STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of May 27, 1998, by
and among Data Transmission Network Corporation, a Delaware corporation
("Buyer"), and Xxxxxx X. Xxxxxx, Excel Interfinancial Corporation, Charter
Financial Holdings, LLC, Xxxxxx X. Xxxxxxxx and Xxxxxxx Xxxxxxxxxx (collectively
the "Sellers" and individually a "Seller"). Xxxxxx X. Xxxxxx is sometimes
referred to in this Agreement as "Xxxxxx".
WHEREAS, each Seller is the owner, beneficially and of record, of the
number of shares of the Common Stock of National Datamax, Inc., a California
corporation (the "Company"), set forth opposite his, her or its name on Schedule
1 attached hereto, and Sellers are the owners, in the aggregate, of all of the
issued and outstanding capital stock of the Company;
WHEREAS, Buyer wishes to purchase from Sellers and Sellers wish to sell
to Buyer all of the issued and outstanding capital stock of the Company upon and
subject to the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, Buyer and Sellers
agree as follows:
ARTICLE I
SALE OF SHARES
1.01 Sale of Shares. Subject to the terms and conditions herein stated,
Sellers agree to sell, assign, transfer and deliver to Buyer on the Closing Date
(as defined herein), free and clear of any and all liens, claims and
encumbrances, good, valid and marketable title to all of the outstanding shares
of capital stock of the Company (the "Shares"), and Buyer agrees to purchase the
Shares from Sellers on the Closing Date. The certificates representing the
Shares shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by Sellers, with all signatures guaranteed by a state or
national bank.
1.02 Price. In full consideration for the purchase by Buyer of the
Shares, Buyer shall pay to Sellers, and Sellers agree to accept from Buyer as
the entire purchase price for the Shares, the following amounts:
(a) Buyer shall pay to each Seller on the Closing Date the amount set
forth opposite such Seller's name in Schedule 1 attached hereto,
being an aggregate amount of Two Million Dollars ($2,000,000).
(b) Sellers will be paid pro rata, based on their percentage ownership
of the Shares, 640% of the amount (the "Excess Amount"), if any,
by which the Recurring Revenue (as hereinafter defined) for each
of the calendar quarters ending June 30, 1998, September 30, 1998,
December 31, 1998, March 31, 1999, and June 30, 1999 exceeds the
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Base Amount (as hereinafter defined). Such payments shall be made
within thirty (30) days after the end of each such calendar
quarter. Recurring Revenue shall mean all revenue received by the
Company which is based on repeating revenues or fees from its
customers including, but not limited to, subscription revenues,
maintenance fees, advertising revenues, and access or usage fees.
The Base Amount shall mean at the time of determination the
greater of (i) $338,087 or (ii) the highest Recurring Revenue for
any calendar quarter subsequent to the calendar quarter ended
March 31, 1998, and preceding the calendar quarter for which the
amount is being determined. The calendar quarter referred to in
clause (ii) as having the highest Recurring Revenue will be the
last calendar quarter for which there was an Excess Amount. As an
example, if the Recurring Revenue for the calendar quarter ending
June 30, 1998 is $300,000 (consequently, there being no Excess
Amount for such quarter) and the Recurring Revenue for the
calendar quarter ending September 30, 1998 is $388,087, then the
Excess Amount for such later calendar quarter is $50,000. If in
the calendar quarter ending December 31, 1998, the Recurring
Revenue is $438,087, then the Excess Amount for such quarter would
be $50,000.
(c) Sellers will be paid pro rata, based on their percentage ownership
of the Shares, 80% of all Non-recurring Revenue (as hereinafter
defined) received by the Company after the Closing Date and before
July 1, 1999. Such payments shall be made quarterly on or before
the date thirty days after the end of each calendar quarter.
Non-recurring Revenue shall mean all revenue received from sales
made or services rendered by the Company other than Recurring
Revenue (as defined above). Non-recurring Revenue shall not
include income from extraordinary items as determined pursuant to
generally accepted accounting principles.
1.03 Closing. The sale referred to in Section 1.01 (the "Closing")
shall take place at the office of the Company at 16955 Xxx Xxx Xxxxx, Xxxxx 000,
Xxx Xxxxx, Xxxxxxxxxx, on June 1, 1998, or at such later date as the parties
hereto shall by written instrument designate. Such time and date are herein
referred to as the "Closing Date".
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
As of the date hereof (except as otherwise specified herein) and as of
the Closing Date, Sellers (without qualification in the case of Xxxxxx X. Xxxxxx
and to their actual knowledge without inquiry in the cases of Sellers other than
Xxxxxx X. Xxxxxx) each jointly and severally represents and warrants to Buyer as
follows:
2.01 Organization and Qualification. At the Closing Date, the Company
will be a corporation duly organized, validly existing and in good standing
under the laws of California and will have all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. California is the only jurisdiction in which the Company is qualified
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or licensed to do business. Buyer has heretofore received true and complete
copies of the Articles of Incorporation and By-laws (or other similar charter
documents), as currently in effect, of the Company.
2.02 Capitalization; Title to Stock. The authorized capital stock of
the Company consists of 10,000,000 shares of common stock, no par value (the
"Common Stock"), of which 873,300 shares are issued and outstanding as of the
date hereof and no shares are held in the Company's treasury. Sellers are the
record owners of all the Company's outstanding shares of Common Stock. All of
the outstanding shares of Common Stock of the Company are duly authorized,
validly issued, fully paid and nonassessable. Except for the sale to Buyer as
contemplated by this Agreement, there are no outstanding options, warrants,
calls or other rights to subscribe for or purchase or acquire from the Company
or Sellers or any affiliate of the Company, or any plans, contracts or
commitments providing for the issuance of, or the granting of rights to acquire
(i) any capital stock of the Company or (ii) any securities convertible into or
exchangeable for any capital stock of the Company. The Company is not
contractually obligated to repurchase, redeem or otherwise acquire any of its
outstanding shares of capital stock. Each Seller represents and warrants only
with respect to that Seller and not with respect to any other Seller, that such
Seller (i) has good, valid and marketable title, beneficially and of record, to
the respective Shares set forth opposite his or its name on Schedule 1 attached
hereto, free and clear of all liens, encumbrances and rights of others, (ii) is
in rightful possession of duly and validly authorized and issued certificates
evidencing his or its ownership of record of such Shares, and (iii) at the
Closing Date, will have full right, power and authority to sell, transfer,
convey and deliver to Buyer, in accordance with the terms of this Agreement,
good, valid and marketable title, beneficially and of record, to all of such
Shares being sold by such Seller to Buyer hereunder, free and clear of all
liens, encumbrances and rights of others.
2.03 Subsidiaries. (a) The Company has no subsidiaries. Except as set
forth on Schedule 2.03, there is no corporation, partnership, joint venture or
other person or entity in which the Company, directly or indirectly, has, or
pursuant to any agreement or agreements has or will have, a right or obligation
to acquire or make by any means, an interest or investment (including, without
limitation, equity ownership, proprietary interest, loans, guarantees of
indebtedness and other similar obligations).
2.04 Authority Relative to the Transactions Contemplated by this
Agreement. At the Closing Date, each Seller will have full power, capacity and
authority (corporate or otherwise) to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. At the Closing Date, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will have been duly and validly authorized on
behalf of all Sellers and no other proceedings on behalf of Sellers are or will
be necessary to approve and authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Sellers, and
(assuming the valid execution and delivery of this Agreement by Buyer) at the
Closing Date will constitute a legal, valid and binding agreement of Sellers,
enforceable against Sellers in accordance with its terms, subject to bankruptcy,
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insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
2.05 Consents and Approval; No Violation. Except as set forth on
Schedule 2.05, neither the execution and delivery of this Agreement by Sellers,
nor the consummation of the transactions contemplated hereby, nor compliance by
any Seller with the provisions hereof, will (i) require the Company or any
Seller to file or register with, notify, or obtain any permit, authorization,
consent or approval of, any governmental or regulatory authority except for
those requirements which become applicable to the Company as a result of the
specific regulatory status of Buyer or as a result of any other facts that
specifically relate to the business activities in which Buyer is engaged; (ii)
conflict with or breach any provision of the Articles of Incorporation, By-laws
or trust agreement (or other similar governing documents) of the Company or any
Seller; (iii) violate or breach a provision of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, any of the terms, covenants, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which the Company or
any Seller is a party, or by which the Company or any Seller or any of their
respective properties or assets may be bound; or (iv) violate any order, writ,
injunction, decree or judgment of any court or governmental authority applicable
to the Company or any Seller or any of their material assets (provided, however,
as to this Section 2.05, each Seller so represents and warrants only with
respect to the Company and that Seller and not with respect to any other
Seller).
2.06 Financial Statements. Sellers have delivered to Buyer the
unaudited balance sheet of the Company as of April 30, 1998, and the statements
of income for the year ended December 31, 1997, and the three month period ended
March 31, 1998 (the "Financial Statements"). The Financial Statements (i) have
been prepared in accordance with the books and records of the Company, and (ii)
present fairly the financial position of the Company as of April 30, 1998 and
the results of operations for the year ended December 31, 1997, and the three
month period ended March 31, 1998, on a cash basis and otherwise in conformity
with generally accepted accounting principles. The Financial Statements do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business except as expressly disclosed therein
or as set forth in Schedule 2.06.
