Exhibit 2.1
AGREEMENT FOR SALE OF SHARES
----------------------------
Agreement made as of the 3rd day of December, 1998,
AMONG:
COMPUTER NETWORK TECHNOLOGY CORPORATION
a Minnesota corporation (the "Purchaser")
- AND EACH OF -
XXXXX X. XXXXX,
an individual residing in the Commonwealth of Pennsylvania
- AND -
XXXXXXXXX X. XXXXX,
an individual residing in the Commonwealth of Massachusetts
(individually each a "Seller" and collectively, the "Sellers")
WHEREAS the Sellers are now and at the Time of Closing will be the
legal and beneficial owners of all of the issued and outstanding shares of
capital stock of IntelliFrame Corporation, a Pennsylvania corporation (the
"Corporation"); and
WHEREAS the Sellers are desirous of selling and the Purchaser is
desirous of purchasing all of the issued and outstanding shares of capital stock
of the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants and agreements hereinafter contained, the parties hereto agree
as follows:
ARTICLE 1
INTERPRETATION
1.1 Defined Terms
(a) Where used herein or in any amendments hereto, the following terms
shall have the following meanings respectively:
"Annual Financial Statements" means the unaudited financial statements
of the Corporation prepared internally by the Corporation, including
the balance sheet as at the end of the Corporation's fiscal year ended
June 30, 1998, and a statement of profit and loss for the fiscal year
then ended and any notes thereto, a copy of which is attached hereto as
a part of Schedule A;
"Business" means the business of the Corporation including the
development, design, maintenance and provision of consulting services
with respect to re-engineering software products.
"Closing Date" means the 3rd day of December, 1998 or such other date
as may be mutually agreed between the parties hereto;
"CPR" shall have the meaning given to such term in Section 12.1(b)
hereof;
"Code" shall have the meaning given to such term in Section 3.1(u)
hereof;
"Contingent Worker" shall have the meaning given to such term in
Section 3.1(u) hereof;
"Continuation Coverage" shall have the meaning given to such term in
Section 3.1(u) hereof;
"Contracts" means all agreements, whether oral or written, to which the
Corporation is a party which agreements include, but are not
necessarily limited to any and all: OEM agreements, employment
agreements, consulting agreements, loan agreements, leases, agreements
granting or pertaining to mortgages or security interests, guarantees,
agreements with customers or suppliers or distributors, agreements
containing noncompetition or confidentiality provisions, government
grant agreements, insurance policies, derivative contracts and
agreements not terminable by the Corporation on thirty (30) days notice
without permission or penalty;
"Corporation" means IntelliFrame Corporation, a Pennsylvania
corporation;
"Corporation Plans" shall have the meaning given to such term in
Section 3.1(u) hereof;
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"Deliverable Agreement" means that certain Software Development
Agreement dated July 29, 1998, as the same may have been amended from
time to time, between the Corporation and the Purchaser;
"Development Employees and Agents" shall have the meaning given to such
term in Section 3.1(v) hereof;
"Employment Agreement" shall have the meaning given to such term in
Section 4.1(f) hereof;
"ERISA" shall have the meaning given to such term in Section 3.1(u)
hereof;
"Financial Statements" means the Annual Financial Statements and the
Month Financial Statements, copies of which are each attached hereto as
a part of Schedule A;
"Intellectual Property" means all rights with respect to internet
domain names, patents, patent applications, patent licenses,
trademarks, trademark licenses, trade names, trademark applications,
brand names, labels, copyrights, copyright registrations, applications
and licenses, service marks, unpatented inventions, techniques,
discoveries, improvements, designs, patterns, logos, artwork, printing
plates, trade secrets, know-how, industrial designs, formulae,
processes, technical information, proprietary rights, customer lists,
databases and non-public information and data, whether patentable or
not, and the goodwill that may be associated with any trademarks,
trademark licenses, trade names, assumed names, trademark applications,
brand names and labels necessary or used or useful in the conduct or
operation of the Business and any rights under licenses related to the
foregoing, including, but not limited to, the names "IntelliFrame" and
"Mapmaker";
"Invention Assignments" shall have the meaning given to such term in
Section 4.1(e) hereof;
"Inventory" means all inventory, work in progress, raw materials,
returned goods inventory, evaluation systems inventory, Products and/or
Services being tested or evaluated by customers or prospective
customers or other third parties, warranty returns inventory, service
inventory, finished products, supplies, packaging and shipping
containers and materials of the Seller (on-site, off-site and
consigned) used in the Business as of the Closing Date as well as
rights to all billed but unshipped inventory;
"Leases" means those agreements to which the Corporation is a party set
forth and described on Schedule 3.1(p) hereto;
"Month Financial Statements" means the internally prepared financial
statements of the Corporation including the balance sheet as at
September 30, 1998 and a statement of profit and loss for the three (3)
month period then ended and any notes thereto, a copy of which is
attached hereto as a part of Schedule A;
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"Multiemployer Plan" shall have the meaning given to such term in
Section 3.1(u) hereof;
"Products and/or Services" means any and all products or services,
which are prepared, developed, produced or sold or otherwise
transferred or provided by the Corporation to any third party
including, but not limited, versions of any language and all features,
modifications, enhancements, derivative works, optional modules,
add-ons and extensions thereof whether currently being marketed or in
development (including beta test versions), and all obsolete and prior
versions, all related programming technology, in both source and object
code form, regardless of the state of development of any such
technology, any other computer program containing a substantial portion
of such source or object code, any tools and utilities and all
development environments, intellectual property used to develop,
upgrade or maintain the programs, and all documentation, drawings,
specifications and technical data and other related technology.
"Purchase Price" shall have the meaning given to such term in Article 2
hereof;
"Purchased Shares" shall have the meaning given to such term in Article
2 hereof;
"Purchaser" means Computer Network Technology Corporation, a Minnesota
corporation;
"Purchaser's Counsel" means Xxxxxxx, Street and Deinard, P.A.;
"Seller(s)" means Xxxxx X. Xxxxx, a resident of Pennsylvania and
Xxxxxxxxx X. Xxxxx, a resident of Massachusetts;
"Sellers' Counsel" means Mintz, Levin, Cohn, Ferris, Glovsky and Popeo
P.C.;
"Time of Closing" means the time on the Closing Date when the
transactions contemplated hereby are consummated such that the
Purchased Shares are appropriately transferred to Purchaser and that
portion of the Purchase Price described in Section 2.2(a) has been paid
to Seller.
(b) All dollar amounts referred to in this agreement are in United
States Dollars.
(c) In this agreement, any reference to any event, change or effect
being "material" with respect to any entity means any material event,
change or effect related to the condition (financial or otherwise),
properties, prospects or business of such entity.
1.2 Schedules
The following Schedules are attached hereto and form part hereof:
Schedule A- Financial Statements;
Schedule 3.1(a) - Locations; Licenses and Permits
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Schedule 3.1(f) - Title;
Schedule 3.1(n) - Taxes;
Schedule 3.1(p) - Leases;
Schedule 3.1(r) - Insurance;
Schedule 3.1(s) - Contracts;
Schedule 3.1(u) - Employee Benefits;
Schedule 3.1(v) - Employees; Development Employees and Agents;
Schedule 3.1(y) - Dividends;
Schedule 3.1(z) - Liabilities to Employees;
Schedule 3.1(aa) - Legal Proceedings;
Schedule 3.1(bb) - Products Liability;
Schedule 3.1(dd) - Intellectual Property;
Schedule 3.1(ff) - Bank Accounts
Schedule 3.1(gg) - Facilities and Equipment;
Schedule 3.1(hh) - Corporate Policy; and
Schedule 3.1(jj) - Accounts Receivable.
