by or used by the Company.
(d) All property that is owned by, leased to, controlled by or
used by the Company, and all surface water, groundwater, soil and air associated
with or adjacent to such property is free of any Hazardous Material.
(e) Each storage tank or other storage container that is or has
been owned by, leased to, controlled by or used by the Company, or that is
located on or beneath the surface of any real property owned by, leased to,
controlled by or used by the Company is in sound condition.
2.19 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Except as set forth in Part 2.19 of the Disclosure Schecdule,
each product that has been developed and sold by the Company to any Person:
(i) conformed and complied in all material respects with
the terms and requirements of any applicable warranty or other Material Company
Contract and with all applicable Legal Requirements; and
19.
(ii) was free of any design defects, construction
defects or other defects or deficiencies at the time of sale.
(b) Except as set forth on Part 2.19 of the Disclosure Schedule,
all services that have been performed by the Company were performed properly and
in conformity in all material respects with the terms and requirements of all
applicable warranties and other Contracts and with all applicable Legal
Requirements.
(c) The Company will not incur or otherwise become subject to any
Liability arising directly or indirectly from any product developed and sold, or
any repair services or other services performed by, the Company on or at any
time prior to the Closing Date.
(d) No product developed and sold by the Company has been the
subject of any recall or other similar action; and no event has occurred, and no
condition or circumstance exists, that would reasonably be expected to (with or
without notice or lapse of time) directly or indirectly give rise to or serve as
a basis for any such recall or other similar action relating to any such
product.
(e) Except as set forth in Part 2.19 of the Disclosure Schedule,
no customer or other Person has ever asserted, or to the Knowledge of the
Selling Shareholders, threatened to assert any claim against the Company (i)
under or based upon any warranty provided by or on behalf of the Company, or
(ii) under or based upon any other warranty relating to any product sold by the
Company or any services performed by the Company. To the Knowledge of the
Selling Shareholders, no event has occurred, and no condition or circumstance
exists, that would reasonably be expected to (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for the assertion
of any such claim.
2.20 INSURANCE.
(a) The Company has made available the following information to
Purchaser with respect to each insurance policy maintained by or at the expense
of, or for the direct or indirect benefit of, the Company: (i) the name of the
insurance carrier that issued such policy and the policy number of such policy;
(iv) whether such policy is a "claims made" or an "occurrences" policy; (v) a
description of the coverage provided by such policy and the material terms and
provisions of such policy (including all applicable coverage limits, deductible
amounts and co-insurance arrangements and any non-customary exclusions from
coverage); (vi) the annual premium payable with respect to such policy, and the
cash value (if any) of such policy; and (vii) a description of any claims
pending, and any claims that have been asserted in the past, with respect to
such policy.
(b) Each of the insurance policies maintained by or at the expense
of, or for the direct benefit of the Company, is valid, enforceable and in full
force and effect, and has been issued by an insurance carrier that, to the best
Knowledge of the Company and the Selling Shareholders, is solvent, financially
sound and reputable. All of the information contained in the applications
submitted in connection with said policies was (at the times said applications
were
20.
submitted) accurate and complete, and all premiums and other amounts owing with
respect to said policies have been paid in full on a timely basis. The nature,
scope and dollar amounts of the insurance coverage provided by said policies are
sufficient to adequately insure the Company's business, assets, operations, key
employees, services and potential liabilities.
(c) Except as set forth in Part 2.20 of the Disclosure Schedule,
there is no pending claim under or based upon any of such policies; and no event
has occurred, and no condition or circumstance exists, that would reasonably be
expected to (with or without notice or lapse of time) directly or indirectly
give rise to or serve as a basis for any such claim.
(d) The Company has never received: (i) any written notice, or to
the Knowledge of the Selling Shareholders, any other communication (in writing
or otherwise) regarding the actual or possible cancellation or invalidation of
any of such insurance policies or regarding any actual or possible adjustment in
the amount of the premiums payable with respect to any of said policies; (ii)
any written notice, or to the Knowledge of the Selling Shareholders, any other
communication (in writing or otherwise) regarding any actual or possible refusal
of coverage under, or any actual or possible rejection of any claim under, any
of such insurance policies; or (iii) any indication that the issuer of any of
such insurance policies may be unwilling or unable to perform any of its
obligations thereunder.
2.21 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.21 of
the Disclosure Schedule: (a) no Related Party has, and no Related Party has at
any time since December 31, 1997 had, any direct or indirect interest of any
nature in any asset used in or otherwise relating to the business of the
Company; (b) no Related Party is, or has at any time since December 31, 1997
been, indebted to the Company; (c) since December 31, 1997, no Related Party has
entered into, or has had any direct or indirect financial interest in, any
Contract, transaction or business dealing of any nature involving the Company;
(d) no Related Party is competing, or has at any time since December 31, 1997
competed, directly or indirectly, with the Company in any market served by the
Company; (e) no Related Party has any claim or right against the Company; and
(f) no event has occurred, and no condition or circumstance exists, that would
reasonably be expected to (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any claim or right in favor of
any Related Party against the Company.
2.22 CERTAIN PAYMENTS, ETC. The Company and no officer, employee, agent
or other Person associated with or acting for or on behalf of the Company, has
at any time, directly or indirectly: (a) used any corporate funds (i) to make
any unlawful political contribution or gift or for any other unlawful purpose
relating to any political activity, (ii) to make any unlawful payment to any
governmental official or employee, or (iii) to establish or maintain any
unlawful or unrecorded fund or account of any nature; (b) made any false or
fictitious entry, or failed to make any entry that should have been made, in any
of the books of account or other records of the Company; (c) made any payoff,
influence payment, bribe, rebate, kickback or unlawful payment to any Person in
connection with the business of the Company; (d) made any unlawful payment to
any Person, or unlawfully provided any favor or anything of value (whether in
the form of property or services, or in any other form) to any Person, for the
purpose of obtaining or paying for (i) favorable treatment in securing business,
or (ii) any other special concession; or (e)
21.
agreed, committed, offered or attempted to take any of the actions described in
clauses "(a)" through "(d)" above.
2.23 PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.23 of the Disclosure Schedule,
there is no pending Proceeding, and to the Knowledge of the Selling Shareholders
no Person has threatened to commence any Proceeding: (i) that involves the
Company or any Selling Shareholder or that otherwise relates to or would
reasonably be expected to adversely affect the Company's business or any of the
assets owned or used by the Company (whether or not the Company is named as a
party thereto); or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement
(b) Except as set forth in Part 2.23 of the Disclosure Schedule,
no event has occurred, and no claim, dispute or other condition or circumstance
exists, that would reasonably be expected to, directly or indirectly, give rise
to or serve as a basis for the commencement of any such Proceeding.
(c) Except as set forth in Part 2.23 of the Disclosure Schedule,
no Proceeding has ever been commenced by or against the Company or any Selling
Shareholder; and no Proceeding otherwise involving or relating to the Company or
any Selling Shareholder has been pending or threatened at any time.
(d) the Company and each Selling Shareholder has made available to
the Purchaser accurate and complete copies of all pleadings, correspondence and
other written materials to which it or he has access that relate to the
Proceedings identified in Part 2.23 of the Disclosure Schedule.