2.07 Undisclosed Liabilities. Except (i) as provided for in the
Financial Statements, (ii) as disclosed in Schedule 2.07 or as specifically
identified on other Schedules to this Agreement or (iii) for normal trade
obligations incurred in the ordinary course of business subsequent to April 30,
1998, consistent with past practices, the Company has no liabilities or
obligations in excess of $10,000 individually or $25,000 in the aggregate of any
kind or nature, whether known or unknown or secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to become due).
2.08 Absence of Certain Changes or Events. Except (i) as set forth in
Schedule 2.08, (ii) as disclosed in the other Schedules hereto, or (iii) as
reflected in the Financial Statements, since April 30, 1998, the Company has not
(a) taken any action specified in Sections 4.01 (a)-(o) herein (other than
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actions taken after the date hereof with the consent of Buyer), (b) suffered any
material adverse change in its assets, liabilities, business, results of
operations or financial condition, (c) suffered any damage, destruction or
casualty loss adversely affecting any material assets of the Company, or (d)
entered into any transaction, or conducted its business or operations, other
than in the ordinary and usual course of business, consistent with past
practices.
2.09 Title and Related Matters. (a) Except as set forth on Schedule
2.09, the Company does not own any real property. All of the properties, rights
and assets, tangible and intangible, now used in or, to the best knowledge of
Sellers, sufficient for the conduct by the Company of its business as presently
conducted will be indirectly transferred to Buyer by its purchase of the Shares.
The interests of the Company in its properties, rights and assets (whether owned
or as a lessee) are free and clear of all Liens other than (i) Liens for taxes
not yet due, (ii) Liens which do not affect the use by, or value to, the Company
of its rights and assets, or (iii) Liens set forth on Schedule 2.09. The term
"Liens" shall mean any pledge, lien, security interest, conditional sale
agreement, or other similar encumbrance.
(b) Except as set forth on Schedule 2.09, the real properties owned or
leased by the Company are used and operated in substantial compliance and in
conformity in all material respects with all permits, leases, contracts,
commitments, licenses and, to the best knowledge of Sellers, applicable laws.
With respect to all buildings which are owned or leased by the Company, except
for restrictions under applicable zoning laws and ordinances, to the best
knowledge of Sellers, no condition, law or regulation precludes or restricts the
use of such properties for the purposes for which they are used.
(c) All of the material assets used in the business of the Company are
in reasonably good and serviceable condition in accordance with industry
practice and as such are, to the best knowledge of Sellers, adequate to conduct
the business of the Company.
2.10 Material Contracts. Except as set forth in Schedule 2.10, the
Company does not have nor is it bound by (a) any agreement, contract or
commitment relating to the employment of any person by the Company, or any
bonus, commission, severance or termination pay, deferred compensation, pension,
profit sharing, stock option, employee stock purchase, retirement or other
employee benefit plan, (b) any agreement, indenture or other instrument which
contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock, (c) any agreement, contract or
commitment relating to capital expenditures in excess of $10,000, (d) any loan
or advance to, or investment in, any other person other than cash advances in
the ordinary course of business consistent with past practice, or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment except for cash advances in the ordinary course of business
consistent with past practice, (e) any debt obligation for borrowed money or any
guarantee or other contingent liability in respect of any indebtedness or
obligation of any other person (other than the endorsement of negotiable
instruments for collection and other similar transactions in the ordinary course
of business), (f) any management, distributorship, sales, service (personal or
otherwise), consulting or any other similar type of contract, (g) any agreement,
contract or commitment limiting the freedom of the Company to engage in any line
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of business or to compete with any other person or in any area, (h) any other
agreement, contract or commitment which involves $25,000 or more and is not
cancelable without penalty within 30 days, (i) any outstanding powers of
attorney or proxies granted to any person for any purpose whatsoever, (j) any
contract or oral or written agreement for the acquisition of any other person,
(k) any agreement as to which the United States Government, any state, local or
municipal government or any foreign government or any agency or instrumentality
of any of the foregoing is a party, exclusive of any such agreement which
contains solely the provisions set forth in a form contract used by the Company
in its ordinary course of business, which forms have been previously made
available to Buyer, or (l) any proposed contract or agreement which upon
acceptance of a customer or third party would create a binding obligation upon
the Company and which would not be cancelable without penalty within thirty (30)
days and would involve a commitment to pay $25,000 or more annually (all such
oral or written agreements, contracts, arrangements and commitments are
hereinafter referred to as the "Material Contracts"). True, complete and correct
copies of all such written contracts, commitments, agreements or arrangements
described on Schedule 2.10 will have been made available to Buyer prior to
Closing. To the best knowledge of Sellers, Schedule 2.10 contains a complete
list of all such oral contracts, agreements, commitments or arrangements and
identifies which of such contracts are oral in nature. Except as set forth on
Schedule 2.10, there is not, under any of the Material Contracts, any default or
event which, with notice or lapse of time or both, would constitute a default on
the part of the Company. Neither the Company nor any Seller has received any
notice from the other party to such Material Contracts of the termination or
threatened termination thereof and no Seller knows of the occurrence of any
event which would allow such other party to terminate such Material Contract
except as otherwise disclosed in the Schedules hereto. Except as set forth on
Schedule 2.10 or any other Schedule hereto, no indebtedness of the Company will
be accelerated by its terms, or result from the consummation of the transactions
contemplated hereby.
Schedule 2.10 contains a complete list of all agreements providing for
the payment of severance pay to employees of the Company (the "Termination
Benefits Agreements"). Except as expressly indicated on Schedule 2.10, no event
has occurred under any of the Termination Benefits Agreements which alone or
upon the giving of notice or the passage of time or both would obligate the
Company to make any payment under any of the Termination Benefits Agreements.
2.11 Major Customer Contracts. Schedule 2.11 identifies the eighteen
(18) agreements in effect on the date of this Agreement that yielded the
greatest amount of Recurring Revenues to the Company for the calendar quarter
ended March 31, 1998 (the "Major Customer Contracts"). With respect to the Major
Customer Contracts:
(a) The Company is the party that provides the services under each of
the Major Customer Contracts and, except as set forth in Schedule 2.11, no Major
Customer Contract contains provisions to the effect that it will be subject to
termination or renegotiation as a result of the transactions contemplated
hereby;
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(b) Prior to Closing Xxxxxx will have made available to Buyer correct
and complete copies of all of the Major Customer Contracts and all amendments
thereto and all extensions and renewals thereof;
(c) Except as set forth on Schedule 2.11, no notice of termination of a
Major Customer Contract has been received by the Company, and no such customer
has indicated in writing its intention to terminate a Major Customer Contract;
(d) There are no credits, monies or the like in excess of $1,000 due to
any customer who is a party to a Major Customer Contract other than pursuant to
the terms of the Major Customer Contracts;
(e) Except as set forth on Schedule 2.11, the Company has not received
any written notice of any warranty or indemnity claims by any customer under a
Major Customer Contract which has not been settled to the satisfaction of the
customer claimant;
(f) Except as set forth on Schedule 2.11, the Company has not received
any written notice of default from any customer under any of the Major Customer
Contracts; and
(g) Except as set forth in Schedule 2.11, the Company has not received
any notice of the filing by or against any customer who is a party to a Major
Customer Contract of a petition in bankruptcy, assignment for the benefit of
creditors, a petition seeking reorganization, composition, liquidation,
dissolution or similar arrangement.
2.12 Leases. Schedule 2.12 hereto sets forth an accurate list of (a)
all written leases under which the Company is a lessee or lessor of real
property or office space and (b) all other leases to which the Company is a
party (as lessee) involving annual rental payments in excess of $5,000. All
rents and additional rent due to date and to the Closing Date on such leases
have and will have been paid and in each case, the lessee has been in peaceable
possession since the commencement of the original term of such lease or
arrangement and is not in default thereunder. Except as set forth on Schedule
2.12, there is not, with respect to leases referred to in clauses (a) and (b)
above, any existing default, or an event of default, or event which, with or
without notice or lapse of time or both, would constitute a default or an event
of default, on the part of the Company.
2.13 Proprietary Rights; Computer Programs, Databases and Software.
(a) Schedule 2.13 contains a complete list of all trademarks, trade
names, assumed names, service marks, logos, patents, copyrights and copyright
registration, and any applications for registration therefor presently owned or
held by the Company or with respect to which the Company owns or holds any
license or other direct or indirect interest (collectively, the "Proprietary
Rights"); and no other Proprietary Rights are used in or are necessary for the
conduct of the business of the Company as such business is presently conducted.
Unless otherwise indicated in such Schedule 2.13 the Company owns sufficient
right, title and interest in and to the material Proprietary Rights for the
conduct of its business. No material Proprietary Rights used by the Company
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conflict with or infringe the rights of any other person. No claims have been
asserted by any person with respect to the ownership, validity, license or use
of the Proprietary Rights and no Seller knows of any basis for such claim. The
Company has taken all measures which it believes to be appropriate to maintain
and protect the Proprietary Rights. The Company has the right to use all
material Proprietary Rights, to provide and sell the services and products
provided and sold by it, and to conduct its business as heretofore conducted,
and, except as set forth on Schedule 2.13, the consummation of the transactions
contemplated hereby will not alter or impair any such rights. Except as set
forth on Schedule 2.13, no person is known to be infringing on or violating the
Proprietary Rights used by the Company.