ARTICLE 2
PURCHASE OF SHARES
2.1 Purchased Shares and Purchase Price. On the terms and subject to conditions
hereof, the Sellers covenant and agree to sell, assign and transfer to the
Purchaser and the Purchaser covenants and agrees to purchase from the Sellers
effective the Closing Date all of the issued and outstanding capital stock of
the Corporation, which consists of twenty (20) shares of Common Stock
("Purchased Shares") free and clear of any mortgages, liens, charges, security
interests, adverse claims, pledges, encumbrances and demands or other
restriction whatsoever.
2.2 Purchase Price. The purchase price for the Purchased Shares to be paid by
Purchaser (the "Purchase Price") shall be Two Million Dollars ($2,000,000.00).
Subject to Purchaser's rights of offset herein contained, the Purchase Price
shall be paid and satisfied in cash by wire transfer of certified funds to an
account in the United States of America or by delivery of a certified or
cashier's check as follows:
(a) One Million dollars ($1,000,000.00) payable to Sellers pro rata in
accordance with their present equity interests in the Corporation on
January 4, 1999; and
(b) One Million Dollars ($1,000,000.00) plus interest thereon accruing
from the date hereof at the rate for 90 day Treasury Bills of the
United States of America as published in the Wall Street Journal
payable to the Seller's pro rata in accordance with their present
equity interests in the Corporation on January 3, 2000.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Sellers' Representations and Warranties. The Sellers hereby, jointly and
severally, represent and warrant as follows in this Section 3.1 and further
acknowledge that the Purchaser is relying upon such representations and
warranties in connection with the purchase by the Purchaser of the Purchased
Shares.
(a) Organization. The Corporation has been duly incorporated and
organized and is validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. The Corporation has the corporate
power to own or lease its property and to carry on its business as such
business is now being conducted. The Corporation is not required to be
duly qualified as a corporation to do business in any jurisdiction
other than the Commonwealth of Pennsylvania and the Commonwealth of
Massachusetts, except to the extent that the failure to be so qualified
would not have a material adverse effect on the Corporation. The
Corporation has all licenses and permits in each jurisdiction in which
the nature of the business conducted by it or the property owned or
leased by it makes such licensing or permitting necessary. None of the
aforementioned licenses or permits contains any burdensome, term,
provision, condition or limitation which has or may have an adverse
effect on the Corporation or the operation of the Business and none of
such licenses or permits will require the consent of or the making of
notice to a third party in order to remain effective following the
Closing. Attached hereto as Schedule 3.1(a) is a list detailing (i) all
locations where the Corporation has offices, carries on business or has
assets, and (ii) all licenses and permits held by the Corporation.
(b) No Violation. Except as disclosed on the Schedules hereto, the
entering into of this agreement and the consummation of the
transactions contemplated hereby will not result in the violation of
any of the terms or provisions of the articles of incorporation or
by-laws of the Corporation, the Contracts, the Leases or of any
indenture or other agreement, written or oral, to which the Corporation
or any Seller may be a party, or by which the any of their respective
assets or properties may be bound. Except as contemplated herein, the
entering into of this agreement and the transactions contemplated
hereby will not result in the violation of any law applicable to any
Seller, the Corporation or any of their respective assets or
properties.
(c) Binding Agreement. This agreement has been duly executed and
delivered by the Sellers and is a valid and binding obligation of each
of the Sellers enforceable against each of the Sellers in accordance
with its terms.
(d) Capitalization. With respect to the capitalization of the
Corporation:
(i) The authorized capital stock of the Corporation consists
of One Thousand (1,000) shares of Common Stock of which only
the Purchased Shares have been duly issued and are
outstanding, and such Purchased Shares have been issued as
fully paid and non-assessable shares, and not in violation of
any pre-emptive
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rights, and are held ten (10) shares by Xxxxxxxxx X. Xxxxx and
ten (10) shares by Xxxxx X. Xxxxx;
(ii) All of the Purchased Shares are owned by the Sellers as
the legal and beneficial owners of record, with a good and
marketable title thereto, free and clear of all mortgages,
liens, charges, security interests, adverse claims, pledges,
encumbrances and demands or other restrictions whatsoever;
(iii) Other than this agreement, no person, firm or
corporation has any agreement or option or any right or
privilege, whether by law, pre-emptive or contractual, capable
of becoming an agreement or option for the purchase from any
Seller of any of the Purchased Shares; and
(iv) No person, firm or corporation has any agreement or
option or any right or privilege to subscribe for or otherwise
acquire any shares of the capital stock or any other
securities of the Corporation, whether by law, pre-emptive or
contractual right, or any arrangement capable of becoming an
agreement.
(e) Other Assets. No Seller owns or has owned (either legally or
beneficially), leases or has leased, or has or had any interest in or
control of any property or assets used by or relating to the
Corporation excepting only Purchased Shares.
(f) Title. Other than as disclosed on Schedule 3.1(f) hereto, the
Corporation owns its undertakings, assets and properties free and clear
of any and all liens, claims, security interests, mortgages, easements,
restrictions, charges and/or encumbrances whatsoever or howsoever
arising. Except as disclosed on Schedule 3.1(f) hereto, the Corporation
owns all of the assets and properties used or usable in the conduct of
the Business.
(g) Subsidiaries. The Corporation has no subsidiaries or interests in
any other entity or person and there are no agreements of any nature to
acquire any such subsidiary or interest in any other entity or person
or to acquire or lease any other business operations.
(h) Books and Records. The books and records of the Corporation fairly
and correctly set out and disclose in all material respects the
financial position of the Corporation as at the date this
representation is made. Complete and accurate copies of all the books
and records of the Corporation have been made available to the
Purchaser and will be delivered at Closing. All material financial
transactions of the Corporation have been accurately recorded in such
books and records. The corporate records and minute books of the
Corporation contain complete and accurate duly executed minutes of all
meetings of the directors and shareholders of the Corporation held
since the incorporation of the Corporation; provided, however, any
actions of the Corporation either which were approved at meetings for
which minutes are missing or which would normally require director
and/or shareholder approval have been properly ratified and confirmed
by appropriate actions by written consent of the directors and/or
shareholders of the Corporation as are necessary and appropriate and as
are contained in the minute
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books of the Corporation or will be delivered to Purchaser at the
Closing. The share certificate books, register of shareholders, and
register of transfers of the Corporation are complete and accurate. The
Sellers are the only individuals who have ever served as directors of
the Corporation.
(i) Financial Statements. Each of the Financial Statements (i) are
based upon the books and records of the Corporation, (ii) reflect
fairly and accurately the operations and financial condition of the
Corporation for the periods or as of the dates indicated, and were
prepared in accordance with generally accepted accounting principles,
uniformly applied on a basis consistent with that of prior years or
periods, (iii) contain and reflect all necessary adjustments and
reserves for a fair and accurate presentation of the results of
operations for the period covered by such Financial Statements.
Notwithstanding the foregoing, the Monthly Financial Statements do not
contain any reserve for taxes arising from the operation of the
Business. Such Monthly Financial Statements do, however, reflect levels
of cash and the Corporation presently has cash sufficient to pay for
all taxes of the Corporation arising from the operation of the Business
prior to the date hereof.
(j) Liabilities. There are no liabilities of the Corporation of any
kind whatsoever, whether or not accrued, whether or not determined or
determinable, and whether or not contingent in respect of which the
Corporation or the Purchaser may become liable on or after the
consummation of the transactions contemplated by this agreement other
than:
(i) liabilities disclosed on, reflected in or provided for in
the Month Financial Statements;
(ii) liabilities expressly disclosed to in this agreement or
in the Schedules attached hereto; or
(iii) liabilities arising in the ordinary course of business
which will not have a material adverse effect on the
Corporation, its Business, assets, financial condition or
prospects.
(k) Indebtedness. Except as disclosed in the Month Financial
Statements, the Corporation does not have outstanding any bonds,
debentures, mortgages, notes or other indebtedness and the Corporation
is not a party to or bound by any agreement to create or issue any
bonds, debentures, mortgages, notes or other indebtedness.