(e) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject; and none of the Selling Shareholders
is subject to any Order that relates to the Company's business or to any of the
assets owned or used by the Company.
(f) To the Knowledge of the Selling Shareholders, no officer or
employee of the Company is subject to any Order that prohibits such officer or
employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
(g) There is no proposed Order that, if issued or otherwise put
into effect, (i) would reasonably be expected to have an adverse effect on the
Company's business, condition, assets, liabilities, operations or financial
performance (or on any aspect or portion thereof) or on the ability of the
Company or any of the Selling Shareholders to comply with or perform any
covenant or obligation under this Agreement or any of the transactions
contemplated by this Agreement, or (ii) would reasonably be expected to have the
effect of preventing, delaying, making illegal or otherwise interfering with any
of the transactions contemplated by this Agreement.
22.
2.24 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) The Company has the right, power and authority to enter into
and to perform its obligations under this Agreement; and the execution, delivery
and performance by the Company of this Agreement have been duly authorized by
all necessary action on the part of the Company and its shareholders. This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) Each Selling Shareholder has the absolute and unrestricted
right, power and capacity to enter into and to perform such Selling
Shareholder's obligations under this Agreement and the agreements contemplated
by this Agreement to which such Selling Shareholder is or may become a party.
This Agreement constitutes the legal, valid and binding obligation of each of
the Selling Shareholders, enforceable against each of the Selling Shareholders
in accordance with its terms. Upon the execution of each of the other agreements
contemplated by this Agreement at the Closing, each of such other agreements
will constitute the legal, valid and binding obligation of each Selling
Shareholder who is a party thereto, and will be enforceable against such Selling
Shareholder in accordance with its terms.
(c) The respective spouses of the Selling Shareholders have the
absolute and unrestricted right, power and capacity to execute and deliver and
to perform their obligations under the Spousal Consents being executed by them.
Said Spousal Consents constitute their legal, valid and binding obligations,
enforceable against them in accordance with their terms.
(d) The Agent has the unrestricted right, power, authority and
capacity to act for and bind each of the Selling Shareholders with respect to
all matters relating to this Agreement and the transactions contemplated by this
Agreement.
2.25 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.25 of
the Disclosure Schedule, neither the execution and delivery of this Agreement or
any of the agreements contemplated by this Agreement, nor the consummation or
performance of any of the transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the Company's articles of incorporation or bylaws, or (ii)
any resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the Company or any
of the Selling Shareholders, or any of the assets owned or used by the Company,
is subject;
23.
(c) to the Knowledge of the Selling Shareholders, cause the
Company, the Purchaser or any affiliate of the Purchaser to become subject to,
or to become liable for the payment of, any Tax;
(d) cause any of the assets owned or used by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(e) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or any of its employees or that otherwise relates to
the Company's business or to any of the assets owned or used by the Company;
(f) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Material Company
Contract;
(g) give any Person the right to (i) declare a default or exercise
any remedy under any Material Company Contract, (ii) accelerate the maturity or
performance of any Material Company Contract, or (iii) cancel, terminate or
modify any Material Company Contract;
(h) contravene, conflict with or result in a violation or breach
of or a default under any provision of, or give any Person the right to declare
a default under, any Contract to which any of the Selling Shareholders is a
party or by which any of the Selling Shareholders is bound; or
(i) result in the imposition or creation of any Encumbrance upon
or with respect to any of the Shares or any asset owned or used by the Company.
Except as set forth in Part 2.26 of the Disclosure Schedule, neither the Company
nor any of the Selling Shareholders was, is or will be required to make any
filing with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution and delivery of this Agreement or any of the
agreements contemplated by this Agreement or the consummation or performance of
any of the transactions contemplated by this Agreement.
2.26 BROKERS. Neither the Company nor any of the Selling Shareholders
has agreed or become obligated to pay, or has taken any action that would
reasonably be expected to result in any Person claiming to be entitled to
receive, any brokerage commission, finder's fee or similar commission or fee in
connection with any of the transactions contemplated by this Agreement.
2.27 SELLING SHAREHOLDERS.
(a) Each Selling Shareholder has the capacity and financial
capability to comply with and perform all of such Selling Shareholder's
covenants and obligations under this Agreement and any of the agreements
contemplated by this Agreement to which such Selling Shareholder is or may
become a party.
24.
(b) Each Selling Shareholder (i) is the record and beneficial
owner of that number of shares set forth next to that Selling Shareholder's name
on the Schedule of Selling Shareholders attached hereto as Exhibit C, (ii) has
good and valid title to all of such shares and (iii) has the absolute right,
power and the authority to sell, transfer and deliver all such shares, in each
case free and clear of all Encumbrances. Except for the shares set forth next to
each Selling Shareholders name on the Schedule of Selling Shareholders, such
Selling Shareholder does not own any, and there are no, additional shares of
capital stock of the Company issued and outstanding. There are no options,
warrants, rights, calls, commitments or other agreements of any character
whatsoever related to shares owned by each Selling Shareholders.
(c) No Selling Shareholder: (i) has, at any time, (A) made a
general assignment for the benefit of creditors, (B) filed, or had filed against
such Selling Shareholder, any bankruptcy petition or similar filing, (C)
suffered the attachment or other judicial seizure of all or a substantial
portion of such Selling Shareholder's assets, (D) admitted in writing such
Selling Shareholder's inability to pay such Selling Shareholder's debts as they
become due, (E) been convicted of, or pleaded guilty to, any felony, or (F)
taken or been the subject of any action that may have an adverse effect on such
Selling Shareholder's ability to comply with or perform any of such Selling
Shareholder's covenants or obligations under this Agreement or any of the
agreements contemplated by this Agreement; or is subject to any Order that may
have an adverse effect on such Selling Shareholder's ability to comply with or
perform any of such Selling Shareholder's covenants or obligations under this
Agreement or any of the agreements contemplated by this Agreement, (ii) has, at
any time, obtained any loans or incurred any indebtedness for which any
property, assets or securities of the Company is pledged as collateral and there
are no Encumbrances on any of the properties, assets or securities of the
Company imposed in connection with any indebtedness or other obligations of any
Selling Shareholder.
(d) There is no Proceeding pending, and, to the Knowledge of the
Selling Shareholders, no Person has threatened to commence any Proceeding, that
would reasonably be expected to have an adverse effect on the ability of any
Selling Shareholder to comply with or perform any of such Selling Shareholder's
covenants or obligations under this Agreement or any of the agreements
contemplated by this Agreement. No event has occurred, and no claim, dispute or
other condition or circumstance exists, that would reasonably be expected to
directly or indirectly give rise to or serve as a basis for the commencement of
any such Proceeding.
2.28 FULL DISCLOSURE.
(a) Neither this Agreement nor any of the agreements contemplated
by this Agreement contains or will contain any untrue statement of fact; and
neither this Agreement nor any of the agreements contemplated by this Agreement
omits or will omit to state any fact necessary to make any of the
representations, warranties or other statements or information contained therein
not misleading.