(b) Prior to the Closing, copies of the license agreements relating to
any computer programs, databases or software used by the Company shall have been
made available to Buyer. The Company owns, leases or licenses and has the right
to use computer programs, databases and software which are sufficient and
adequate to operate the business of the Company as it is presently being
conducted. Except as set forth on Schedule 2.13, all such computer programs,
databases and software and the source codes thereof, if applicable, have been
maintained only at the Company's offices at 16955 Xxx Xxx Xxxxx, Xxxxx 000, Xxx
Xxxxx, Xxxxxxxxxx. Except in the ordinary course of its business or as set forth
in Schedule 2.13, the Company has not sold, licensed, leased or otherwise
transferred or granted any interest or rights to any of its computer programs,
databases or software to any other person. The occurrence in or use by such
computer programs, databases and software of dates on or after January 1, 2000
("millennial dates") will not adversely affect the performance thereof with
respect to data dependent data, compilations, output, or other functions
(including but not limited to calculating, comparing and sequencing) and that
such computer programs, databases and software will create, store, process and
output information related to or including millennial dates without error or
omissions.
2.14 Litigation. Schedule 2.14 sets forth a complete list and an
accurate description of all claims, actions, suits, proceedings and
investigations pending and threatened, by or against or involving the Company or
its business and, in the case of collection claims, those involving claims in
excess of $10,000. No such pending or threatened claims, actions, suits,
proceedings or investigations, if adversely determined, would, individually or
in the aggregate, materially adversely affect the business, financial condition,
results of operations or prospects of the Company taken as a whole or the
transactions contemplated hereby. The Company does not know of any reasonable
basis for any other such claim, action, suit, proceeding or investigation. The
Company is not subject to any judgment, order or decree entered in any lawsuit
or proceeding which may have a material adverse effect on any of its operations,
business practices or on its ability to acquire any property or conduct business
in any area.
2.15 Employee Benefit Matters. (a) Except as disclosed on Schedule 2.15
hereto and as described in subparagraph (b) (i) below, neither the Company nor
any member of the Control Group (within the meaning of section 414(b) of the
Internal Revenue Code of 1986, as amended (the "Code") maintains, has
contributed to or has ever been obligated to contribute to, for, on behalf of or
with respect to current or former employees of the Company, any employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), multiemployer plan (as defined in ERISA Section
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3(37)), stock purchase plan, stock option plan or deferred compensation
agreement, plan or funding arrangement (collectively "Employee Plans").
(b) (i) The only employee welfare benefit plans (as defined in ERISA
Section 3(1)) maintained by the Company is a Group Medical Insurance Plan (the
"Company Plan"). A copy of the Company Plan has been furnished to Buyer.
(ii) To the best knowledge of Sellers, with respect to the Company
Plan:
(A) to the extent it is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code meets such
requirements in all material respects;
(B) there is no disqualified benefit (as such term is defined in Code
Section 4976(b)) which would subject Sellers, the Company or Buyer to a tax
under Code Section 4976(a);
(C) to the extent it is a group health plan (as such term is defined in
Code Section 162 (i)(3)), it complies and has complied with the applicable
requirements of Code Section 162(k), Title XXII of the Public Health Service Act
and the applicable provisions of the Social Security Act in all material
respects; and
(D) it may be amended or terminated by the Company or Buyer on or at
any time after the Closing Date.
2.16 Governmental Authorizations and Regulations. The Company has all
material licenses, franchises, permits and other governmental authorizations
necessary to the conduct of its business, as presently conducted and the same
are in full force and effect. The business of the Company is being conducted in
compliance in all material respects with all applicable licenses, franchises,
permits and other governmental authorizations and, to the best knowledge of
Sellers, in compliance in all material respects with all applicable laws,
ordinances, rules and regulations of all governmental authorities relating to
its properties or applicable to its business. Except as set forth on Schedule
2.16, the Company has not received any notice of any alleged violation of any of
the foregoing.
2.17 Labor Matters. Except as set forth in Schedule 2.17, (i) the
Company is in compliance in all material respects with all applicable laws
respecting health and occupational safety, employment and employment practices,
terms and conditions of employment and wages and hours (including, without
limitation, the Federal Immigration Reform and Control Act of 1986), (ii) there
is no unfair labor practice complaint against the Company pending or threatened
before the National Labor Relations Board, (iii) there are no proceedings
pending or threatened before the National Labor Relations Board with respect to
the Company, (iv) there are no discrimination charges (relating to sex, age,
religion, race, color, national origin, ethnicity, handicap or veteran status or
any other basis protected by relevant law) pending before any federal, state or
local agency or authority against the Company or any of its employees, (v) no
grievance which might have a material adverse effect upon the Company is
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currently pending, (vi) the Company is not bound by any collective bargaining
agreement and there is no collective bargaining agreement currently being
negotiated by the Company and (vii) the Company has not experienced any material
labor difficulty during the past three years.
2.18 Insurance. The Company maintains insurance coverage which Xxxxxx
believes to be sufficient for compliance with all requirements of law and of all
agreements to which the Company is a party and which provides adequate insurance
coverage for the business of the Company. With respect to all policies, all
premiums currently payable or previously due and payable with respect to all
periods up to and including the Closing Date will have been paid and no notice
of cancellation or termination has been received with respect to any such
policy. Such policies will remain in full force and effect through the
respective dates set forth in such policies without the payment of, additional
premiums, unless called for in its original terms.
2.19 Tax Matters. (a) Except as set forth in Schedule 2.19, the Company
has filed or will file or cause to be filed within the time and in the manner
prescribed by law all Federal, state, local and foreign tax returns and tax
reports which are required on or before the Closing Date to be filed by, or with
respect to, it. Such returns and reports accurately reflect all liability for
taxes of the Company for the periods covered thereby. All Federal, state, local
and foreign income, profits, franchise, sales, use, occupancy, excise,
withholding, payroll, employment and other taxes and assessments (including
interest and penalties) payable by, or due from, the Company have been fully
paid or adequately disclosed and provided for in the Financial Statements of the
Company.
(b) The Company has not filed any election or caused any deemed
election under Section 338 of the Code.
(c) Except as set forth in Schedule 2.19, (i) the Company is not
delinquent in the payment of any Taxes (as defined in Section 6.03 hereof), and
(ii) no extensions of time have been granted to the Company to file any return
required by applicable law to be filed by it prior to or on the Closing Date,
which have expired or will expire on or before the Closing Date without such
return having been filed.
(d) The federal income tax returns of the Company (or returns of any
consolidated group which include the Company) have not been examined by the
Internal Revenue Service (the "IRS").
(e) The Company has not participated (nor will the Company participate
prior to the Closing) in or cooperate with an international boycott within the
meaning of Section 999 of the Code.
(f) Except as set forth in Schedule 2.19, all transactions which could
give rise to a substantial understatement of federal income tax (within the
meaning of Section 6661 of the Code) were adequately disclosed on the returns
required in accordance with Section 6661(b)(2)(8) of the Code.
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2.20 Transactions with Affiliates. Except as expressly provided in this
Agreement or as set forth in Schedule 2.20, the Company does not owe any amount
or have any liability (contingent or otherwise), contract, commitment,
arrangement or obligation to or with Sellers or any of their affiliates. Except
as set forth on Schedule 2.20, neither Xxxxxx nor any of his affiliates owns,
directly or indirectly, any interest that will survive the Closing in, or is a
director or employee of, or consultant to, any organization that is a competitor
in the United States, supplier, licensor, customer, creditor or debtor of the
Company. No Seller or persons known by any Seller to be affiliates of any Seller
have any material interest in any significant property, real or personal,
tangible or intangible, of the Company.
2.21 Accounts Receivable. Except as set forth on Schedule 2.21, the
accounts receivable reflected on the April 30, 1998 balance sheet contained in
the Financial Statements and all accounts receivable arising between April 30,
1998 and the date hereof arose from bona fide transactions in the ordinary
course of business. Except as set forth on Schedule 2.21, no account has been
assigned or pledged to any other person, firm or corporation and no defense or
setoff to any such account has been asserted by the account obligor. The amount
of all accounts receivable, unbilled invoices and other debts due or recorded in
the records and books of account of the Company as being due to the Company at
the Closing Date less the amount of $20,000 are good and collectible in full in
the ordinary course of business.
2.22 Environmental Matters. Except as set forth in Schedule 2.22:
(a) The Company is in material compliance with, and has not done
anything to be in material violation of, the terms and conditions of all
environmental permits, licenses, and other authorizations required under all
applicable federal, state and local laws relating to the environment, or the
premises owned, leased or occupied by them.
(b) To the best knowledge of Sellers, there are no conditions at, on,
under or related to, the real property constituting the premises upon which the
business of the Company is conducted or otherwise owned, occupied or leased by
the Company (collectively, the "Premises") which presently poses a significant
hazard to human health or the environment. There has been no production, use,
treatment, storage in underground tanks, pits, or surface impoundments,
transportation or disposal by the Company of any Hazardous Substance, as
hereinafter defined, on the Premises nor any release or threatened release by
the Company of any Hazardous Substance, pollutant or contaminant into or upon or
over the Premises or into or upon ground or surface water at or within 2,000
feet of the boundaries of the Premises. To the best knowledge of Sellers, except
as set forth in Schedule 2.22, there are no asbestos or asbestos-containing
materials incorporated into the buildings or interior improvements that are part
of the Premises or other assets to be indirectly transferred pursuant to this
Agreement. For purposes of this Agreement, "Hazardous Substance" shall mean, any
hazardous or toxic substance, material or waste which is regulated by any local
governmental authority, or any State or the United States Government.