(l) Certain Third Party Obligations. The Corporation is not a party to
or bound by any agreement or guarantee, indemnification, assumption or
endorsement or any other like commitment of the obligations,
liabilities, contingent or otherwise, or indebtedness of any other
person, firm or corporation.
(m) Adverse Changes. From the date of the Annual Financial Statements
there has not been any material adverse change in the financial
conditions, prospects, assets or liabilities of the Corporation as the
same existed as of the date of the Annual Financial Statements, except
for changes resulting from operations and transactions in the ordinary
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course of business; provided that any such latter changes do not, and
no Seller has any reasonable basis to believe that any such latter
changes will, adversely affect the financial condition or prospects of
the Corporation. Since the dates of the Annual and Month Financial
Statements (i) the Business has been carried on in the ordinary and
normal course, (ii) there has been no transfer of the Corporation's
assets (other than sales of inventory in the ordinary course of
business), no increases or accelerations in payments of salary or
bonuses to any officers, directors or employees (and no approvals of
the same) no distributions of cash or assets of the Corporation to any
shareholders (and no approvals of the same), and (iii) there has been
no change in the business, operations, affairs or condition of the
Corporation, financial or otherwise, arising as a result of any
legislative or regulatory change, the termination or alteration of any
agreement, the revocation of any license or right to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot,
storm, condemnation, act of God or otherwise; except changes occurring
in the ordinary course of business, which changes have not, and no
Seller has any reasonable basis to believe any such changes will,
adversely affect(ed) the organization, business, properties, prospects
and financial condition of the Corporation.
(n) Taxes. Except as disclosed on Schedule 3.1(n), the Corporation has
duly and timely filed all tax returns required to be filed by it and
has paid all taxes (including, without limitation, income, sales, goods
and services, property, import, export, payroll and capital taxes)
which are or were due and payable, and has paid all assessments and
reassessments, and all other amounts payable by the Corporation.
Installments have been made by the Corporation as required by law for
taxes payable for the current period for which tax returns are not yet
required to be filed. There are no agreements, waivers or other
arrangements providing for an extension of time or for audits by the
relevant authorities with respect to the filing of any tax return by,
or payment of any tax, governmental charge or deficiency with respect
to, the Corporation. There are no actions, suits, proceedings,
investigations or claims now threatened or pending against the
Corporation in respect of taxes, governmental charges or assessments,
or any matters under discussion with any governmental authority
relating to taxes, governmental charges or assessments asserted by any
such authority. The Corporation has withheld from each payment made to
any of its officers, directors, former directors, and employees the
amount of all taxes, including but not limited to income tax, and other
deductions required to be withheld therefrom and has paid the same to
the proper tax or other receiving authorities within the time required
under any applicable federal, state or local law or regulation.
(o) Consignment Arrangements. The Corporation is not a party to any
material conditional sales contract, hire-purchase agreement or other
title retention agreement or any consignment agreement, agency
agreement or other relationship whereby assets of the Corporation are
in the possession of a third party.
(p) Leases. The Corporation is not a party to or bound by any lease or
agreement in the nature of a lease in regard to real or personal
property, whether as lessor or lessee, except those Leases listed on
Schedule 3.1(p) hereto, and each of such Leases is in good standing and
in full force and effect without amendment thereto. All such Leases are
in
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writing, copies of which have been provided to Purchaser. The
Corporation is not, and to the knowledge of each Seller and the
Corporation no other party is, in breach of any of the covenants,
conditions or agreements contained in each such Lease and no Seller is
aware of any proposed or ongoing capital expenditures relating to such
leased property for which the Corporation may be liable to pay any part
of the costs of such repair.
(q) Use of Property. The uses to which the leased properties or
equipment and real property referred to in subsection 3.1(p) have been
and are being put have never breached and are not in breach of any
statute, by-law, ordinance, regulation, covenant or restriction.
(r) Insurance. Attached hereto as Schedule 3.1(r) is a true and
complete schedule setting out all insurance policies (specifying the
insurer, the amount of the coverage, the type of insurance, the policy
number and any pending claims thereunder) maintained by the Corporation
on its properties, assets, businesses or personnel at the date this
representation is made. The Corporation is not in default with respect
to any of the provisions contained in any such insurance policy and has
not failed to give any notice or present any claim under any such
insurance policy in due and timely fashion. There have been no
substantial changes in the insurance described in Schedule 3.1(r) since
December 31, 1997 and such insurance coverage will be continued in full
force and effect to and including the Closing Date. Annexed hereto as
part of Schedule 3.1(r) is a description of all personal insurance
policies held by the Corporation in respect of its employees including
named insureds, coverage amounts and beneficiaries.
(s) Agreements. The Corporation does not have any outstanding
Contracts, whether written or oral, of any nature or kind whatsoever
except (i) those Contracts set out and described in Schedule 3.1(s)
hereto; (ii) the Leases described in Schedule 3.1(p) hereto; (iii) the
insurance policies described in Schedule 3.1(r) hereto; and (iv) the
employment and benefit agreements described in Schedule 3.1(u) hereto.
Each of the aforementioned Schedules respectively lists any and all
consents or notices which must be obtained or made in order to avoid a
termination or breach of or default under any such Contracts because of
the transactions contemplated hereby.
(t) Defaults. The Corporation is not, and to the knowledge of each
Seller and the Corporation no other party is, in material default or
material breach of any Contracts to which it is a party including,
without limitation, computer software licenses and there exists to the
knowledge of each Seller no state of facts which after notice or lapse
of time or both would constitute such a default or breach, and all such
contracts, agreements, indentures or other instruments are now in good
standing and the Corporation is entitled to all benefits thereunder.
(u) Benefit Plans. Schedule 3.1(u) hereto sets forth all stock
purchase, stock option, deferred compensation, incentive compensation,
severance or termination pay plans, agreements and arrangements and all
"employee benefit plans", as defined in Section 3(3) of ERISA and all
other employee fringe benefit and employee compensation arrangements,
established, sponsored, maintained or offered by the Corporation or to
which the Corporation contributed or is obligated to contribute
thereunder for current or
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former employees of the Corporation or which are otherwise sponsored or
maintained by third parties in an "affiliated service group" or
"controlled group" in which the Corporation is a member as such terms
are defined or otherwise utilized in ERISA or the Code (the
"Corporation Plans"). Schedule 3.1(u) separately identifies each
Corporation Plan which is a "multiemployer plan", as defined in Section
3(37) of ERISA ("Multiemployer Plan"). True, correct and complete
copies of the following documents, with respect to each of the
Corporation Plans, have been made available or delivered to Purchaser
by the Sellers, (a) any plans and related trust documents, and
amendments thereto; (b) the last three filed Forms 5500; (c) the last
Internal Revenue Service determination letter, if applicable; and (d)
summary plan descriptions. The Corporation is not and has never been a
member of any "affiliated service group" or "controlled group" as such
terms are defined or otherwise utilized in ERISA or the Code. With
respect to the Corporation Plans and other arrangements of the
Corporation pertaining to its employees:
(i) the Corporation Plans intended to qualify under Section
401 of the Code and the trusts maintained pursuant thereto are
exempt form federal income taxation under section 501 of the
Code, and nothing has occurred with respect to the operation
of the Corporation Plans which could cause the loss of such
qualification or exemption or the imposition of any liability,
penalty or tax under ERISA or the Code which may result in a
material adverse effect on the Corporation or the Business;
(ii) the Corporation Plans have been maintained in accordance
with their terms and with all provisions of the Code and ERISA
(including rules and regulations thereunder) and other
applicable federal and state laws and regulations, except
where the failure to so maintain would not result in a
material adverse effect on the Corporation or the Business;
(iii) no plan or employment arrangement exists that could
result in the payment by the Corporation to any current,
former, or future director or employee of the Corporation of
any money or other property rights or accelerate or provide
any other rights or benefits to any such employee or director
as a result of transactions contemplated by this Agreement,
whether or not such payment, acceleration, or provision would
constitute a "parachute payment" (within the meaning of
Section 280G of the Code) or whether or not some other
subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered;
(iv) the Corporation does not have any employee who cannot be
dismissed on not more than the notice required by common law
or statute without further liability;
(v) no Corporation Plan continues any benefit to any employee
or former employee of the Corporation other than continuation
of health coverage to the extent required by Section 4980B of
the Code and Part 6 of Subtitle B of Part I of
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ERISA (and comparable provisions of state law) or continuation
of life insurance benefits to the extent required by state law
("Continuation Coverage"), and the Corporation has complied
with all requirements relating to Continuation Coverage is not
subject to any liability, penalty or tax in connection
therewith;
(vi) no Corporation Plan is a defined benefit pension plan and
neither the Corporation nor any member of any "affiliated
service group" or "controlled group" as such terms are defined
or otherwise utilized in ERISA or the Code has ever maintained
or contributed to any defined benefit plan or Multiemployer
Plan;
(vii) no leased employee, temporary employee, contingent
employee, or independent contractor ("Contingent Worker") has
a claim for benefits under any Corporation Plan, other than a
claim under a Corporation Plan with respect to which the
Corporation has recognized the Contingent Worker as a
participant in said Corporation Plan; and
(viii) there are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against any
Corporation Plan or against the Corporation or any individual
or other entity that may have a claim for indemnification
against the Corporation with respect to any Corporation Plan
or its assets.