(b) Except as set forth in Part 2.28 of the Disclosure Schedule,
there is no fact within the Knowledge of the Selling Shareholders that (i) would
be reasonably expected to have a material adverse effect on the Company's
business, condition, assets, liabilities, operations or
25.
financial performance (or on any aspect or portion thereof) or on the ability of
the Company or any of the Selling Shareholders to comply with or perform any
covenant or obligation under this Agreement or any of the agreements
contemplated by this Agreement, or (ii) would be reasonably expected to have the
effect of preventing, delaying, making illegal or otherwise interfering with any
of the transactions this Agreement or any of the agreements contemplated by this
Agreement.
(c) All of the information set forth in the Disclosure Schedule,
and all other information regarding the Company and its business, condition,
assets, liabilities, operations or financial performance that has been furnished
to the Purchaser or any of its Representatives by or on behalf of the Company or
any of the Company's Representatives, is accurate and complete in all material
respects.
(d) The Company and the Selling Shareholders have provided the
Purchaser and the Purchaser's Representatives with full and complete access to
all of the Company's records and other documents and data.
2.29 INVESTMENT REPRESENTATIONS. Each of the Selling Shareholders
understand that the shares of Purchaser Common Stock to be issued pursuant to
Section 1.1 and 1.2 of this Agreement have not been registered under the
Securities Act or qualified under state securities or "blue sky" laws ("State
Securities Laws"). Each of the Selling Shareholders also understand that the
shares of Purchaser Common Stock are being issued pursuant to an exemption from
registration and/or qualification contained in the Securities Act and applicable
State Securities Laws based in part upon each of the Selling Shareholder's
representations contained in this Agreement. Each of the Selling Shareholders
hereby represents and warrants as follows:
(a) SELLING SHAREHOLDERS BEAR ECONOMIC RISK. Selling Shareholder
has substantial experience in evaluating the merits and risks of its investment
in the Purchaser and has the capacity to protect its own interests. Selling
Shareholder must bear the economic risk of this investment indefinitely unless
the shares of Purchaser Common Stock are registered pursuant to the Securities
Act, or an exemption from such registration is available. Selling Shareholder
understands that the Company is not obligated to, and has no present intention
to register the shares of Purchaser Common Stock to be issued pursuant to this
Agreement. Selling Shareholder also understands that there is no assurance that
any exemption from registration under the Securities Act will be available and
that, even if available, such exemption may not allow the Selling Shareholder to
transfer all or any portion of the shares of Purchaser Common Stock under the
circumstances, in the amounts or at the times the Selling Shareholder might
propose.
(b) ACQUISITION FOR OWN ACCOUNT. Selling Shareholder is acquiring
the shares of Purchaser Common Stock for Selling Shareholder's own account and
beneficial interest for investment only, and not for sale or with a view to
distribution of the shares of Purchaser Common Stock or any part thereof, has no
present intention of selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the same, and does not
presently have reason to anticipate a change in such intention. Selling
Shareholder also
26.
represents that the entire legal and beneficial interest of the shares of
Purchaser Common Stock it is acquiring pursuant to this Agreement is being
acquired for the account of the Selling Shareholder only and neither in whole
nor in part for any other person, and that any transfer of the shares of
Purchaser Common Stock will be made in compliance with the Securities Act and
all other applicable securities laws.
(c) SELLING SHAREHOLDER CAN PROTECT ITS INTERESTS. Selling
Shareholder represents that by reason of its business or financial experience,
Selling Shareholder has the capacity to protect its own interests in connection
with the transactions contemplated in this Agreement.
(d) ACCREDITED INVESTOR. Each Selling Shareholder represents that
he or she is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
(e) COMPANY INFORMATION. Selling Shareholder has had an
opportunity to discuss the Purchaser's business, management and financial
affairs with directors, officers and management of the Purchaser and has had the
opportunity to review the Purchaser's operations and facilities. Selling
Shareholder has also had the opportunity to ask questions of, and receive
answers from, the Purchaser and its management regarding the terms and
conditions of this investment and to obtain any additional information necessary
to verify the accuracy of the information given the Selling Shareholder. Selling
Shareholder acknowledges that it has received all the information it has
requested from the Purchaser and considers necessary or appropriate for deciding
whether to acquire the shares of Purchaser Common Stock.
(f) RULE 144. Selling Shareholder acknowledges and agrees that the
shares of Purchaser Common Stock issued pursuant to this Agreement must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Selling Shareholder has been
advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares acquired in a private
transaction subject to the satisfaction of certain conditions, including, among
other things, the availability of certain current public information about the
Purchaser, the resale occurring not fewer than one year after a party has
purchased and paid for the security to be sold, the sale being through an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Securities Exchange Act of 1934, as
amended) and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. Selling Shareholder is a resident of the State of
Pennsylvania.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants, to and for the benefit
of the Selling Shareholders, as follows:
27.
3.1 ACQUISITION OF SHARES. The Purchaser is not acquiring the Shares
with the current intention of making a public distribution thereof.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT.
(a) The Purchaser has the right, power and authority to enter into
and perform its obligations under this Agreement;
(b) The execution, delivery and performance of this Agreement by
the Purchaser has been duly authorized by all necessary action on the part of
the Purchaser; and
(c) This Agreement constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
3.3 SEC FILINGS
Purchaser has made available to the Company a complete and
accurate copy (excluding copies of exhibits) of each report, schedule,
registration statement and definitive proxy statement filed by Purchaser with
the SEC on or after January 1, 1997 (the "Purchaser SEC Documents"), which are
all the forms, reports and documents required to be filed by Purchaser with the
SEC since January 1, 1997. The Purchaser SEC Documents (i) complied with the
requirements of the Securities Act or the Exchange Act, as the case may be, at
and as of the times they were filed (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing); and (ii)
did not at and as of the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3.4 BROKERS. The Purchaser has not agreed or become obligated to pay,
and has not taken any action that would reasonably be expected to result in any
Person claiming to be entitled to receive, any brokerage commission, finder's
fee or similar commission or fee in connection with any of the Transactions.
3.5 INVESTMENT REPRESENTATIONS. Purchaser understands that the Shares
purchased pursuant to Section 1.1 and 1.2 of this Agreement have not been
registered under the Securities Act or qualified under State Securities Laws.
Purchaser also understands that the Shares are being sold pursuant to an
exemption from registration and/or qualification contained in the Securities Act
and applicable State Securities Laws based in part upon Purchaser's
representations contained in this Agreement. Purchaser hereby represents and
warrants as follows:
(a) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares
for Purchaser's own account and beneficial interest for investment only, and not
for sale or with a view to distribution of the Shares or any part thereof, has
no present intention of selling (in
28.
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
(b) PURCHASER CAN PROTECT ITS INTERESTS. Purchaser represents that
by reason of its business or financial experience, Purchaser has the capacity to
protect its own interests in connection with the transactions contemplated in
this Agreement.
(c) COMPANY INFORMATION. Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of, and receive answers from, the Company and its management
regarding the terms and conditions of this investment and to obtain any
additional information necessary to verify the accuracy of the information given
to Purchaser. Purchaser acknowledges that it has received all the information it
has requested from the Company and considers necessary or appropriate for
deciding whether to acquire the Shares.