2.23 Brokers and Finders. No Seller has employed any broker or finder
and no broker or finder is entitled to any brokerage fees, commissions or
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finder's fees arising from any act, representation or promise of any of them in
connection with the transactions contemplated hereby; provided, however, each
Seller so represents and warrants only with respect to that Seller and not with
respect to any other Seller.
2.24 Books and Records. The minute books of the Company, as previously
made available to Buyer, contain accurate records in all material respects of
all meetings of and corporate actions or written consents by the respective
stockholders and Boards of Directors of the Company. Except as set forth in
Schedule 2.24, the Company does not have any of its records, systems, controls,
data or information recorded, stored, maintained, operated or otherwise wholly
or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) which
(including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
2.25 Bank Accounts. Sellers will cause the Company to deliver to Buyer
at least 3 business days prior to the Closing an accurate and complete list
showing the name and address of each bank in which the Company has an account or
safe deposit box, the number of any such account or any such box and the names
of all persons authorized to draw thereon or to have access thereto.
2.26 Other Information. The information furnished to Buyer by Xxxxxx or
the Company or pursuant to this Agreement, including the exhibits hereto, the
schedules identified herein, and in any certificate or other document executed
or delivered pursuant hereto by Sellers (which for purposes of this Agreement
shall be deemed to be representations and warranties), is not materially false
or misleading, does not contain any misstatement of material fact, and does not
omit to state any material fact required to be stated in order to make the
statements therein not misleading in light of the circumstances under which they
were made.
2.27 No Changes Prior to Closing Date. During the period from the date
hereof to and including the Closing Date, the Company will not have taken any of
the actions specified in Section 4.01(a)-(o), without the prior written consent
of Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date hereof and as of the Closing Date, Buyer represents and
warrants to Sellers as follows:
3.01 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3.02 Authority Relative to this Agreement. Buyer has full power,
capacity and authority (corporate or otherwise) to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
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Directors of Buyer and no other proceedings on the part of Buyer or its
stockholders are necessary to approve and authorize the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Buyer and
(assuming the valid execution and delivery of the Agreement by Sellers)
constitutes a legal, valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy and other laws of general application relating to
creditors' rights and general principles of equity.
3.03 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof, will (i) require Buyer to file or register with, notify, or
obtain any permit, authorization, consent, or approval of, any governmental or
regulatory authority except for those requirements which become applicable to
Buyer as a result of the specific regulatory status of the Company or as a
result of any other facts that specifically relate to the business activities in
which the Company is or proposes to be engaged; (ii) conflict with or breach any
provision of the Certificate of Incorporation or by-laws of Buyer; (iii) violate
or breach any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default under, any of the
terms, covenants conditions or provisions of any note, bond mortgage, indenture
deed of trust, license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Buyer is a party, or by which
Buyer or any of its properties or assets may be bound, except for such breach or
default which would not have a material adverse effect on the transactions
contemplated by this Agreement taken as a whole; or (iv) violate any order,
writ, injunction, decree, judgment, statute, law or ruling of any court or
governmental authority applicable to Buyer or any of its material assets, which
violation would have a material adverse effect on the transactions contemplated
by this Agreement taken as a whole.
3.04 Litigation; Compliance with Law. Buyer is not a party to any
action or proceeding which seeks, or is subject to, any outstanding order, writ,
injunction or decree, which restrains or enjoins consummation of the
transactions contemplated hereby or which otherwise challenges the transactions
contemplated hereby and (ii) there is no litigation, administrative, arbitral or
other proceeding, or petition or complaint or, to the knowledge of Buyer,
investigation before any court or governmental or regulating authority or body
pending or, to the knowledge of Buyer, threatened against or relating to Buyer
that would materially adversely affect Buyer's ability to perform its
obligations pursuant to this Agreement.
3.05 Brokers and Finders. Buyer has not employed any broker or finder
and, to Buyer's knowledge, no broker or finder is entitled to any brokerage
fees, commissions or finder's fees arising from any act, representations or
promise of Buyer, in connection with the transactions contemplated hereby.
3.06 Purchase for Investment. Buyer will acquire all of the outstanding
stock of the Company to be purchased by it hereunder for its own account for
investment and not with a view toward any resale or distribution thereof.
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3.07 Access and Information. Between the Closing and June 30, 1999,
Buyer and its representatives shall and shall cause the Company and its
representatives to afford Xxxxxx on behalf of Sellers and their representatives
full and free access to the Company's personnel, properties, contracts, books
and records, and other existing documents and data as Sellers may reasonably
request, and furnish Sellers with such additional financial, operating and other
data and information as Sellers may reasonably request to confirm compliance
with the terms of this Agreement. Such information shall be subject to the
restrictions set forth in Section 4.02 (b) of this Agreement.
3.08 Maintenance of Company Powers. Between the Closing and June 30,
1999, Buyer shall maintain and preserve the corporate existence of the Company
and all rights, privileges, licenses, trade names, franchises and other rights,
the absence of which would have a material adverse affect on the conduct of its
business; conduct its business in an orderly manner, without voluntary
interruption; maintain its properties in good working order and condition,
ordinary wear and tear and damage by casualty excepted; and from time to time
make all needed repairs to, and renewals or replacements of its properties so
that the efficiency of those properties shall be fully maintained and preserved.
3.09 Maintenance of Business Organization. Between the Closing and June
30, 1999, Buyer shall use its good faith efforts to maintain the relations and
good will of all material customers of the Company.
3.10 Continuation of Business. Between Closing and June 30, 1999, Buyer
shall continue to conduct the business operations of the Company in a
commercially reasonable manner calculated in good faith to increase the
Recurring Revenue and Non-Recruiting Revenue of the business of the Company.
3.11 Affirmative Undertakings. Without limiting the generality of
Section 3.10, Buyer specifically undertakes and agrees for the period commencing
on Closing and ending June 30, 1999, as follows:
(a) it will continue marketing support for the products and
services of the Company by providing funding, personnel and management support
for such efforts at levels not less than those provided in the ordinary course
of business prior to Closing;
(b) it will continue product development and enhancement efforts
for the Company's products and services by providing funding, personnel and
management support for such efforts at levels not less than those provided in
the ordinary course of business prior to Closing;
(c) it will maintain price structures for the products and
services of the Company in a commercially reasonable manner intended in good
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faith, along with the marketing plans for such products and services, to
increase the Recurring Revenues and Non-Recurring Revenue of the Company;
(d) it will use its good faith efforts to maintain market
identity and product integrity for each of the material products and services of
the Company and will market such products and services in a commercially
reasonable manner intended in good faith to increase Recurring Revenue and
Non-Recurring Revenue of the Company.
(e) it will maintain in full force and effect all existing
agreements between the Company and Buyer or modify such agreements only in a
commercially reasonable manner intended in good faith to increase the Recurring
Revenue and Non-Recurring Revenue of the Company and will neither cause nor
permit the occurrence of any event constituting, either currently or with the
passage of time, a breach or default by the Company or Buyer thereunder, subject
to applicable cure periods;
(f) it will use commercially reasonable efforts to maintain the
Major Customer Contracts in full force and effect in accordance with their terms
as of the Closing or modify such agreements only in a commercially reasonable
manner intended in good faith to increase the Recurring Revenue and
Non-Recurring Revenue of the Company and shall not cause or permit the
occurrence of any event constituting, either currently or with the passage of
time, a breach or default by the Company, subject to the applicable cure
periods, with respect to any such contract.
3.12 Negative Covenants. During the period from Closing to June 30,
1999, Buyer will not cause or permit the Company to:
(a) except as required by or necessary to bring in compliance
with generally accepted accounting principles (A) utilize accounting principles
different from those used in the preparation of the Financial Statements, (B)
change its method of maintaining its books or accounts and records from such
methods as in effect with respect to the preparation of the Financial Statements
so as to cause a material adverse affect in the financial condition of the
Company or its operations taken as a whole, or (C) accelerate booking of
revenues or the deferral of expenses, other than as shall be consistent with
past practice and in the ordinary course of business;
(b) in any manner which would have a material adverse affect on
the financial condition of the Company or its operations taken as a whole,
license, transfer, grant, waive, release, permit to lapse or otherwise fail to
preserve any of the material Proprietary Rights, dispose of or permit to lapse
any material license, permit or other form of authorization, or dispose of any
customer lists;
(c) terminate or amend to fail to perform all of its obligations
under any material contract; or
(d) enter into an agreement to do any of the things described in
clauses 3.12 (a) through (c).