As used herein "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time and any and all
regulations or rulings promulgated thereunder or arising therefrom and
"Code" means the Internal Revenue Code of 1986, as amended from time to
time and any and all regulations or rulings promulgated thereunder or
arising therefrom.
(v) Employees. Schedule 3.1(v) sets forth a true and complete list of
the names of each employee of the Corporation, together with such
person's position or function, annual base salary or wages and any
incentive, bonus or other benefit arrangements with respect to such
person. Schedule 3.1(v) also sets forth a true and complete list of any
and all past or present employees and independent contractors who have
ever provided services to the Corporation by assisting in the creation,
development, marketing or maintenance of any items of Intellectual
Property or Products and/or Services (the "Development Employees and
Agents"); such list specifying which individuals were employees vs.
independent contractors as well as the nature of the services provided
by each such individual. The Corporation is not a party to, and there
does not otherwise exist, any union, collective bargaining or similar
agreement with respect to employees of the Corporation There has never
been and there is not any actual or threatened, strike, work stoppage
or work slowdown that has had or may have an adverse effect on the
business, operations, condition (financial or otherwise) or prospects
of the Corporation. No unfair labor practice complaint or sex, age,
race or other discrimination claim has been brought during the last
five (5) years against the Corporation before any governmental or
regulatory authority. No officer or employee of the Corporation is
subject to any agreement with any other person or entity which requires
such officer or employee to assign any interest in inventions or other
intellectual property or keep
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confidential any trade secrets, proprietary data, customer lists or
other business information or which restricts such officer or employee
from engaging in competitive activities or solicitation of customers.
All officers, directors and employees of the Corporation are either
citizens of the United States of America or have work visas permitting
them to work in the United States of America under applicable
immigration law into the foreseeable future; it being more specifically
represented that (i) Xxxxxxxxx X. Xxxxx has a permanent work visa
allowing him to permanently reside and work in the United States of
America, and (ii) each of Xxxxxxx Xxxxxx and Xxxxx Xxxxxxx have
temporary work visas permitting them to reside and work in the United
States of America until October 31, 2000 and July 12, 2001,
respectively.
(w) Payments. No payments have been made or authorized since December
31, 1997 by the Corporation to its current or former officers,
directors, shareholders or employees or to any person or company not
dealing at arm's length with any of the foregoing, except in the
ordinary course of business and at the regular rates payable to them of
salary, pension, bonuses, rents or other remuneration of any nature.
(x) Related Party Indebtedness. The Corporation has no loans or
indebtedness outstanding which have been made to or from directors,
former directors, officers, shareholders and/or employees of the
Corporation or to any person or corporation not dealing at arm's length
with any of the foregoing.
(y) Dividends. Except as disclosed on Schedule 3.1(y), the Corporation
has not subsequent to December 31, 1997, directly or indirectly,
declared or paid any dividends or declared or made any other
distribution on any of its shares of any class. The Corporation has
not, directly or indirectly, redeemed, purchased or otherwise acquired
any of its shares of any class of its capital stock or agreed to do so.
(z) Liabilities to Employees. All vacation pay, bonuses, commissions
and other emoluments owed employees or agents of the Corporation are
reflected and have been accrued in the books of account and Financial
Statements of the Corporation or are disclosed on Schedule 3.1(z).
(aa) Legal Matters. Except as disclosed in Schedule 3.1(aa), there are
no actions, suits or proceedings (whether or not purportedly on behalf
of the Corporation), pending or threatened against or affecting the
Corporation or any Seller, at law or in equity, or before or by any
federal, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign. No Seller is aware of any existing ground on which any such
action, suit or proceeding might be threatened or commenced. At all
times prior to the date hereof each of the Corporation and its Business
has existed and been operated in full compliance with any and all
applicable rules, laws and regulations, including, but not limited to
the Occupational Health and Safety Act or similar state or local laws,
rules or regulations governing workplace safety, any laws, rules or
regulations pertaining to the protection of the environment or any
laws, rules or regulations regarding employment and employment
practices, terms and conditions of employment and wages and hours with
respect to employees.
13
(bb) Products Liability. Schedule 3.1(bb) lists all Products or
Services provided or sold by the Corporation. Schedule 3.1(bb) hereto
lists all product liability claims exceeding $5,000 in any one instance
suffered or incurred by the Corporation in the past five (5) years from
the date hereof. With the exception of warranties implied by applicable
law, Schedule 3.1(bb) further sets forth (or lists any written
contracts containing) any and all warranties or guarantees extended by
the Corporation in connection with the provision or sale by it of any
Products or Services. The amount of any liability incurred by the
Corporation with respect to the provision or sale by it of any Products
or Services, either individually or in the aggregate with other similar
liabilities, does not exceed amounts specifically reserved for such
liabilities on the Month Financial Statements. The Products and
Services meet all specifications and standards set forth in the
Corporation's written descriptions of the Products or Services and its
representations and warranties made to any of its customers or
distributors (express or implied, written or oral). Complete and
accurate copies or written summaries of such descriptions or
representations and warranties have been delivered to Purchaser.
(cc) Exports. The Corporation (whether through the Business or
otherwise) does not and has not ever exported any Products or Services
from the United States to foreign countries.
(dd) Intellectual Property. Schedule 3.1(dd) contains a correct and
complete list of all licenses, contracts, agreements or understandings
pursuant to which the Corporation has authorized any individual or
entity to use any of the Intellectual Property pursuant to which the
Corporation has granted a license with respect to the Intellectual
Property and Schedule 3.1(dd) contains a complete list of all licenses,
contracts, agreements or understandings pursuant to which the
Corporation has licensed, acquired ownership or other rights which are
included in the Intellectual Property. Schedule 3.1(dd) sets forth a
complete list of domain names, patents, patent applications, trade
marks, service marks, trade xxxx applications and copyright
registrations. The Seller owns, possesses, or licenses and as of the
Closing Date will own, possess, or license, all right, title and
interest in and to the items of Intellectual Property that are required
to conduct its businesses as now conducted without conflict with the
rights of others. Except as set forth in Schedule 3.1(dd): (i) the
Corporation has the right to use and market and to the knowledge of the
Corporation, the sole and exclusive right to use and market, the
Intellectual Property (including applications for any of the foregoing)
used in connection with the Business, and none of the past or present
employees, officers, directors or stockholders of the Corporation, or
anyone else, has any rights with respect thereto; (ii) the consummation
of the transactions contemplated hereby will not alter or impair any
such rights; (iii) the Corporation has not received any notice or claim
of infringement, misuse or misappropriation or any claim challenging or
questioning the validity or effectiveness of any of the claims of
Intellectual Property, and there is no valid basis for any such claim;
and (iv) the Corporation is not liable, nor has it made any contract or
arrangement whereby it may become liable, to any individual or entity
for any royalty or other compensation for use of any of the items of
Intellectual Property. Schedule 3.1(dd) includes the text of the
Corporation's standard licenses for the Intellectual Property and no
material variations have been made to such form. The Corporation has
not
14
granted any person, firm or entity any exclusive right to distribute
its products in any territory or the exclusive right to use any of the
products.