(d) Notwithstanding anything to the contrary, Purchaser hereby
acknowledges that the Company and the Selling Shareholders have not made any
representations or warranties, express or implied, other than those included in
this Agreement or the Exhibits and Schedules hereto.
3.6 DUE ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary power and authority to conduct its business in the manner
in which its business is currently being conducted and to own and use its assets
in the manner in which its assets are currently owned and used and to perform
its obligations under all Contracts to which Purchaser is a party.
3.7 CAPITALIZATION, ETC. The authorized capital stock of the Purchaser
consists of 20,000,000 shares of common stock having a par value of $.01 per
share, of which 8,334,581 shares have been issued and are outstanding as of
April 22, 1999, and 1,000,000 shares of preferred stock having a par value of
$.01 per share, none of which has ever been issued or is outstanding. The
Purchaser has, and each Selling Shareholder will acquire at the Closing, good
and valid title to the Purchaser Common Stock free and clear of any
Encumbrances. All of the Purchaser Common Stock to be issued to the Selling
Shareholders pursuant to this Agreement (i) will be duly authorized and validly
issued, (ii) will be fully paid and non-assessable, and (iii) will be issued in
full compliance with all applicable securities laws and other applicable Legal
Requirements.
3.8 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of
this Agreement or any of the agreements contemplated by this Agreement, nor the
consummation or performance of any of the transactions contemplated by this
Agreement, will directly or indirectly (with or without notice or lapse of
time);
(a) Contravene, conflict with or result in a violation of (i) any
of the provisions of the certificate of incorporation or bylaws of the
Purchaser, or (ii) any resolution
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adopted by the stockholders of the Purchaser, the board of directors or any
committee of the board of directors of the Purchaser; or
(b) Contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the Purchaser, or
any of the assets owned or used by the Purchaser, is subject.
3.9 ABSENCE OF CHANGES. Since December 31, 1998, there has not been
any material adverse change in Purchaser's business, condition, assets,
liabilities, operations, or financial performance (or in any aspect or portion
thereof).
SECTION 4. INDEMNIFICATION, ETC.
4.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Company and the
Selling Shareholders shall survive (i) the Closing and the sale of the Shares to
the Purchaser; (ii) any sale or other disposition of any or all of the Shares by
the Purchaser; and (iii) any Acquisition Transaction effected by or otherwise
involving the Purchaser or the Company and shall expire on the date that is one
(1) year after the Closing Date (the "Expiration Date"); PROVIDED, HOWEVER, that
if, at any date prior to the Expiration Date, Purchaser (acting in good faith)
delivers to the Agent a written notice alleging the existence of an inaccuracy
in or a breach of any of the representations or warranties made by any of the
Selling Shareholders or the Company (and setting forth in reasonable detail the
basis for Purchaser's belief that such an inaccuracy or breach may exist) and
asserting a claim for recovery under Section 4.2 based on such alleged
inaccuracy or breach, then the claim asserted in such notice shall survive the
Expiration Date until such date as such claim is fully and finally resolved.
(b) The representations and warranties of the Company and the
Selling Shareholders, and the rights and remedies that may be exercised by the
Indemnities, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or Knowledge of, any of
the Indemnities or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule shall be deemed to be a
representation and warranty made by the Company and the Selling Shareholders in
this Agreement.
4.2 INDEMNIFICATION BY SELLING SHAREHOLDERS. The Selling Shareholders,
jointly and severally, shall hold harmless and indemnify each of the Indemnities
from and against, and shall compensate and reimburse each of the Indemnities
for, any Damages which are directly or indirectly suffered or incurred by any of
the Indemnities or to which any of the Indemnities may otherwise become subject
at any time (regardless of whether or not such Damages relate to any third-party
claim) and which arise directly or indirectly from or as a direct or indirect
result of, or
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are directly or indirectly connected with any inaccuracy in or breach of any
representation or warranty made by the Company or any of the Selling
Shareholders in this Agreement or in the Disclosure Schedule; PROVIDED, HOWEVER,
that the Selling Shareholders shall not be required to make any indemnification
payment pursuant to this Section 4.2 for any breach of any representation or
warranty until such time as the total amount of Damages (including the Damages
arising from such breach and all other Damages arising from any other breach of
any representation or warranty) that have been directly or indirectly suffered
or incurred by any one or more of the Indemnities, or to which any one or more
of the Indemnities has or have otherwise become subject, exceeds $150,000 in the
aggregate. At such time as the total amount of such Damages exceeds $150,000 in
the aggregate, the Indemnities shall be entitled to be indemnified against that
amount of such damages in excess of $150,000; PROVIDED, FURTHER, HOWEVER, that
the liability of each of the Selling Shareholders for any and all Damages shall
be limited solely to the Indemnity Shares.
4.3 NO CONTRIBUTION. Each Selling Shareholder waives, and acknowledges
and agrees that such Selling Shareholder shall not have and shall not exercise
or assert or attempt to exercise or assert, any right of contribution or right
of indemnity or any other right or remedy against the Company in connection with
any indemnification obligation or any other Liability to which such Selling
Shareholder may become subject under this Agreement or the transactions
contemplated hereby.
4.4 NO SETOFF. Except for the right to apply the Indemnity Shares
against Damages incurred by Purchaser in accordance with this Agreement and the
Escrow Agreement, the Purchaser shall not have the right to set off any amount
that may be owed to any Indemnitee under this Section 4 against any amount
otherwise payable by an Indemnitee to the Agent or any of the Selling
Shareholders.
4.5 EXCLUSIVITY OF INDEMNIFICATION REMEDIES. From and after the
Closing, and except as set forth in Section 7.12, the indemnification remedies
and other remedies provided in this Section 4 shall be deemed to be the
exclusive remedies of Purchaser in the event of any inaccuracy or breach of any
representation or warranty hereunder by the Company or the Selling Shareholders,
and resource to the Indemnity Shares shall be the sole and exclusive remedy of
Purchaser under this Agreement, other than for claims arising out of actual
fraud.