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ARTICLE IV
COVENANTS OF THE PARTIES
4.01 Conduct of Business of the Company. During the period from the
date of this Agreement to the Closing Date, Sellers will cause the Company to
(i) conduct its business and operations according to its ordinary course of
business consistent with past practice except as otherwise provided in this
Section 4.01, (ii) use its best efforts to preserve intact its business
organization and its relationship with licensors, suppliers, distributors,
employees, customers and others having business relationships with them, except
as may otherwise be agreed by Sellers and Buyer, and (iii) use its best efforts
to maintain the Major Customers Contracts in full force and effect in accordance
with their terms up to the Closing Date. Without limiting the generality of the
foregoing, prior to the Closing without the prior written consent of Buyer,
Sellers will not permit the Company to:
(a) change or amend its Articles of Incorporation or By-laws (or
similar governing documents);
(b) (i) create, incur or assume any debt, liability or obligation,
direct or indirect, whether accrued, absolute, contingent or otherwise, other
than normal trade obligations incurred in the ordinary course of business
consistent with past practice or (ii) pay any debt, liability or obligation of
any kind other than current liabilities incurred in the ordinary course of
business consistent with past practice and current maturities of existing
long-term debt or (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, or make any loans or advances to any person except in the
ordinary course of business consistent with past practice; provided, however,
that without the prior written consent of Buyer, the Company shall not enter
into a new agreement to provide services or amend in a material respect any
existing agreement to provide services or, by action or failure to act, renew or
cause to be renewed any Major Customer Contract or other customer contracts
designated by Buyer in writing in effect at the date hereof;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
the capital stock of the Company, or redeem or otherwise acquire any of the
capital stock of the Company or split, combine or otherwise similarly change the
capital stock of the Company or authorize the creation or issuance of or issue
or sell any shares of its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person any right to acquire
from it, any shares of its capital stock, or agree to take any such action;
(d) (i) change in any manner the rate or terms of compensation or bonus
payable or to become payable to any director, officer or employee or (ii) change
in any manner the rate or terms of any insurance, pension, severance, or other
employee benefit plan, payment or arrangement made to, for or with any
employees;
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(e) discharge or satisfy any lien other than in the ordinary course of
business and consistent with past practice or subject to any Lien any assets or
properties;
(f) except as otherwise permitted in this Section 4.01, enter into any
agreement or commitment for any borrowing, capital expenditure or capital
financing in excess of $10,000 individually or in the aggregate;
(g) sell, lease, transfer or dispose of any of its properties or
assets, waive or release any rights of material value, or cancel, compromise,
release or assign any indebtedness owed to it or any claims held by it in each
case other than in the ordinary course of business consistent with past
practice;
(h) make any investment of a capital nature either by purchase of stock
or securities, contributions to capital, property transfers or otherwise, or by
the purchase of any material property or assets of any other individual, firm,
corporation or entity, except in the ordinary course of business consistent with
past practice;
(i) except as required by generally accepted accounting principles (A)
utilize accounting principles different from those used in the preparation of
the Financial Statements, (B) change in any manner its method of maintaining its
books or accounts and records from such methods as in effect on the date of the
Financial Statements, or (C) accelerate booking of revenues or the deferral of
expenses, other than as shall be consistent with past practice and in the
ordinary course of business;
(j) take any action to permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated or any of the
coverage thereunder to lapse, unless simultaneously with such termination or
cancellation replacement policies providing substantially the same coverage and
which are obtainable on substantially the same economic terms are in full force
and effect; provided, however that if the Company shall receive notice of any
such cancellation or termination, it shall so notify Buyer promptly upon receipt
thereof and, if feasible upon the payment of a premium which is not materially
greater than the premium payable under such terminated or canceled policy,
obtain simultaneously with such termination or cancellation such replacement
policies;
(k) enter into any collective bargaining agreement;
(l) settle or compromise any claim, suit or cause of action involving
more than $10,000;
(m) license, transfer, grant, waive, release, permit to lapse or
otherwise fail to preserve any of the material Proprietary Rights, dispose of or
permit to lapse any material license, permit or other form of authorization, or
dispose of any customer list;
(n) terminate or amend or fail to perform all of its obligations under
any Material Contract; or
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(o) enter into an agreement to do any of the things described in
clauses (a) through (n) above.
4.02 Current Information. During the period from the date of this
Agreement to the Closing, Xxxxxx will promptly notify Buyer in writing of any
significant development not in the ordinary course of business consistent with
past practice or of any material adverse change in the assets, liabilities,
business, financial condition, prospects or results of operation of the Company
and of any governmental complaints, investigations or hearings of which they or
the Company have been advised involving the Company, or the institution or
threat of the institution of any litigation or proceedings involving the
Company.
4.03 Access to Information. (a) Between the date of this Agreement and
the Closing Date, Sellers will cause the Company to (i) afford Buyer and its
designated representatives full access to the premises, books and records of the
Company, and (ii) cause the Company's officers, and use its best efforts to
cause the Company's advisors (including, without limitation, their auditors,
attorneys and other advisors) to furnish Buyer and its designated
representatives (including Buyer's auditors, accountants, attorneys and
representatives) with financial and operating data and other information with
respect to the business and properties of the Company for the purpose of
permitting Buyer to make such investigation of the business, properties,
financial and legal condition of the Company as Buyer deems necessary or
desirable to familiarize itself therewith.
(b) After the Closing Date, Sellers will, and will cause all of its
advisors, agents and affiliates (collectively, "representatives"), to maintain
all information, written or oral, specifically concerning the business of the
Company and unique to such business (the "Information") in confidence and not to
disclose any portion of such Information to any person or entity. In the event
that any Seller or any of their representatives is requested or required (by
oral question or request for information or documents in legal proceedings,
interrogatories, subpoena, civil investigative demand or similar process) to
disclose any Information, it is agreed that Buyer will be promptly notified of
such request or requirement so that it may seek an appropriate protective order,
and/or waive compliance with the provisions of this Section 4.03(b). If Buyer
does not promptly seek and obtain a protective order, any Seller or any of their
representatives may disclose such Information to the tribunal notwithstanding
the first sentence of this Section 4.03(b); provided that such person shall use
its reasonable best efforts to obtain, at the request of Buyer, reasonable
assurance that confidential treatment will be accorded to such portion of the
Information required to be disclosed as Buyer designates. The foregoing
provisions of this Section 4.03(b) shall not apply to (i) Information which at
the time of disclosure, is generally available to the public, or (ii)
Information which, after disclosure, becomes generally available to the public
other than as a consequence of a breach of this Section 4.03(b).
4.04 Expenses. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby will be paid by the respective party
that incurred such cost and expense (it being understood, however, that all
reasonable legal and accounting fees and expenses so incurred by Xxxxxx shall be
paid by the Company).
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4.05 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement and except as otherwise provided herein, all of the parties
hereto will use their reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement or to put Buyer in possession of all of the assets of the
Company, each party to this Agreement will, or will cause its affiliates as the
case may be, to take all such necessary action including, without limitation,
the execution and delivery of such further instruments and documents as may
reasonably be requested by the parties hereto for such purposes or otherwise to
complete or perfect the transactions contemplated hereby.
4.06 Consents. Each of the parties hereto will use its reasonable best
efforts to obtain the written consents of all persons and governmental
authorities required to be obtained by each such party and necessary to the
consummation of the transactions contemplated by this Agreement.
4.07 Filings. Buyer and Sellers will file pursuant to applicable
securities laws all requisite documents and notifications in connection with the
transactions contemplated by this Agreement. Buyer and each Seller will
coordinate and cooperate with each other in exchanging such information and
providing such reasonable assistance as the others may require to comply with
applicable securities laws.
4.08 Disclosure Supplements. From time to time prior to the Closing,
Sellers will promptly supplement or amend the Schedules ("Disclosure
Supplements") referred to in this Agreement with respect to any matter hereafter
arising which, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in a Schedule
or which is necessary to correct any information in a Schedule or in any
representation or warranty of any Seller which has been rendered inaccurate
thereby. The representations and warranties of Sellers shall be amended by the
Disclosure Supplements in all respects and for all purposes other than for the
purposes of determining satisfaction of the conditions to Closing set forth in
Article V.
4.09 Public Announcements. Sellers and Buyer will consult with each
other before any of them or the Company issues any press releases or otherwise
makes any public statements (including statements made to employees of the
Company) with respect to this Agreement and the transactions contemplated
hereby.
4.10 Transfer Taxes. All transfer taxes (including all stock transfer
taxes, if any) incurred in connection with this Agreement and the transactions
contemplated hereby will be borne by Sellers, and Sellers will, at their own
expense, file all necessary tax returns and other documentation with respect to
all such transfer taxes, and, if required by applicable law, the other parties
hereto will (and will cause the Company to) join in the execution of any such
tax returns or other documentation.
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4.11 No Solicitation. Sellers shall not, and shall cause the Company
not to, initiate, solicit, encourage, or participate in, any discussions with,
or provide any information to, any corporation, partnership, person, entity or
group, other than Buyer and its employees and agents, concerning any merger,
consolidation, sale of assets or similar transaction involving the Company, or
any sale of Shares or capital stock of the Company, including securities
convertible into or exchangeable for such securities, by the issuer (any such
transaction being referred to herein as an "Acquisition Proposal"). Sellers will
suspend any pre-existing discussions involving any Acquisition Proposal and will
immediately advise Buyer if the Company or any Seller receives any Acquisition
Proposal from any corporation, partnership, person, entity or group.
4.12 Access to Customers and Suppliers. Between the date of this
Agreement and the Closing Date, Sellers will cause the Company to permit a
representative of Buyer to accompany a representative of the Company when they
meet with or talk to the officers and employees of the customers and suppliers
of the Company. In addition, Sellers will cause the Company to permit a
representative of Buyer to meet with or talk to the officers and employees of
the customers and suppliers of the Company, provided, however, that the Company
shall have a right to have a representative present at such meetings and
discussions.