(ee) Inventory. The Inventory is, except to the extent of reserves
therefore in the Financial Statements, salable or usable in the normal
course of the Business.
(ff) Bank Accounts. Attached hereto as Schedule 3.1(ff) is a true and
complete list showing the name of each bank, trust company or similar
institution in which the Corporation has accounts or safety deposit
boxes and the names of all persons authorized to draw thereon or to
have access thereto.
(gg) Facilities and Equipment. All facilities, equipment and furniture
owned or used by the Corporation in connection with the Business are in
good operating condition and are in a state of good repair and
maintenance, reasonable wear and tear excepted. A complete and accurate
listing of such facilities, equipment and furniture is set forth on
Schedule 3.1(gg) hereto.
(hh) Corporate Policy. Schedule 3.1(hh) hereto sets out a description
of all corporate policy manuals or similar materials of the
Corporation; copies of which have all been provided to the Purchaser.
(ii) Year 2000 Compliance. None of the Products or Services produced,
developed, prepared, sold, licensed, rendered, or otherwise provided by
the Corporation in the conduct of the business will malfunction, will
cease to function, will generate incorrect data or will produce
incorrect results when processing, providing or receiving (A)
date-related data in connection with any valid date in the twentieth
and twenty-first centuries or (B) date-related data in connection with
any valid date in the twentieth and twenty-first centuries.
(jj) Accounts Receivable, Installment Receivables, and Accounts
Payable. All accounts receivable of the Corporation, whether or not
reflected on the Financial Statements, represent sales actually made or
leases entered into in the ordinary course of business or valid claims
as to which full performance has been rendered and such accounts
receivable are fully collectible. Except to the extent reserved against
on the Financial Statements and as set forth Schedule 3.1(jj), no
counterclaims or offsetting claims with respect to any such accounts
receivable are pending or, to the knowledge of the Sellers, threatened.
Listed on Schedule 3.1(jj) is a true and correct listing of all
accounts receivable of the Corporation (including the consolidated
aging thereon) and no material change has occurred since the date of
preparation, except in the ordinary course of business. The accounts
payable of the Seller reflected on the Financial Statements arose, or
will arise, from bona fide transactions in the ordinary course of
business, and all such accounts payable either have been paid, are not
yet due and payable under the Corporation's payment policies and
procedures or are being contested by the Corporation in good faith.
Listed on Schedule 3.1(jj) is a is true and correct listing of all
accounts payable of the Corporation and no material change has occurred
since that date, except in the ordinary course of business.
15
(kk) Continuation of Business. Except as set forth on Schedule 3.1(kk),
assets owned by the Corporation and those leased to the Corporation as
described in the Schedules hereto are sufficient for the continued
operation of the Corporation's business by Purchaser (without further
capital expenditure) following the Closing in the same manner as the
Corporation has operated such business in the past. Neither the Sellers
nor the Corporation have any knowledge that any customer, supplier or
distributor of the Corporation intends to cease doing business with the
Corporation either because of the transactions contemplated hereby or
for any other reason. There are no outstanding disputes with any
customer, supplier or distributor of the Corporation. All of the
Corporation's products perform in accordance with the written
descriptions of such products provided to customers and distributors.
(ll) Status of Contracted Deliverable. The Sellers know of no
circumstances which would delay the Corporation in properly performing
and completing all of its duties and obligations under the Deliverable
Agreement in a timely fashion if such Deliverable Agreement were not
being terminated in connection with the transactions contemplated
hereby.
(mm) Complete Disclosure. All information relating to the Corporation
or the Business of the Corporation which is known, or which on
reasonable inquiry ought to be known, to the Corporation or any Seller
and which would materially affect a purchaser for value of, or
subscriber for shares in the Corporation has been disclosed to the
Purchaser. Neither Seller nor the Corporation has any information or
knowledge of any facts relating to the Business or to the Purchased
Shares, which if known to the Purchaser, might be reasonably expected
to deter the Purchaser from completing the transactions contemplated
herein.
3.2 Purchaser's Representations and Warranties. The Purchaser hereby represents
and warrants as follows in this Section 3.2 and acknowledges that the Sellers
are relying upon such representations and warranties in connection with the sale
by the Sellers of the Purchased Shares.
(a) Organization. The Purchaser has been duly incorporated and
organized and is validly existing and in good standing under the laws
of the State of Minnesota. The Purchaser has the corporate power to own
or lease its property and to carry on its business as now being
conducted by it. The Purchaser is duly qualified as a corporation to do
business and is in good standing in each jurisdiction in which the
nature of its business conducted by it or the property owned or leased
by it makes such qualification necessary.
(b) Binding Agreement. This agreement has been duly executed and
delivered by the Purchaser and is a valid and binding obligation of the
Purchaser enforceable in accordance with its terms.
(c) No Violation. The performance by Purchaser of its obligations under
this agreement will not result in a violation of any law or regulation
applicable to the Purchaser.
16
(d) Authority. The Purchaser has all requisite corporate power and
authority to acquire the Purchased Shares and to execute and deliver
this Agreement.
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Sellers' Covenants. The Sellers, jointly and severally, hereby covenant and
agree with the Purchaser that, unless otherwise requested in writing by the
Purchaser or the Purchaser's Counsel, at or up to the Time of Closing they will
do or will cause to be done by the Corporation the following things:
(a) Due Diligence. Permit the Purchaser, prior to the Closing Date,
through its representatives, to make such investigation of the
properties and assets of the Corporation and of its financial and legal
condition as the Purchaser deems necessary or advisable to familiarize
itself with such properties, assets and other matters. Such
investigation shall not in any way affect or mitigate each Seller's
covenants, representations and warranties hereunder or the Purchaser's
right to rely thereon, which shall all continue in full force and
effect as provided in Article 6. The Purchaser and its representatives
will be permitted to have, after the date of execution hereof, full
access to the Business premises and the Corporation's employees,
customers and suppliers and the Sellers agree that they shall ensure
that the Corporation shall produce the following documents of the
Corporation for inspection by the Purchaser and/or its representatives:
all leases, licenses, contracts, title documents, insurance
policies, pension plans, guarantees, lists of salaries,
management contracts, documents relating to pending law suits,
if any, deeds and title papers, all minute books, share
certificate books, share registers and other corporate
documents, including the constituting documents of the
Corporation, and all books, records, accounts, financial
statements, tax returns, tax credit results and all other data
which in the opinion of the Purchaser or its representatives
are required to make an examination of the Corporation and the
Business.
(b) Operation of Business. Continue to operate the Business in the
usual and ordinary course; such duty to include, but not necessarily be
limited to, specifically taking and/or causing the Corporation to take
the following actions:
(i) continue to maintain in full force and effect all policies
of insurance now in effect or renewals thereof and to give all
notices and present all claims under all policies of insurance
in due and timely fashion.