4.6 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against the
Company, against any other Indemnitee or against any other Person) with respect
to which any of the Selling Shareholders may become obligated to indemnify, hold
harmless, compensate or reimburse any Indemnitee pursuant to this Section 4, the
Purchaser shall have the right, at its election, to designate the Agent to
assume the defense of such claim or Proceeding at the sole expense of the
Selling Shareholders. If the Purchaser so elects to designate the Agent to
assume the defense of any such claim or Proceeding:
(a) the Agent shall proceed to defend such claim or Proceeding in
a diligent manner with counsel satisfactory to the Purchaser;
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(b) the Purchaser shall make available to the Agent any
non-privileged documents and materials in the possession of the Purchaser that
may be necessary to the defense of such claim or Proceeding;
(c) the Agent shall keep the Purchaser informed of all material
developments and events relating to such claim or Proceeding;
(d) the Purchaser shall have the right to participate in the
defense of such claim or Proceeding;
(e) the Agent shall not settle, adjust or compromise such claim or
Proceeding without the prior written consent of the Purchaser, unless the amount
of such settlement is less than the remaining Value of the Indemnity Shares at
that time, and a complete and final release is obtained in favor of the
Purchaser and the Company, if applicable; and
(f) the Purchaser may at any time (notwithstanding the prior
designation of the Agent to assume the defense of such claim or Proceeding)
assume the defense of such claim or Proceeding. If the Purchaser does not elect
to designate the Agent to assume the defense of any such claim or Proceeding (or
if, after initially designating the Agent to assume such defense, the Purchaser
elects to assume such defense), the Purchaser may proceed with the defense of
such claim or Proceeding on its own. If the Purchaser so proceeds with the
defense of any such claim or Proceeding on its own: (i) all expenses relating to
the defense of such claim or Proceeding (whether or not incurred by the
Purchaser) shall be borne and paid exclusively by the Selling Shareholders; (ii)
the Selling Shareholders shall make available to the Purchaser any documents and
materials in the possession or control of any of the Selling Shareholders that
may be necessary to the defense of such claim or Proceeding; (iii) the Purchaser
shall keep the Agent informed of all material developments and events relating
to such claim or Proceeding; and (iv) the Purchaser shall have the right to
settle, adjust or compromise such claim or Proceeding with the consent of the
Agent; PROVIDED, HOWEVER, that the Agent shall not unreasonably withhold such
consent.
4.7 EXERCISE OF REMEDIES BY INDEMNITIES OTHER THAN PURCHASER. No
Indemnitee (other than the Purchaser or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless the Purchaser (or any successor thereto or
assign thereof) shall have consented to the assertion of such indemnification
claim or the exercise of such other remedy.
SECTION 5. COVENANT NOT TO COMPETE.
5.1 COVENANT. Each of the Selling Shareholders acknowledge and agree
that the Company's reputation and goodwill are an integral part of the business
success throughout the areas where the Company conducts its business. If any of
the Selling Shareholders deprives Purchaser of any of the Company's goodwill or
in any manner utilizes their reputation and goodwill in competition with the
Company, Purchaser will be deprived of the benefits it has bargained for
pursuant to this Agreement. For the consideration to be delivered by Purchaser
to
32.
the Selling Shareholders pursuant to this Agreement, and as an inducement for
Purchaser to enter into this Agreement, each of the Selling Shareholders agrees
that for a period of two (2) years after the Closing Date, such Selling
Shareholder shall not, without Purchaser's prior written consent, directly or
indirectly, (i) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, partners, consultant or otherwise with, any business or
organization in any of the counties of Pennsylvania or in any part of the United
States, which directly or indirectly, competes with the businesses of the
Company or Purchaser as presently conducted or proposed to be conducted or (ii)
solicit, induce or influence any employee of the Company to terminate his or her
relationship with the Company. Each of the Selling Shareholders agree to
maintain in confidence and not to disclose to any third party, any ideas,
methods, customer lists, supplier lists, business plans, trade secrets to other
proprietary information or proprietary rights of the Company. In the event the
covenant in this Section 5 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time over too great a geographical area or by reason of its being too
extensive in any other respect, it shall be interpreted to extend only over the
maximum period of time for which it may be enforceable, and/or over the maximum
geographical area as to which it may be enforceable and/or to the maximum extent
in all other respects as to which it may be enforceable, all as determined by
such court in such action.
5.2 INJUNCTIVE RELIEF. Each of the Selling Shareholders acknowledges
that breach of the covenant contained in this Section 5 will cause irreparable
damage to Purchaser, the exact amount of which will be difficult to ascertain,
and that the remedies at law for any such breach will be inadequate.
Accordingly, each of the Selling Shareholders agree that if the Selling
Shareholders, or any one of them, breaches the covenant contained in this
Section 5, in addition to any other remedy which may be available at law or in
equity, Purchaser shall be entitled to specific performance and injunctive
relief, without posting a bond or other security.
SECTION 6. PIGGYBACK REGISTRATION RIGHTS.
6.1 DEFINITIONS. For purposes of this Section 6, the following terms
shall have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" means any person owning of record Registrable Securities.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means the Purchaser Common Stock issued
to the Selling Shareholders as consideration for the Shares under Sections 1.1
and 1.2 of this Agreement.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Purchaser's
Common Stock that are
33.
Registrable Securities and either (a) are then issued and outstanding or (b) are
issuable pursuant to then exercisable or convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Purchaser in complying with Sections 2.2 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Purchaser, reasonable fees and disbursements not to exceed
twenty-five thousand dollars ($25,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Purchaser which shall be paid in any event by the
Purchaser).
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
6.2 PIGGYBACK REGISTRATIONS. The Purchaser shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Purchaser excluding registration statements
relating to employee benefit plans or with respect to corporate reorganizations
or other transactions under Rule 145 of the Securities Act) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Purchaser, so notify the Purchaser in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Purchaser, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Purchaser with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Purchaser gives notice under this Section 6.2 is for an underwritten offering,
the Purchaser shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 6.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Purchaser. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated,
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first, to the Purchaser; second, to Finova Capital Corporation; and third, to
all shareholders of the Purchaser included in such registration (including the
Holders) on a PRO RATA basis. No such reduction shall reduce the securities
being offered by the Purchaser for its own account to be included in the
registration and underwriting. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written notice
to the Purchaser and the underwriter, delivered at least ten (10) business days
prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing person shall be deemed to be a
single "Holder", and any PRO RATA reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Purchaser shall have the
right to terminate or withdraw any registration initiated by it under this
Section 6.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Purchaser in
accordance with Section 6.3 hereof.
6.3 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 6.2 herein shall be borne by the
Purchaser. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered PRO
RATA on the basis of the number of shares so registered.
6.4 OBLIGATIONS OF THE PURCHASER. Whenever required to effect the
registration of any Registrable Securities, the Purchaser shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective. The Purchaser shall not be
required to file, cause to become effective or maintain the effectiveness of any
registration statement that contemplates a distribution of securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other
35.
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; PROVIDED that the Purchaser shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Purchaser for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Purchaser, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
6.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 6 shall terminate and be of no further force and
effect if all Registrable Securities held by such Holder (and its affiliates,
partners, former partners, members and former members) may be sold under Rule
144 during any ninety (90) day period.
6.6 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 6.
(b) It shall be a condition precedent to the obligations of the
Purchaser to take any action pursuant to Section 6.2 that the selling Holders
shall furnish to the Purchaser such information regarding themselves, the
Registrable Securities held by them and the intended
36.
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
6.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 6.2:
(a) To the extent permitted by law, the Purchaser will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Purchaser: (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) 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, or (iii) any violation
or alleged violation by the Purchaser of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law in connection with
the offering covered by such registration statement; and the Purchaser will pay
as incurred to each such Holder, partner, officer, director, underwriter or
controlling person for any legal or other expenses reasonably incurred by 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 6.7(a) 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 Purchaser, which consent shall not be unreasonably withheld,
nor shall the Purchaser 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
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Purchaser, each of its directors, its officers
and each person, if any, who controls the Purchaser within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Purchaser or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and
37.
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Purchaser or any such
director, officer, controlling person, underwriter or other Holder, or partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 6.7(b) 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 Holder, which consent
shall not be unreasonably withheld; PROVIDED FURTHER, that in no event shall any
indemnity under this Section 6.7 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 6.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 6.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 6.7.