ARTICLE V
CONDITIONS
5.01 Conditions to Each Party's Obligations to Effect the Transactions
Contemplated Hereby. The respective obligations of each party hereto to effect
the transactions contemplated hereby shall be subject to the fulfillment at or
prior to the Closing of each of the following conditions:
(a) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or governmental authority, nor shall any
action or proceeding brought by any governmental authority or agency, be
pending, which (i) prevents, restricts or delays or seeks to prevent, restrict
or delay the consummation of the transactions contemplated by this Agreement or
(ii) seeks a material amount of monetary damages in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Xxxxxx and Buyer shall have entered into as of the Closing Date the
agreement referred to in Section 7.01 and otherwise performed their respective
obligations under Article VII.
5.02 Conditions to the obligations of Sellers to Effect the
Transactions Contemplated Hereby. The obligations of Sellers to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Closing of each of the following conditions, any one or more of
which may be waived in whole or in part by Sellers in writing:
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(a) Buyer shall have performed and complied in all material respects
with all agreements, obligations, conditions and covenants contained in this
Agreement required to be performed and complied with by it at or prior to the
Closing and all representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date, and Sellers shall have received
certificates to that effect signed by the President or any Vice President of
Buyer together with such other documents, instruments and writings required to
be delivered by Buyer at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required by Buyer in connection herewith.
(b) Sellers shall have received an opinion from counsel to Buyer, dated
the Closing Date, to the effect set forth in Exhibit A hereto.
(c) Buyer shall have delivered to Sellers a copy of the Certificate of
Incorporation of Buyer, including all amendments thereto, certified by the
Secretary of State of the State of Delaware and (ii) a certificate from the
Secretary of the State of Delaware to the effect that Buyer is in good standing
in such State.
(d) No actions or proceedings which have a material likelihood of
success shall have been instituted or, to the knowledge of Buyer, threatened by
any governmental body or authority to restrain or prohibit any of the
transactions contemplated hereby.
(e) All material consents, waivers, authorizations and approvals, if
any, necessary to permit Sellers to consummate the transactions contemplated by
this Agreement shall have been received.
(f) All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to Sellers and their counsel.
5.03 Conditions to the Obligations of Buyer to Effect the Transactions
Contemplated Hereby. The obligations of Buyer to effect the transactions
contemplated hereby shall be further subject to the fulfillment at or prior to
the Closing of each of the following conditions, any one or more of which may be
waived in whole or in part by Buyer in writing:
(a) Sellers shall have performed and complied in all material respects
with all agreements, obligations, conditions and covenants contained in this
Agreement required to be performed and complied with by them at or prior to the
Closing and all the representations and warranties of Sellers set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as amended by any Disclosure Supplements as of the Closing
Date, and Buyer shall have received certificates to that effect signed by
Sellers together with such other documents, instruments and writings required to
be delivered by Sellers or by the Company at or prior to the Closing pursuant to
this Agreement or otherwise required in connection herewith, provided, however,
that if the Disclosure Supplements reveal a change from the Schedules attached
hereto at the date hereof that is unacceptable to Buyer, Buyer shall not be
obligated to effect the transactions contemplated hereby.
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(b) Sellers shall have delivered to Buyer (i) copies of the Company's
Articles of Incorporation including all amendments thereto certified by the
Secretary of State of the State of California, (ii) certificate from the
Secretary of State to the effect that the Company is in good standing and
listing all charter documents of the Company on file, and (iii) a certificate as
to the tax status of the Company in the State of California .
(c) Prior to the Closing Date, there shall be no material adverse
change in the assets or liabilities, the business or condition, financial or
otherwise, the results of operations, or prospects of the Company, from April
30, 1998, and Sellers shall have delivered to Buyer a certificate, dated the
Closing Date, to such effect.
(d) No action or proceedings which have a reasonable likelihood of
success shall have been instituted or, to the best knowledge of Sellers,
threatened by any governmental body or authority to restrain or prohibit any of
the transactions contemplated hereby.
(e) Each party hereto shall have received all material consents,
waivers, approvals, licenses or other authorizations required from any
governmental or non-governmental entity for the execution, delivery and
performance of this Agreement by the parties hereto.
(f) Other than as disclosed in the schedules attached hereto, the
Company shall not have received any notice of cancellation of any Major Customer
Contract or real property lease or have any basis to believe any such
cancellation may occur.
(g) Buyer shall have received an opinion from counsel to Sellers, dated
the Closing Date, in form and substance satisfactory to Buyer and its counsel,
to the effect set forth in Exhibit B hereto.
(h) No injunction or other court order requiring that any part of the
business or assets of any of the Company be held separate or divested or that
any business or assets of Buyer or any affiliate of Buyer be divested, or
imposing or involving any conditions on Buyer or its affiliates or the Company,
which could be reasonably expected to have a material adverse effect on the
assets, liabilities, business, financial condition, prospects or results of
operations of either Buyer or any affiliate of Buyer on the one hand, or the
Company on the other hand, shall be in effect and no proceedings shall be
pending by or before, or threatened in writing by or before, any governmental
body or court of competent jurisdiction with respect thereto.
(i) The Company shall not have taken any of the actions set forth in
Section 4.01(a) - (o) without the prior written consent of Buyer.
(j) Buyer shall have received satisfactory evidence of the resignation
as of the time of Closing of such of the present officers (in their capacity as
corporate officers only) and directors of the Company as Buyer may request at
least 3 business days prior to Closing.
00
- 000 -
(x) There shall not be in effect at the Closing Date any contractual
provisions restricting the ability of the Company or any affiliate thereof to
conduct any business or compete with any person or restricting the area in which
it may conduct any business.
(l) Buyer and its counsel shall have approved (which approval shall not
be unreasonably withheld) (i) the form of stock certificate and related
instruments of transfer to be delivered to Buyer at the Closing, (ii) all other
proceedings to be effected at the Closing or otherwise in connection with the
transactions contemplated by this Agreement, and (iii) all other documents and
instruments to be delivered at the Closing or otherwise in connection with the
transactions contemplated by this Agreement.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.01 Survival of Representations, Warranties and Covenants. All
covenants and agreements of any party hereto set forth herein shall survive the
Closing for the period provided for in such covenant or, if not so provided, for
a period of one year. The representations and warranties set forth herein shall
survive the Closing and shall remain in effect for a period of one year from the
Closing Date, provided that (x) any claim for indemnification which is asserted
within the time period set forth in Section 6.02(e) shall survive such one year
period, for the period set forth in such Section, and (y) claims under Section
6.03 with respect to liability for Taxes which are asserted prior to the
expiration of the applicable statute of limitation (including any extension
thereof) respecting such Tax liability or obligation shall also survive such one
year period for the period set forth in such Section.
6.02 Post-Closing Indemnification. (a) From and after the Closing Date,
Xxxxxx shall defend, indemnify and hold harmless Buyer and its subsidiaries
(including the Company) and each of their successors, assigns, officers,
directors and employees (the "Buyer Indemnitee Group") against and in respect of
any and all losses, actions, suits, proceedings, claims, liabilities, damages,
causes of action, demands, assessments, judgments, and investigations and any
and all costs and expenses paid to third parties, including without limitation,
reasonable attorneys' fees and expenses (collectively, "Damages"), suffered by
any of them as a result of, or arising from: (i) except for matters referred to
in clauses (ii) and (iii) hereof and in Section 6.03, any inaccuracy in or
breach of or omission from any of the representations or warranties made by
Xxxxxx in Article II of this Agreement or pursuant hereto (as amended by the
Disclosure Supplements), or any nonfulfillment, partial or total, of any of the
covenants or agreements made by Xxxxxx in this Agreement to the extent not
waived by Buyer in writing; (ii) except for matters referred to in clause (iii)
hereof and in Section 6.03, any claim, action, suit, proceeding or investigation
of any kind relating to or arising from events occurring prior to the Closing
Date, instituted by or against or involving the Company or any of its business
or assets (other than those claims, actions, suits, proceedings and
investigations set forth in Schedule 2.14 of the Disclosure Schedule) regardless
of whether such claims, actions, suits, proceedings or investigations are made
or commenced before or after the Closing Date, provided that Damages relating to
claims, actions, suits, proceedings and investigations that relate to events
occurring both before and after the Closing Date shall be equitably allocated
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between Buyer and Sellers and; (iii) the failure or inability of the Company to
collect all accounts receivable reflected on the Financial Statements less the
amount of $20,000, provided, however, the Company and Buyer shall have used all
customary methods to collect such accounts receivable and provided further, that
if Xxxxxx shall be required to pay any amounts hereunder, Buyer or the Company
shall assign uncollected accounts receivable to Xxxxxx, who may use all
necessary reasonable means to collect it, including bringing an action in the
name of the Company.
(b) From and after the Closing Date, Buyer shall defend, indemnify and
hold harmless Sellers and their heirs, trustees, successors and assigns against
and in respect of any and all losses, actions, suits, proceedings, claims,
liabilities, damages, causes of action, demands, assessments, judgments, and
investigations and any and all costs and expenses paid to third parties,
including without limitation, reasonable attorneys' fees and expenses, suffered
by any of them as a result of, or arising from, any inaccuracy in or breach of
or omission from any of the representations or warranties made by Buyer in
Article III of this Agreement or pursuant hereto, or any non-fulfillment,
partial or total, of any of the covenants or agreements made by Buyer in this
Agreement to the extent not waived by Sellers in writing.