(ii) cause the Corporation to duly and timely file all tax
returns required to be filed by it and (subject to any defense
asserted in good faith that the same are not due and owing by
the Corporation which may be made by the Sellers at their sole
17
cost and expense) to promptly pay all taxes, assessments and
governmental charges which are due and owing to any
governmental authority; cause the Corporation not to enter
into any agreement, waiver or other arrangement providing for
an extension of time with respect to the filing of any tax
return or the payment or assessment of any tax, governmental
charge or deficiency;
(iii) make no changes affecting the banking and safety deposit
arrangements referred to in Article 3 and open no new bank
accounts or safe deposit boxes or grant any new powers of
attorney except with the prior written consent of the
Purchaser;
(iv) use best efforts to ensure that any and all agreements or
arrangements of the Corporation with its suppliers, customers
and distributors and others having business relations with it
shall remain in full force and effect up to and following the
Time of Closing;
(v) ensure that the Corporation performs its obligations under
its contracts and agreements and not engage in any new line of
business or enter into any agreement, transaction or activity
or make any commitment except those in the ordinary course
which are not otherwise prohibited by the terms and conditions
of this agreement or which would cause any of the
representations and warranties herein to be false;
(vi) make no changes to nor amend the articles of
incorporation or bylaws of the Corporation;
(vii) not enter into, modify or extend in any manner the terms
of any Corporation Plan or any contract with an employee or
either Seller nor grant any increase in the compensation of
officers, directors or employees, whether or not hereafter
payable, including any such increase pursuant to any option,
bonus, stock purchase, pension, profit-sharing, deferred
compensation, retirement or other plan, arrangement, contract
or commitment;
(viii) not terminate the employment of any employee;
(ix) use best efforts to continue to collect accounts
receivable of the Corporation and pay the accounts payable of
the Corporation in the ordinary course of business;
(x) not (a) create, incur or assume any debt, (b) assume,
guarantee, endorse or otherwise become liable or responsible
for the obligations of any other person or entity, (c) make a
loan to any other person or entity, (d) make any capital
contribution to, or investments in, any other person or
entity, or (e) make any capital expenditure without the prior
written consent of the Purchaser;
18
(xi) not change in any manner the authorized capital stock of
the Corporation, and, in particular, ensure that no further
securities (or rights to acquire the same) shall be created or
issued or granted;
(xii) not declare or set aside for payment any dividend or
other distribution in respect of its capital stock or any
other securities and not allow the Corporation or any Seller
to redeem, purchase or otherwise acquire any share of the
capital stock or any other securities of any other Seller or
the Corporation or any rights or obligations convertible or
exchangeable for any shares of the capital stock or any other
securities of the Corporation or obligations convertible into
such, or any options, warrants or other rights to purchase or
subscribe for any of the foregoing;
(xiii) not sell, transfer or assign any assets or properties
of the Corporation other than sales of inventory made in the
ordinary course of business and to maintain the Intellectual
Property in tact; and
(xiv) use best efforts to (a) preserve and maintain the
goodwill of the Corporation, (b) preserve intact the corporate
existence and business organization of the Corporation, and
(c) keep the employees of the Corporation available to the
Purchaser following the Closing Date.
(c) take all necessary steps and proceedings as approved by the
Purchaser's Counsel to permit all of the Purchased Shares to be duly
and regularly transferred to the Purchaser.
(d) cause all of the directors and officers of the Corporation to
resign or be removed in favor of nominees of the Purchaser, such
resignations or removals to be effective as at the Time of Closing
(e) cause all Development Employees and Agents of the Corporation to
execute and deliver invention assignments in a form acceptable to
Purchaser in its sole discretion (the "Invention Assignments");
(f) each of the Sellers shall enter into and execute an Employment
Agreement with the Corporation in a form satisfactory to Purchaser (the
"Employment Agreements"), such Employment Agreements to contain
noncompetition and confidentiality provisions without which the Sellers
acknowledge Purchaser would not enter into this agreement or the
transactions contemplated hereby;
(g) [Intentionally Omitted]
(h) execute and deliver an appropriate termination of any shareholders
agreement pertaining to the Corporation in a form reasonably acceptable
to Purchaser.
(i) use best efforts to obtain those consents and make those notices to
third parties which are required in connection with the transactions
contemplated by this agreement; and
19
(j) use best efforts to satisfy the conditions to the Purchasers
obligations to close the transactions contemplated by this agreement as
set forth in Article 6 hereof.
4.2 Purchaser's Right of Offset. Any amount for which any Seller is liable
hereunder or pursuant hereto, whether for an indemnification claim or otherwise
(including any costs related thereto for which any Seller is responsible), may
at Purchaser's option be setoff against any payments due from Purchaser or its
affiliates to any Seller pursuant to any agreement, instrument or document,
including but not limited to this agreement. Neither the exercise of nor the
failure to exercise such setoff right shall constitute an election of remedies
nor limit Purchaser or its affiliates in any manner in the enforcement of any
other remedies available to any of them.
4.3 Certain Matters With Respect to Employees. Subject to the terms and
conditions of the Employment Agreements, following the consummation of the
transactions contemplated hereby the Purchaser hereby agrees that all employees
of the Corporation which it retains shall maintain their initial hire date with
the Corporation for the purposes of determining their eligibility of any
benefits programs which the Purchaser may implement for the Corporation. The
Purchaser hereby acknowledges that following the Closing it presently intends to
retain within the Corporation all present employees of the Corporation. Subject
to the provisions of the Employment Agreements, the Purchaser (and the
Corporation) shall be under no obligation, however, to maintain the employment
of any employee of the Corporation following the Closing.
4.4 Termination of Deliverable Agreement. In connection with the Closing, the
Deliverable Agreement shall be terminated so that it is of no further force or
effect.
ARTICLE 5
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 Survival. The representations and warranties of each of the parties
contained in this agreement and contained in any document or certificate given
pursuant hereto as well as the right of the other party to rely thereon shall
survive until July 1, 2000; provided, however, (i) the representations and
warranties of Sellers contained in Sections 3.1(a), (c), (d-g), (n), (aa), (dd)
and, solely with respect to the provision of a "Star Framework" Product at
Mercedes, (ii), and the right of Purchaser to reply thereon shall survive the
Time of Closing until the expiration of any applicable statutes of limitation
relating to the subject matter of such representations and warranties, and (ii)
the right of a party to obtain indemnification or other relief permitted
hereunder by making a claim with respect to any representation or warranty shall
be extended until such claim has been finally resolved and, if applicable, paid
in full so long as the claim has been appropriately commenced by the provision
of notice to the other party prior to the expiration of the effectiveness of the
applicable representation and warranty.