(d) If the indemnification provided for in this Section 6.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; PROVIDED, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
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(e) The obligations of the Purchaser and Holders under this
Section 6.7 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
6.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Purchaser to register Registrable Securities pursuant to this Section 6 may not
be assigned.
6.9 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 6
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Purchaser and the Holders of at least a majority in
interest of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this Section 6.9 shall be binding upon each Holder
and the Purchaser. By acceptance of any benefits under this Section 6, Holders
of Registrable Securities hereby agree to be bound by the provisions hereunder.
6.10 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell or otherwise transfer
or dispose of any Common Stock (or other securities) of the Purchaser held by
such Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of Common Stock (or other
securities) of the Purchaser not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Purchaser filed
under the Securities Act. Each Holder agrees to execute and deliver such other
agreements as may be reasonably requested by the Purchaser or the underwriter
which are consistent with the foregoing or which are necessary to give further
effect thereto. In addition, if requested by the Purchaser or the representative
of the underwriters of Common Stock (or other securities) of the Purchaser, each
Holder shall provide, within ten (10) days of such request, such information as
may be required by the Purchaser or such representative in connection with the
completion of any public offering of the Purchaser's securities pursuant to a
registration statement filed under the Securities Act. The obligations described
in this Section 6.10 shall not apply to a registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the
future. The Purchaser may impose stop-transfer instructions with respect to the
shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
6.11 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Purchaser agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities
39.
Act, at all times after the effective date of the first registration filed by
the Purchaser for an offering of its securities to the general public; and
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Purchaser under the Exchange Act.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 SELLING SHAREHOLDERS' AGENT.
(a) The Selling Shareholders hereby irrevocably nominate,
constitute and appoint Xxxx X. Xxxxxx (the "Agent") as the agent and true and
lawful attorney-in-fact of the Selling Shareholders, with full power of
substitution, to act in the name, place and stead of the Selling Shareholders
for purposes of executing any documents and taking any actions that the Agent
may, in his sole discretion, determine to be necessary, desirable or appropriate
in connection with the performance of this Agreement or any of the transactions
contemplated hereby. Xxxx X. Xxxxxx hereby accepts his appointment as Agent.
(b) The Selling Shareholders hereby grant to the Agent full
authority to execute, deliver, acknowledge, certify and file on behalf of the
Selling Shareholders (in the name of any or all of the Selling Shareholders or
otherwise) any and all documents that the Agent may, in his sole discretion,
determine to be necessary, desirable or appropriate, in such forms and
containing such provisions as the Agent may, in his sole discretion, determine
to be appropriate (including the General Release referred to in Section
1.7(b)(vii) and any amendment to or waiver of rights under this Agreement or any
of the transactions contemplated by this Agreement). Notwithstanding anything to
the contrary contained in this Agreement or any of the agreements contemplated
by this Agreement: (i) the Purchaser shall be entitled to deal exclusively with
the Agent on all matters relating to this Agreement or any of the transactions
contemplated by this Agreement (including all matters relating to any notice to,
or any Consent to be given or action to be taken by, any Selling Shareholder);
and (ii) each Indemnitee shall be entitled to rely conclusively (without further
evidence of any kind whatsoever) on any document executed or purported to be
executed on behalf of any Selling Shareholder by the Agent, and on any other
action taken or purported to be taken on behalf of any Selling Shareholder by
the Agent, as fully binding upon such Selling Shareholder.
(c) The Selling Shareholders recognize and intend that the power
of attorney granted in Section 7.1(a): (i) is coupled with an interest and is
irrevocable; (ii) may be delegated by the Agent; and (iii) shall survive the
death or incapacity of each of the Selling Shareholders.
(d) The Agent shall be entitled to treat as genuine, and as the
document it purports to be, any letter, facsimile, telex or other document that
is believed by his to be genuine and to have been telexed, telegraphed, faxed or
cabled by a Selling Shareholder or to have been signed and presented by a
Selling Shareholder.
40.
(e) If the Agent shall die, become disabled or otherwise be unable
to fulfill his responsibilities hereunder, the Selling Shareholders shall,
within ten days after such death or disability, appoint a successor to the Agent
and immediately thereafter notify the Purchaser of the identity of such
successor. Any such successor shall succeed the Agent as Agent hereunder. If for
any reason there is no Agent at any time, all references herein to the Agent
shall be deemed to refer to the Selling Shareholders.
(f) All expenses incurred by the Agent in connection with the
performance of his duties as Agent shall be borne and paid by the Selling
Shareholders.
7.2 FURTHER ASSURANCES. Each party hereto shall execute and/or
cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
7.3 FEES AND EXPENSES. Subject to the provisions of Section 4
(including the indemnification and other obligations of the Selling Shareholders
thereunder), the Purchaser shall bear and pay all fees, costs and expenses
(including all legal fees and expenses payable to Xxxxxx Godward LLP) that have
been incurred or that are in the future incurred by or on behalf of the
Purchaser, the Selling Shareholders or the Company in connection with the
transactions contemplated by this Agreement, including: (i) the negotiation,
preparation and review of any letter of intent or similar document relating to
this Agreement or any of the transactions contemplated by this Agreement; (ii)
the investigation and review conducted by the Purchaser and its Representatives
with respect to the Company's business; (iii) the negotiation, preparation and
review of this Agreement and all certificates, opinions and other instruments
and documents delivered or to be delivered in connection with the transactions
contemplated by this Agreement; and (iv) the consummation and performance of the
transactions contemplated by this Agreement.
7.4 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Agreement or any of the transactions contemplated by this
Agreement or the enforcement of any provision of any of this Agreement or any of
the transactions contemplated by this Agreement is brought against any party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
7.5 NOTICES. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
telecopier) to the address or telecopier number set forth beneath the name of
such party below (or to such other address or telecopier number as such party
shall have specified in a written notice given to the other parties hereto):
41.
if to the Company:
Dynamic Technologies, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
WITH A COPY TO:
Xxxxxx X. Xxxxxxx
0000 XxXxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
if to the Agent or to any of the Selling Shareholders:
Xxxx X. Xxxxxx
c/o Dynamic Technologies
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
if to the Purchaser:
Javelin Systems, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Fax: (000) 000-0000
WITH A COPY TO:
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
7.6 PUBLICITY. On and at all times after the Closing Date:
(a) no press release or other publicity concerning this Agreement
or any of the transactions contemplated by this Agreement shall be issued or
otherwise disseminated by or on behalf of the Company or any of the Selling
Shareholders, and the Company and the Selling Shareholders
42.
shall continue to keep the existence and terms of this Agreement and the
transactions contemplated by this Agreement strictly confidential; and
(b) each Selling Shareholder shall keep strictly confidential, and
shall not use or disclose to any other Person, any non-public document or other
information in such Selling Shareholder's possession that relates directly or
indirectly to the business of the Company, the Purchaser or any affiliate of the
Purchaser.
7.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
7.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
7.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
7.10 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the County of
Orange, California.