(c) From and after the Closing Date, each Seller other than Xxxxxx
shall defend, indemnify and hold harmless the Buyer Indemnitee Group against and
in respect of any and all Damages suffered by any of them as a result of, or
arising from, any inaccuracy in or breach of or omission from any of the
representations or warranties made by such Seller in Article III of this
Agreement or pursuant hereto, or any non-fulfillment, partial or total, of any
of the covenants or agreements made by such Seller in this Agreement.
(d) If a claim by a third party is made against an indemnified party,
and if such party intends to seek indemnity with respect thereto under this
Article VI, the indemnified party shall promptly (and in any case within thirty
days of such claim being made) notify the indemnifying party of such claim,
provided, however, that the failure to so notify the indemnifying party shall
not discharge the indemnifying party of its obligations hereunder except that
the indemnifying party shall not be liable for default judgments or any amounts
related thereto if the indemnified party shall not have so notified the
indemnifying party. Subject to the following sentence, the indemnifying party
shall have thirty days after receipt of such notice to undertake, conduct and
control, through counsel of its own choosing (which is satisfactory to the
indemnified party) the settlement or defense thereof, and the indemnified party
shall cooperate with it in connection therewith (provided that the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel shall be borne by the indemnified party) and the
indemnifying party shall promptly reimburse the indemnified party for the full
amount of any loss resulting from such claim and all related expenses as
incurred by the indemnified party within limits of this Article VI.
Notwithstanding anything herein to the contrary, the indemnified party shall
have the right to conduct and control the defense of any such claim in the event
that such claim (including a claim for equitable relief) or the continuation of
such claim could reasonably be expected to materially adversely affect the
business, results of operations, prospects or financial condition of the
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indemnified party or any of its affiliates, provided, however, the indemnified
party may not settle any claim for an amount in excess of $25,000 or consent to
any settlement which imposes equitable remedies on the indemnifying party or its
affiliates without the prior consent of the indemnifying party, which consent
shall not be unreasonably withheld, unless the indemnified party agrees to waive
any right to indemnity therefor by the indemnifying party. If the indemnifying
party does not notify the indemnified party within thirty days after the receipt
of the indemnified party's notice of a claim of indemnity hereunder that it
elects to undertake the defense thereof or if the indemnifying party is not
reasonably contesting the claim in good faith, the indemnified party shall have
the right to contest, settle or compromise the claim in the exercise of its
reasonable judgment, and all losses incurred by the indemnified party, including
all fees and expenses of counsel for the indemnified party, shall be paid by the
indemnifying party.
(e) Claims for indemnification made under this Section 6.02 shall be
made within a period of one year from the Closing Date, provided, however,
notwithstanding the foregoing, claims for indemnification with respect to any
action, lawsuit, proceeding or investigation of any kind relating to or arising
out of the matters referred to in Section 6.02(a)(ii) and claims for
indemnification pursuant to Section 6.02(a)(iii) may be made within five years
from the Closing Date.
6.03 Tax Indemnity, Etc.
(a) Xxxxxx shall be responsible for and pay all Taxes attributable to
the Company or its subsidiaries or for which the Company is liable for any
period or portion of a period that ends on or before the Closing Date
("pre-Closing Date") which have not been paid or adequately provided for in the
Financial Statements. Such Taxes shall include but not be limited to the Taxes
of any member of an affiliated group of which the Company was a member for
federal income tax purposes or any entity with which the Company filed a
combined return for state or local tax purposes.
(b) Subject to Section 6.04, Xxxxxx shall indemnify Buyer, the Company
and their affiliates and their respective successors and assigns (each, a "Tax
Indemnified Party", and collectively, "Tax Indemnified Parties") against and
hold the Tax Indemnified Parties harmless on an after-tax basis from all
liability, loss or damage and from all expenses paid to third parties (including
reasonable attorneys' fees) with respect to all such Taxes described in the
immediately preceding clause (a) which are in excess of U.S. $5,000.
(c) If, in connection with the audit of any federal, state, local or
foreign return, any claim or demand is asserted in writing against a Tax
Indemnified Party which may result in a claim for indemnification under this
Section 6.03, such party shall notify Xxxxxx of such claim or demand within
twenty-five (25) days of receipt thereof. Xxxxxx shall have the right to control
at his own cost and expense, the defense of such claim or demand, provided,
however, he shall consult with Buyer with respect to such defense, and he shall
not compromise or settle such claim or demand without the consent of Buyer if
such compromise or settlement would adversely affect Buyer, which consent shall
not be unreasonably withheld. Subject to the foregoing, the Tax Indemnified
Party shall cooperate fully in such defense as and to the extent reasonably
25
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requested by Xxxxxx. In the event Xxxxxx does not timely pursue the defense of
the matter, the Tax Indemnified Party shall have the full right to defend
against such liability, and shall be entitled to settle or agree to pay in full
such claim or demand in its sole discretion and thereafter pursue its rights
under this Agreement.
(d) Xxxxxx shall pay to the Tax Indemnified Party all indemnity amounts
within thirty (30) days after written demand therefor, or, if they timely
contest a claim or demand, within thirty (30) days after the matter is settled
or finally determined.
(e) Xxxxxx and Buyer shall cooperate fully with each other in
accordance with the reasonable request of the other party, in connection with
any audit, litigation or other proceeding with respect to the Tax liability of
the Company and the preparation of any tax return with respect to the Company.
Such cooperation shall include the retention, and upon a party's request, the
provision to the other parties of records and information which are reasonably
relevant to any such proceeding or return, as well as making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Strict confidentiality shall be maintained
for such records and information.
(f) For purposes of this Section 6.03, in the case of any Taxes that
are imposed on a periodic basis and are payable for a period that begins before
the Closing Date and ends after the Closing Date, the portion of such Tax
payable for the period ending on the Closing Date shall (i) in the case of any
property taxes and other taxes determined at a fixed rate for a period, be
deemed to be the amount of such Tax for the entire period multiplied by a
fraction the numerator of which is the number of days in the period ending on
the Closing Date and the denominator of which is the number of days in the
entire period, and (ii) in the case of any other Taxes, be deemed equal to the
amount which would be payable if the taxable year ended on the Closing Date.
(g) All tax allocation, tax sharing and similar agreements, if any, to
which the Company is or was a party at any time on or before the Closing Date
shall be terminated as of the Closing Date with respect to the Company. The
Company shall have no obligation for the payment of any amount pursuant to any
such agreement, except as expressly provided for in the Financial Statements.
Subject to Section 6.04, the foregoing indemnity obligations of Xxxxxx and the
covenants and agreements of the parties contained in this Section 6.03 shall
survive the Closing and be applicable for the applicable statute of limitations
(as such may be waived or extended).
(h) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs
duties, fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign) upon the Company or its subsidiaries.
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6.04 Limitation on Indemnification. (a) Notwithstanding the provisions
of Sections 6.02 and 6.03 hereof, (i) Xxxxxx shall not be obligated to indemnify
and hold harmless the Buyer Indemnitee Group and the Tax Indemnified Parties
unless and until the aggregate amount of all claims for which indemnification is
sought under Sections 6.02 and 6.03 exceeds Fifty Thousand Dollars ($50,000),
and then only as to the amount by which aggregate claims thereunder exceed
$50,000 and (ii) the aggregate liability with respect to the indemnifications
contained in Sections 6.02 and 6.03 shall not exceed ten percent (10%) of the
aggregate cash consideration paid or to be paid to Xxxxxx pursuant to Sections
1.02 and 7.02 hereof; provided, however, the limitations contained in this
Section 6.04 shall not apply to an inaccuracy in or breach of the
representations and warranties of Xxxxxx in Section 2.02 hereof, for which there
shall be no limitations (either minimum thresholds or maximum amounts)
applicable to the indemnifications therefore contained in Section 6.02(a)(i).
Notwithstanding the provisions of Section 6.02 hereof, Buyer shall not be
obligated to indemnify and hold harmless Sellers until the aggregate of all
claims for which indemnification is sought under Section 6.02 exceeds Fifty
Thousand Dollars ($50,000), and then only as to the amount by which aggregate
claims thereunder exceed $50,000.
(b) Except for liability provided for in Section 8.02(b) hereof and the
remedy of specific performance provided for in Section 9.12 hereof, Buyer
acknowledges and agrees that its sole and exclusive remedy with respect to any
and all claims relating to any inaccuracy in or breach of or omission from any
of the representations or warranties made by Xxxxxx in Article II of this
Agreement shall be pursuant to the indemnification provisions set forth in this
Article VI. Except for liability provided for in Section 8.02(b) hereof and the
remedy of specific performance provided for in Section 9.12 hereof, Sellers
acknowledge and agree that their sole and exclusive remedy with respect to any
and all claims relating to any inaccuracy in or breach of or omission from any
of the representations or warranties made by Buyer in Article III of this
Agreement shall be pursuant to the indemnification provisions set forth in this
Article VI.
ARTICLE VII
ADDITIONAL AGREEMENTS WITH XXXXXX
7.01 Non-Competition. At the Closing, Xxxxxx and Buyer shall execute
and deliver to each other the Confidentiality and Non-competition Agreement in
the form attached hereto as Exhibit C, dated as of the Closing Date.