20
ARTICLE 6
CONDITIONS OF CLOSING
6.1 Purchaser's Conditions. The obligation of the Purchaser to purchase the
Purchased Shares is subject to the following terms and conditions for the
exclusive benefit of the Purchaser to be fulfilled and/or performed at or prior
to the Time of Closing:
(a) the covenants, representations and warranties of the Sellers
contained in this agreement or in any Schedule hereto or certificate or
other document delivered to the Purchaser pursuant hereto shall be true
and correct as of and shall have been remade by the Sellers at the Time
of Closing with the same force and effect as when they were made upon
the full execution of this agreement and regardless of the date as of
which the information in this agreement or any such Schedule or
certificate or document is given. The Purchaser shall have received at
the Time of Closing a certificate of each Seller dated the Closing
Date, in form satisfactory to Purchaser's Counsel, to the effect that
such covenants, representations and warranties referred to above are
remade as of the Closing Date with the same force and effect as when
they were made upon the full execution of this agreement and regardless
of the date as of which the information in this agreement or in any
Schedule hereto or certificate or other document delivered to Purchaser
pursuant hereto was given; provided that the acceptance of such
certificate and the closing of the transactions contemplated herein
provided for shall not be a waiver of the covenants, representations
and warranties contained herein or in any Schedule hereto or in any
certificate or document given pursuant to this agreement or in the
certificate under this subsection (a), which covenants, representations
and warranties shall continue in full force and effect as provided in
Article 5;
(b) the Sellers shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it and,
where applicable, shall have supplied the Purchaser with satisfactory
evidence of such compliance;
(c) [Intentionally Omitted];
(d) at the Closing Date, there shall have been no material adverse
change in the affairs, assets, liabilities, financial condition,
prospects or business (financial or otherwise) of the Corporation since
the date of the Month Financial Statements other than with respect to
corporate taxes payable as contemplated herein;
(e) no substantial damage by fire or other hazard to the physical
assets of the Corporation shall have occurred prior to the Time of
Closing (whether or not covered by insurance);
(f) no legislation (whether by statute, by-law, regulation or
otherwise) shall have been enacted or introduced which, in the opinion
of the Purchaser, adversely affects or may adversely affect the
operations and Business of the Corporation;
21
(g) [Intentionally Omitted];
(h) the Sellers shall have provided the Purchaser with evidence
satisfactory to the Purchaser of the obtaining of consents from and of
the making of notice to any third parties as may be required in
connection with the transactions contemplated hereby;
(i) at or prior to the Time of Closing the Purchaser shall have
received assurances satisfactory to Purchaser in its sole discretion
that all liens and encumbrances on the assets and properties of the
Corporation, other than items designated as a "permitted encumbrances"
on Schedule 3.1(f) hereto shall have been released;
(j) at the Time of Closing on the Closing Date, upon fulfillment of all
of the other conditions set out in this Article 6 which have not been
waived in writing by the applicable party, the Sellers shall deliver to
the Purchaser:
(i) certificates respecting all the Purchased Shares duly
endorsed for transfer to the Purchaser and will cause
transfers of such shares to be duly and regularly recorded in
the name of the Purchaser on the books and records of the
Corporation;
(ii) good standing certificates and tax goods standing
certificates for the Corporation from the Commonwealth of
Pennsylvania as well as evidence reasonably satisfactory to
Purchaser that the Corporation has submitted or is prepared to
submit the materials necessary to become qualified to do
business in the Commonwealth of Massachusetts;
(iii) certified copies of the articles of incorporation and
by-laws of the Corporation;
(iv) an opinion of Sellers' Counsel reasonably satisfactory to
Purchaser's counsel;
(v) copies of all Leases and Contracts not previously
delivered to Purchaser;
(vi) resignations and releases of all directors and officers
of the Corporation in forms acceptable to Purchaser;
(vii) the corporate seals of the Corporation and all corporate
records and books of account of the Corporation, including
without limiting the generality of the foregoing, the minute
books, share register books, share certificate books and
annual reports; and
(viii) Invention Assignments executed by each of the
Development Employees and Agents of the Corporation;
22
(ix) The Employment Agreements executed by each of the Sellers
and Purchaser's standard "work for hire" and confidentiality
agreements executed by each of Xxxxxxx Xxxxxx and Xxxxx
Xxxxxxx;
(x) an appropriate termination of any shareholders agreement
of the Corporation in a form reasonably acceptable to
Purchaser;
6.2 Failure of Conditions. In case any of the foregoing conditions shall not be
fulfilled and/or performed at or before the Closing Date, the Purchaser may
rescind this agreement by notice to the Sellers in such event the Purchaser
shall be released from all obligations hereunder, provided that any of the said
conditions may be waived in whole or in part by the Purchaser without prejudice
to its rights of rescission in the event of the non-fulfillment of any other
condition or conditions, any such waiver to be binding on the Purchaser only if
the same is in writing.
6.3 Sellers' Conditions. The sale and purchase of the Purchased Shares is
subject to the following terms and conditions for the exclusive benefit of the
Sellers to be fulfilled and/or performed at or prior to the Time of Closing:
(a) the covenants, representations and warranties of the Purchaser
contained in this agreement or in any Schedule hereto or certificate or
other document delivered to the Sellers pursuant hereto shall be true
and correct on and as of the Closing Date with the same force and
effect as though such covenants, representations and warranties had
been made on and as of such date, regardless of the date as of which
the information in this agreement or any such Schedule or certificate
or document is given, and the Sellers shall have received at the Time
of Closing on the Closing Date a certificate of an officer of the
Purchaser dated the Closing Date, in form satisfactory to Sellers'
Counsel, to the effect that such covenants, representations and
warranties referred to above are true and correct on and as of the
Closing Date with the same force and effect as though made on and as of
such date; provided that the acceptance of such certificate and the
closing of the transaction herein provided for shall not be a waiver of
the covenants, representations and warranties contained herein or in
any Schedule hereto or in any certificate or document given pursuant to
this agreement or in the certificate under this subsection (b), which
covenants, representations and warranties shall continue in full force
and effect as provided in Article 5; and
(b) the Purchaser shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it and,
where applicable, shall have supplied the Sellers with reasonably
satisfactory evidence of such compliance.
6.4 Failure of Conditions. In case any of the foregoing conditions shall not be
fulfilled and/or performed at or before the Closing Date, the Sellers may
rescind this agreement by notice to the Purchaser and in such event the Sellers
shall be released from all obligations hereunder; provided that any of the said
conditions may be waived in whole or in part by the Sellers without prejudice to
its rights of rescission in the event of the non-fulfillment of any other
condition or conditions, any such waiver to be binding on the Sellers only if
the same is in writing.
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ARTICLE 7
CLOSING
7.1 Closing. The closing shall take place at 10:00 a.m. Central Standard Time
(or such other time agreed to by the parties) on December 3, 1998 at the offices
of Xxxxxxx, Street and Deinard, P.A., 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxxxx, Xxxxxxxxx 00000.
ARTICLE 8
BROKERS, FINDERS AND INVESTMENT BANKERS
8.1 Brokers, Finders and Investment Bankers. The Sellers hereby, jointly and
severally, represent and warrant that no Seller nor the Corporation has employed
or retained any broker, finder or investment banker or other intermediary or
incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees, finders' fees or other similar fees in connection with the
transactions contemplated herein.
ARTICLE 9
NOTICES
9.1 Notices. All notices, requests and demands and other communications
hereunder must be in writing and shall be deemed to have been duly given when
(i) personally delivered, (ii) when forwarded by Federal Express, Airborne or
another private carrier which maintains records showing delivery information,
(iii) when sent via facsimile transmission but only if a written or facsimile
acknowledge of receipt is received by the sending party, or (iv) when placed in
the United States mail and forwarded by Registered or Certified mail, return
receipt requested, postage prepaid, addressed to the party to whom such notice
is being given at the following addresses:
IF TO SELLERS: Xxxxx X. Xxxxx
000 Xxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Xxxxxxxxx X. Xxxxx
0 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxxxxxxxx 00000
24
with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
IF TO PURCHASER: Computer Network Technology Corporation
000 Xxxxx Xxxxxxx 000, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
with a copy to: Xxxxxxx, Street and Deinard, P.A.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
ARTICLE 10
INDEMNIFICATION BY SELLERS
10.1 Agreement by the Sellers. The Sellers, jointly and severally, agree that
they will indemnify and hold Purchaser and its affiliates harmless in respect of
the aggregate of all indemnifiable damages of the Purchaser and such affiliates.
For this purpose, "indemnifiable damages" of the Purchaser and its affiliates
means the aggregate of all expenses, losses, costs, deficiencies, liabilities
and damages (including related counsel fees and expenses) incurred or suffered
by the Purchaser and its affiliates (i) resulting from any inaccurate
representation or warranty made by any Seller in or pursuant to this agreement,
(ii) resulting from any default in the performance of any of the covenants or
agreements made by a Seller in this agreement, or (iii) liabilities not fully
disclosed to Purchaser on the Schedules hereto arising out of the existence or
operation of the Business prior to the Time of Closing, (including without
limitation undisclosed liabilities arising out of the Corporation's employment
of its employees or the termination of such employment prior to the Time of
Closing, undisclosed liabilities with respect to Products or Services conducted,
prepared, delivered or sold prior to the Closing regardless of whether such
liabilities arise pursuant to a warranty extended to a customer or otherwise,
and undisclosed liabilities for taxes of the Corporation accruing for periods or
pertaining to income earned prior to the Time of Closing). Without limiting the
generality of the foregoing, with respect to the measurement of "indemnifiable
damages", the Purchaser and its affiliates shall have the right to be put in the
same financial position as they would have been in had each of the
representations and warranties of the Sellers been true and correct and had each
of the covenants of the Sellers been performed in full; provided, however, that
Purchaser and its affiliates shall not be entitled to recover any consequential
or other indirect damages they suffer.