Each party to this Agreement: (i) expressly and irrevocably consents and submits
to the jurisdiction of each state and federal court located in the County of
Orange, California (and each appellate court located in the State of California)
in connection with any such legal proceeding; (ii) agrees that each state and
federal court located in the County of Orange, California shall be deemed to be
a convenient forum; and (iii) agrees not to assert (by way of motion, as a
defense or otherwise), in any such legal proceeding commenced in any state or
federal court located in the County of Orange, California, any claim that such
party is not subject personally to the jurisdiction of such court, that such
legal proceeding has been brought in an inconvenient forum, that the venue of
such proceeding is improper or that this Agreement or the subject matter of this
Agreement may not be enforced in or by such court.
(c) Each Selling Shareholder agrees that, if any Proceeding is
commenced against any Indemnitee by any Person in or before any court or other
tribunal anywhere in the world, then such Indemnitee may proceed against such
Selling Shareholder in such court or other tribunal with respect to any
indemnification claim or other claim arising directly or indirectly from or
relating directly or indirectly to such Proceeding or any of the matters alleged
therein or any of the circumstances giving rise thereto.
43.
(d) Nothing contained in Section 7.10(b) or 7.10(c) shall be
deemed to limit or otherwise affect the right of any Indemnitee to commence any
legal proceeding or otherwise proceed against the Company or any of the Selling
Shareholders in any other forum or jurisdiction.
(e) The Selling Shareholders irrevocably constitute and appoint
the Agent as their agent to receive service of process in connection with any
legal proceeding relating to this Agreement or the enforcement of any provision
of this Agreement.
(f) The Selling Shareholders irrevocably waive the right to a jury
trial in connection with any legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement.
7.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Selling Shareholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); and the Purchaser and its successors and
assigns (if any). This Agreement shall inure to the benefit of: the Company; the
Selling Shareholders; the Purchaser; the other Indemnities (subject to Section
4.8); and the respective successors and assigns (if any) of the foregoing. The
Purchaser may freely assign any or all of its rights under this Agreement
(including its indemnification rights under Section 4), in whole or in part, to
any other Person without obtaining the consent or approval of any other party
hereto or of any other Person.
7.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). Each
of the parties hereto agrees that:
(a) in the event of any Breach or threatened Breach by such party
of any covenant, obligation or other provision set forth in this Agreement, each
other party shall be entitled (in addition to any other remedy that may be
available to it) to (i) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (ii) an injunction restraining such Breach or threatened Breach;
and
(b) neither the Selling Shareholders, Purchaser nor any other
Indemnitee shall be required to provide any bond or other security in connection
with any such decree, order or injunction or in connection with any related
action or Proceeding.
7.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
44.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
7.14 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser and the Agent.
7.15 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
7.16 PARTIES IN INTEREST. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their Representatives, the Indemnities and their respective
successors and assigns (if any).
7.17 ENTIRE AGREEMENT. This Agreement and the transactions contemplated
by this Agreement set forth the entire understanding of the parties relating to
the subject matter thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter thereof.
7.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
45.
THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AND DELIVERED
AS OF THE DATE FIRST WRITTEN ABOVE.
"PURCHASER": JAVELIN SYSTEMS, INC.
a Delaware corporation
By:
------------------------------------------
"THE COMPANY": DYNAMIC TECHNOLOGIES, INC.,
a Pennsylvania corporation
By:
------------------------------------------
Xxxxxx Xxxxxx, President
SB HOLDINGS, INC.
a Pennsylvania corporation
By:
------------------------------------------
Xxxx X. Xxxxx, President
"SELLING SHAREHOLDERS":
------------------------------------------
XXXX X. XXXXX
------------------------------------------
XXXX X. XXXXXX
------------------------------------------
XXXXXX XXXXXX
"AGENT":
------------------------------------------
XXXX X. XXXXXX
SIGNATURE PAGE TO JAVELIN SYSTEMS, INC.
STOCK PURCHASE AGREEMENT
46.
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or assets (other than in the ordinary course of business);
(b) THE ISSUANCE, SALE OR OTHER DISPOSITION OF (i) ANY CAPITAL
STOCK OF THE COMPANY, (ii) ANY OPTION, CALL, WARRANT OR RIGHT (WHETHER OR NOT
IMMEDIATELY EXECRABLE) TO ACQUIRE ANY CAPITAL STOCK OF THE COMPANY, OR (iii) ANY
SECURITY, INSTRUMENT OR OBLIGATION THAT IS OR MAY BECOME CONVERTIBLE INTO OR
EXCHANGEABLE FOR ANY CAPITAL STOCK OF THE COMPANY; OR
(c) ANY MERGER, CONSOLIDATION, BUSINESS COMBINATION, SHARE
EXCHANGE, REORGANIZATION OR SIMILAR TRANSACTION INVOLVING THE COMPANY.
AGENT. "Agent" shall have the meaning specified in Section 7.1 of the
Agreement.
AGREEMENT. "Agreement" shall mean the Stock Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.
BEST EFFORTS. "Best Efforts" shall mean the efforts that a prudent
Person desiring to achieve a particular result would use in order to ensure that
such result is achieved as expeditiously as possible.
CERCLA. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act.
CLOSING. "Closing" shall have the meaning specified in Section 1.6 of
the Agreement.
CLOSING DATE. "Closing Date" shall have the meaning specified in
Section 1.6 of the Agreement.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.
COMPANY. "Company" shall mean collectively, Dynamic Technologies, Inc.
and SB Holdings, Inc.
COMPANY FINANCIAL STATEMENTS. "Company Financial Statements" shall have
the meaning specified in Section 2.4 of the Agreement.
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COMPANY PLAN. "Company Plan" shall mean any Current Benefit Plan or
Past Benefit Plan.
COMPANY RETURNS. "Company Returns" shall have the meaning specified in
Section 2.16 of the Agreement.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
CURRENT BENEFIT PLAN. "Current Benefit Plan" shall mean any Employee
Benefit Plan that is currently in effect and:
(a) that was established or adopted by the Company or any ERISA
Affiliate or is maintained or sponsored by the Company;
(b) In which the Company participates;
(c) With respect to which the Company or any ERISA Affiliate is or
may be required or permitted to make any contribution; or
(d) With respect to which the Company or any ERISA Affiliate is or
may become subject to any liability.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, Liability, settlement, judgment, award, fine, penalty, Tax, fee
(including any legal fee, expert fee, accounting fee or advisory fee), charge,
cost (including any cost of investigation) or expense of any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to the Purchaser on behalf of
the Company and the Selling Shareholders, a copy of which is attached to the
Agreement and incorporated in the Agreement by reference.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) OF ERISA.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any
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restriction on the transfer of any security or other asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use of
any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
GAAP. "GAAP" shall mean generally accepted accounting principles,
applied on a basis consistent with the basis on which the Company Financial
Statements were prepared.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is, has been or may in the future be issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or
(b) right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) Federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
HAZARDOUS MATERIAL. "Hazardous Material" shall include:
(a) any petroleum, waste oil, crude oil, asbestos, urea
formaldehyde or polychlorinated biphenyl;
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(b) any waste, gas or other substance or material that is
explosive or radioactive;
(c) any "hazardous substance," "pollutant," "contaminant,"
"hazardous waste," "regulated substance," "hazardous chemical" or "toxic
chemical" as designated, listed or defined (whether expressly or by reference)
in any statute, regulation or other Legal Requirement (including CERCLA, any
other so-called "superfund" or "superlien" law, the Resource Conservation
Recovery Act, the Federal Water Pollution Control Act, the Toxic Substances
Control Act, the Emergency Planning and Community Right-to-Know Act and the
respective regulations promulgated thereunder);
(d) any other substance or material (regardless of physical form)
or form of energy that is subject to any Legal Requirement which regulates or
establishes standards of conduct in connection with, or which otherwise relates
to, the protection of human health, plant life, animal life, natural resources,
property or the enjoyment of life or property from the presence in the
environment of any solid, liquid, gas, odor, noise or form of energy; and
(e) any compound, mixture, solution, product or other substance or
material that contains any substance or material referred to in clause "(a)",
"(b)", "(c)" or "(d)" above.
INDEMNITIES. "Indemnities" shall mean the following Persons:
(a) the Purchaser;
(b) the Purchaser's current and future affiliates (including the
Company);
(c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred
to in clauses "(a)", "(b)" and "(c)" above;
PROVIDED, HOWEVER, that (i) the company shall not be entitled to exercise any
rights as an indemnitee prior to the closing, and (ii) none of the selling
shareholders shall at any time be deemed to be "indemnities."
KNOWLEDGE. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual has actual knowledge of such
fact or other matter. For purposes of this definition, an individual shall be
deemed to have actual knowledge of the existence and content of any written
documents or agreements in the Company's possession or control. The Company
shall be deemed to have "Knowledge" of a particular fact or other matter if Xxxx
X. Xxxxxx or Xxxx X. Xxxxx has Knowledge of such fact or other matter.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation,
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ruling, directive, pronouncement, requirement, specification, determination,
decision, opinion or interpretation that is, has been or may in the future be
issued, enacted, adopted, passed, approved, promulgated, made, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with GAAP (in regard to the Company) or
generally accepted accounting principles (in regard to any other person) and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
MATERIAL COMPANY CONTRACT DEFINITION
(a) Part 2.12 of the Disclosure Schedule identifies each Contract
that constitutes a "Material Company Contract." For purposes of this Agreement,
a "Material Company Contract" shall be deemed to be any Contract:
(i) relating to the employment or engagement of, or the
performance of services by, any employee, consultant or
independent contractor which involves a potential commitment of
the Company in excess of $60,000 per year;
(ii) relating to the acquisition, transfer, use, development,
sharing or license of any technology or any Proprietary Asset
(except for any Proprietary Asset that is licensed to the Company
under any third party software license agreement generally
available to the public at a cost of less than $10,000);
(iii) imposing any material restriction on the Company's right
or ability (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any
other Person, to sell any product or other asset to or perform
any services for any other Person or to transact business or
deal in any other manner with any other Person, or (c) to
develop or distribute any technology;
(iv) creating or involving any agency relationship,
distribution arrangement or franchise relationship involving
payments or obligations in excess of $25,000 per year;
(v) relating to the acquisition, issuance or transfer of any
securities;
(vi)creating or relating to the creation of any
encumbrance with respect to any asset owned or used by the Company
having a value in excess of $25,000;
(vii) involving or incorporating any guaranty, any pledge,
any performance or completion bond, any indemnity (other than
customary intellectual property indemnitees for hardware and
software sold by the Company), any right of
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contribution or any surety arrangement, any of which obligations
involve a Company obligation in excess of $25,000 per year;
(viii) creating or relating to any partnership or joint
venture or any sharing of revenues, profits, losses, costs or
liabilities;
(ix) relating to the purchase or sale of any product or
other asset by or to, or the performance of any services by or
for, any Related Party;
(x) entered into outside the ordinary course of business;
(xi) that may not be terminated by the Company (without
penalty) within 60 days after the delivery of a termination notice
by the Company; and
(xii) contemplating or involving (A) the payment or
delivery of cash or other consideration in an amount or having a
value in excess of $100,000 in the aggregate, or (B) the
performance of services having a value in excess of $100,000 in
the aggregate.)
ORDER. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is, has been or may in the future be issued, made, entered,
rendered or otherwise put into effect by or under the authority of any court,
administrative agency or other Governmental Body or any arbitrator or
arbitration panel; or
(b) Contract with any Governmental Body that is, has been or may
in the future be entered into in connection with any Proceeding.
PAST BENEFIT PLAN. "Past Benefit Plan" shall mean any Employee Benefit
Plan (other than a Current Benefit Plan):
(a) of which the Company or any ERISA Affiliate has ever been a
"plan sponsor" (as defined in Section 3(16)(B) of ERISA) or that otherwise has
at any time been established, adopted, maintained or sponsored by the Company or
by any ERISA Affiliate;
(b) in which the Company or any ERISA affiliate has ever
participated;
(c) with respect to which the Company or any ERISA affiliate has
ever made, or has ever been required or permitted to make, any contribution; or
(d) with respect to which the Company or any ERISA affiliate has
ever been subject to any Liability.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
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PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation that is,
has been or may in the future be commenced, brought, conducted or heard by or
before, or that otherwise has involved or may involve, any Governmental Body or
any arbitrator or arbitration panel.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service xxxx (whether registered or unregistered), service xxxx
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset.
PURCHASER. "Purchaser" shall mean Javelin Systems, Inc., a Delaware
corporation.
RELATED PARTY. Each of the following shall be deemed to be a "Related
Party":
(a) each of the Selling Shareholders;
(b) each individual who is, or who has at any time been, an
officer of the Company;
(c) each member of the immediate family of each of the individuals
referred to in clauses "(a)" and "(b)" above; and
(d) any Entity (other than the Company) in which any one of the
individuals referred to in clauses "(a)", "(b)" and "(c)" above holds (or in
which more than one of such individuals collectively hold), beneficially or
otherwise, a controlling voting, proprietary or equity interest.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives. The
Selling Shareholders and all other Related Parties shall be deemed to be
"Representatives" of the Company.
SELLING SHAREHOLDERS. "Selling Shareholders" shall have the meaning
specified in the introductory paragraph of the Agreement.
SHARES. "Shares" shall have the meaning specified in Recital "A" to the
Agreement.
SPOUSAL CONSENTS. "Spousal Consents" shall mean the Spousal Consents
being executed by the respective spouses of the Selling Shareholders
contemporaneously with the execution and delivery of the Agreement.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer
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tax, stamp tax, sales tax, use tax, property tax, business tax, occupation tax,
inventory tax, occupancy tax, withholding tax or payroll tax), levy, assessment,
tariff, impost, imposition, toll, duty (including any customs duty), deficiency
or fee, and any related charge or amount (including any fine, penalty or
interest), that is, has been or may in the future be (a) imposed, assessed or
collected by or under the authority of any Governmental Body, or (b) payable
pursuant to any tax-sharing agreement or similar Contract.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
UNAUDITED INTERIM BALANCE SHEET. "Unaudited Interim Balance Sheet"
shall have the meaning specified in Section 2.4 of the Agreement.
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