With respect to any claim for indemnification made by Purchaser or its
affiliates hereunder, the Purchaser or its affiliates may thereupon seek to
recover by any legal means either directly from the Sellers or pursuant to
offsets under Section 4.2. Nothing in the preceding
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sentence shall prevent the Purchaser or its affiliates from obtaining equitable
relief in an appropriate case. The Purchaser agrees to use its best efforts to
give prompt written notice to the Sellers of each claim for indemnifiable
damages which it believes it has suffered; provided, however, that no delay in
the giving of such notice shall affect the rights of the Purchaser to recover
indemnifiable damages hereunder.
10.2 Limitation on Recovery. Notwithstanding any other provision of this
Agreement, the Sellers shall not be liable to Purchaser or its affiliates for
any breach of the representations and warranties of Sellers contained herein
unless and until the indemnifiable damages of Purchaser and its affiliates total
Twenty Thousand Dollars ($20,000.00) in the aggregate, at which time Sellers
shall be liable in full for all such indemnifiable damages and all further
indemnifiable damages beyond such amount.
ARTICLE 11
MISCELLANEOUS
11.1 Merger Clause. This Agreement contains the final, complete and exclusive
statement of the agreement between the parties with respect to the transactions
contemplated herein and all prior or contemporaneous written or oral agreements
with respect to the subject matter hereof are merged herein.
11.2 Amendments. No change, amendment, qualification or cancellation hereof
shall be effective unless in writing and executed by each of the parties hereto
individually or by its duly authorized officers, as the case may be.
11.3 Benefits and Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns, as the case may be.
11.4 Captions. The captions are for convenience of reference only and shall not
be construed as a part of this Agreement.
11.5 Governing Law. This Agreement shall be construed, interpreted, enforced and
governed by and under the laws of the State of Minnesota without regard for
choice of law rules.
11.6 Schedules. All the Schedules to this Agreement are incorporated herein by
reference and shall be deemed to be a part of this Agreement for all purposes.
11.7 Severability. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or provisions of this Agreement shall not affect the
validity or enforceability of the remaining portions of this Agreement or any
part thereof.
11.8 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall constitute an original but all of which shall constitute one
and the same instrument.
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11.9 Assignment. No party hereto may assign or delegate any of its rights,
interests, duties or obligations hereunder without the prior written consent of
all the other parties hereto; provided that the Purchaser may assign or delegate
any of its rights, interests, duties or obligations hereunder without obtaining
the Sellers' consent to any entity which controls or is controlled by or is
under common control with the Purchaser.
11.10 Fees, Expenses and Taxes. Purchaser hereby agrees to a limit of Twenty
Thousand Dollars ($20,000.00) in the aggregate that Purchaser shall pay (i) any
and all sales or use taxes which are payable on the transfer of the Purchased
Shares from the Sellers to the Purchaser hereunder, and (ii) the legal fees of
the Sellers needed to complete the transactions contemplated hereby. Except as
otherwise specifically contemplated elsewhere herein, each party hereto shall
pay its own costs and expenses which arise from this agreement and the
transactions contemplated herein. To the extent such amounts are not paid by
Purchaser in accordance with this Section 11.10, the Sellers hereby, jointly and
severally, agree that they shall be responsible for and pay any and all sales or
use taxes which are payable on the transfer of the Purchased Shares from the
Sellers to the Purchaser hereunder. Except to the extent of cash presently
available in the Corporation at the Time of Closing, the Sellers hereby further,
jointly and severally, agree that they shall be responsible for and pay any and
all tax liabilities which pertain to the existence and/or operation of the
Corporation for all periods prior to the Time of Closing and shall cooperate
with the Purchaser in the preparation and filing of any tax returns which
pertain to such taxes. Such obligation shall include, but not be limited to, the
preparation and filing of tax returns and payment of all franchise taxes or
similar fees owed to the Commonwealth of Massachusetts in connection with the
qualification of the Corporation to do business in such state. Any failure of
Seller's to satisfy their obligations under this Section 11.10 shall not be
subject to any limitations set forth in Section 10.2 hereof.
11.11 Confidentiality. Except to the extent otherwise required by law the
Sellers hereby agree that they shall keep the terms and conditions of this
agreement and the transactions contemplated hereby fully confidential.
11.12 Exclusivity. The Sellers do hereby covenant and agree that pending the
Closing they shall not enter and shall cause the Corporation to refrain from
entering into any negotiations or agreements pertaining to the sale or transfer
of the Purchased Shares, the sale or transfer of a substantial portion of the
Corporation's assets or any merger or other business combination of the
Corporation with another entity.
11.13 Affiliates. As used in this agreement references to "affiliates" of the
Purchaser shall include any entity (including but not limited to the
Corporation) which controls, is controlled by or is under common control with
the Purchaser and shall also include any officers, directors or employees of
such entities.
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ARTICLE 12
ARBITRATION
12.1 Arbitration of Disputes.
(a) The parties shall attempt in good faith to resolve any dispute
arising out of or relating to this agreement, the breach, termination
or validity hereof (including without limitation with respect to any
claim for indemnification pursuant to Article 10 hereof) promptly by
negotiation between the representatives of Purchaser and the Sellers
who have authority to settle the controversy. Either Purchaser or the
Sellers may give to the other party written notice that a dispute
exists (a "Notice of Dispute"). The Notice of Dispute shall include a
statement of such party's position and the name and title of the
representatives who will represent the parties. Within ten (10)
business days of the delivery of the Notice of Dispute, the
representatives of Purchaser and the Sellers shall meet at a mutually
acceptable time and place, and thereafter as long as they reasonably
deem necessary, to attempt to resolve the dispute. All reasonable
requests for information by one party to the other shall be honored.
(b) If a dispute has not been resolved by negotiation as provided in
paragraph (a) above within fifteen (15) days of the date of the Notice
of Dispute, then either party may initiate mediation under the then
current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes, and the parties shall endeavor to
settle such dispute by such mediation. The neutral third party mediator
shall be selected by CPR from the CPR panel of neutrals (in accordance
with any criteria upon which the parties have been able to agree).
(c) Any controversy or claim arising out of or relating to this
agreement, the breach, termination or validity hereof, or the
transactions contemplated herein (including without limitation with
respect to any claim for indemnification pursuant to Article 10
hereof), if not settled by negotiation or mediation as provided in
paragraphs (a) and (b) above, shall be settled by arbitration in
Minneapolis, Minnesota in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes, by three
arbitrators. Either party may initiate arbitration thirty (30) days
following the delivery of a Notice of Dispute if the dispute has not
then been settled by negotiation or mediation, or sooner if the other
party fails to participate in negotiation or mediation in accordance
with paragraphs (a) and (b) above. The parties shall each use their
best efforts so that any arbitration which is initiated shall be
concluded within thirty (30) days. The three arbitrators shall be
appointed by CPR from the CPR panel of neutrals (in accordance with any
criteria upon which the parties have been able to agree). In any such
arbitration, each of the parties hereto shall pay its own costs and
expenses and the fees, costs and expenses of the arbitrators shall be
paid fifty percent (50%) by Purchaser and fifty percent (50%) by the
Sellers. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. S. 1-16, and the award rendered by the
arbitrators shall be final and binding on the parties and may be
entered by any court having jurisdiction thereof and may include
equitable relief. The parties hereby submit to the jurisdiction of any
court (State or Federal) located
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in the City of Minneapolis, Minnesota for the enforcement of any awards
granted in arbitration.
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IN WITNESS WHEREOF, Sellers and Purchaser have each caused this
agreement to be appropriately executed all as of the day and year first above
written.
SELLERS:
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Xxxxx X. Xxxxx
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Xxxxxxxxx X. Xxxxx
PURCHASER:
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COMPUTER NETWORK TECHNOLOGY CORPORATION
By:
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Name/Title:
--------------------------------
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