7.02 Purchase of Xxxxxx' Goodwill. Subject to the Closing, Xxxxxx
agrees to sell, assign and transfer to Buyer on the Closing Date, and Buyer
agrees to purchase all of the individual and personal goodwill of Xxxxxx
pertaining to or arising out of the business of developing software and
providing financial and communication services for the financial services
industry (the "Goodwill"). Although the Goodwill was used by Xxxxxx in the
conduct of the business of the Company up to the date of this Agreement, it is
acknowledged by Sellers to be a separate and valuable asset of Xxxxxx apart from
the goodwill of the Company. Concurrently with the Closing, Xxxxxx shall assign
the Goodwill to Buyer, free and clear of all liens, claims and encumbrances, by
a duly executed assignment in form reasonably requested by Buyer. In full
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consideration for the purchase by Buyer of the Goodwill, Buyer shall pay to
Xxxxxx (i) 160% of the Excess Amount (as defined in Section 1.02(b)) for each of
the calendar quarters ending June 30, 1998, September 30, 1998, December 31,
1998, March 31, 1999, and June 30, 1999 and (ii) 20% of the Non-recurring
Revenue (as defined in Section 1.02(c)) received by the Closing after the
Closing Date and before July 1, 1999. Such payments shall be made quarterly
simultaneously with the payments to Sellers as provided in Section 1.02 (b) and
(c) hereof. Buyer shall have a right of setoff against these payments for any
liability of Xxxxxx to Buyer pursuant to this Agreement.
7.03 Inactive Software Systems. All ownership and rights of the Company
to its currently inactive software systems known as "Mutual Fund and Variable
Annuity Hypothetical System" and "Wholesaler System", only to the extent
separable from other software programs or systems of the Company, will be
transferred to Xxxxxx on or prior to the Closing Date, subject to (i) Buyer's
right of first refusal to acquire such software systems in the event of their
subsequent disposition or transfer; and (ii) such software systems not being
used in a manner which, if used by Xxxxxx, would violate the restriction against
competition contained in the Confidentiality and Non-Competition Agreement
attached as Exhibit C hereto.
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of Sellers and Buyer; or
(b) by either Buyer or Xxxxxx if the Closing shall not have occurred on
or before May 25, 1998 or such later date as may be agreed upon by Buyer and
Xxxxxx.
8.02 Procedure and Effect of Termination. In the event of termination
of this Agreement and abandonment of the transactions contemplated hereby by any
or all of the parties pursuant to Section 8.01, written notice thereof shall
forthwith be given to the other parties to this Agreement and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein:
(a) the parties hereto will promptly redeliver to Sellers or Buyer, as
the case may be, all documents, work papers and other materials of any other
party relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof; and
(b) no party hereto shall have any liability or further obligation to
any other party to this Agreement pursuant to this Agreement except (i) with
respect to Section 4.04, and (ii) solely with respect to terminations pursuant
to Section 8.01(b), any party whose material breach of any covenant or agreement
hereunder shall have resulted in the failure of the transactions contemplated by
this Agreement to close, shall be liable for breach of contract or otherwise, to
28
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the extent provided by law; provided, however, that this subsection (b) (ii)
shall not be construed to limit the remedies otherwise available with respect to
such defaulting party.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of Buyer and Sellers.
9.02 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
9.02.
9.03 No Third Party Beneficiaries. Except as provided in this
Agreement, nothing in this Agreement shall confer any rights upon any person or
entity which is not a party or a permitted assignee of a party to this
Agreement.
9.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram or telex, telecopy,
courier, express mail delivery service, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
(a) if to Sellers, to:
Xxxxxx X. Xxxxxx
16955 Xxx Xxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
XxXxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
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(b) if to Buyer, to:
Data Transmission Network Corporation
0000 Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Xx. Vice President
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxxx
0000 Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: R. Xxxxx Xxx
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9.05 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties.
9.06 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by the law of the State of Nebraska as to all matters, including, but
not limited to, matters of validity, construction, effect, performance and
remedies without giving effect to the principles of choice of law thereof.
9.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.08 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
9.09 Entire Agreement. This Agreement, including the Exhibits hereto
and the documents, schedules, certificates and instruments referred to herein
embodies the entire agreement and understanding of the parties hereto in respect
of the transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein or therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such transactions.
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9.10 Certain Definitions.
(a) An "affiliate" of a person shall mean any person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
person.
(b) The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities or by contract or otherwise.
(c) The term "person" shall mean and include an individual, a
partnership, a limited liability company, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
(d) The term "day" shall mean a calendar day unless otherwise stated.
(e) The term "subsidiary" when used in reference to any other person
shall mean any corporation of which outstanding securities having ordinary
voting power to elect a majority of the Board of Directors of such corporation
are owned directly or indirectly by such other person.
(f) Whenever any representation or warranty contained in this Agreement
is qualified by reference to the knowledge, information or belief of a party,
such party confirms that it has made due and diligent inquiry as to the matters
that are the subject of such representation and warranty.
9.11 Severability. The parties hereto acknowledge that the provisions
of this Agreement, including the territorial and time limitations set forth in
Section 7.01 hereof, are reasonable under the circumstances. The parties intend
that the covenants contained in Section 7.01 (a) and (b) shall be construed as
separate covenants as to each city, county and state in the United States in
which the Company is conducting business as of the Closing. Any provision of
this Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction.
9.12 Specific Performance. Each of the parties hereto acknowledges and
agrees that the other parties hereto would be irreparably damaged in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached. Accordingly, each of the parties
hereto agrees that they each shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
personal and subject matter jurisdiction, in addition to any other remedy to
which such party may be entitled at law or in equity. In the event of any action
or proceeding to enforce the terms and conditions of this Agreement, the
prevailing party shall be entitled to an award of reasonable attorneys' and
expert's fees and costs in addition to such other relief as may be granted.
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IN WITNESS WHEREOF, Sellers and Buyer have signed, or caused this
Agreement to be signed by their respective representatives, as the case may be,
as of the date first above written.
DATA TRANSMISSION NETWORK
CORPORATION
Date: May 27, 1998 /s/ Xxxxxxx X. Xxxx
-------------------------------
Xxxxxxx X. Xxxx, Xx. Vice President
Date: May 28, 1998 /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx
EXCEL INTERFINANCIAL CORPORATION
Date: May 28, 1998 /s/ Xxxxxxx Xxxx
----------------------------------
Xxxxxxx Xxxx, Executive Vice President
CHARTER FINANCIAL HOLDINGS, LLC
Date: May 29, 1998 /s/ Xxxx X. X'Xxxxxxx
---------------------------------
Xxxx X. X'Xxxxxxx, Manager
Date: May 28, 1998 /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxx
Date: May 28, 1998 /s/ Xxxxxxx Xxxxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxxxx
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SCHEDULE 1
Percentage of
Name and Number of Payment Due Balance of
Address Of Seller Shares Owned at Closing Purchase Price
Xxxxxx X. Xxxxxx 790,000 $1,809,200 90.46%
Excel Interfinancial 13,300 $ 30,400 1.52%
Corporation
Charter Financial 10,000 $ 23,000 1.15%
Holdings, LLC
Xxxxxx X. Xxxxxxxx 45,000 $ 103,000 5.15%
Xxxxxxx Xxxxxxxxxx 15,000 $ 34,400 1.72%
------- ---------- -----
TOTALS 873,300 $2,000,000 100%
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EXHIBIT A
(Opinion of AK&C)
Dated _______________ ,1998
Xx. Xxxxxx X. Xxxxxx
16955 Xxx Xxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxx:
We have acted as counsel to Data Transmission Network Corporation (the
"Company"), a Delaware corporation, in connection with the Company's purchase of
all of the issued and outstanding capital stock of National Datamax, Inc.
pursuant to that certain Stock Purchase Agreement dated as of May ___, 1998,
among all of the stockholders of National Datamax, Inc. and the Company (the
"Agreement"). This opinion is being rendered to you pursuant to Section 5.02(b)
of the Agreement. Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Agreement.
In connection with this opinion, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion, including those relating to the authorization, execution and delivery
of the Agreement. We reviewed the following documents and agreements:
(i) the Agreement;
(ii) the Certificate of Incorporation of the Company as certified
by the Secretary of State of the State of Delaware (the
"Certificate of Incorporation");
(iii) the Bylaws of the Company as certified by the Secretary of the
Company on the date of this opinion letter (the "Bylaws"); and
(iv) actions taken by the Board of Directors of the Company to
authorize the transactions contemplated by the Agreement.
In such examination and review we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to the
opinions hereafter expressed which we did not independently establish or verify,
we have relied without investigation upon certificates, statements and
representations of representatives of the Company. During the course of our
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discussion with such representatives and our review of the documents described
above in connection with the preparation of these opinions, no facts were
disclosed to us that caused us to conclude that any such certificate, statement
or representation is untrue. In making our examination of the documents executed
by persons or entities other than the Company, we have assumed that each such
other person or entity had the power and capacity to enter into and perform all
his, her or its obligations thereunder and the due authorization of, and the due
execution and delivery of, such documents by each such person or entity.
As used in this opinion, the expression "to our knowledge" with
reference to matters of fact means that after an examination of documents in our
files or made available to us by the Company and after inquiries of officers of
the Company, and considering the actual knowledge of those attorneys in our firm
who have given substantive attention to legal matters for the Company, without
independent investigation or inquiry as to factual matters, but not including
any constructive or imputed notice of any information, we find no reason to
believe that the opinions expressed herein are factually incorrect. Beyond that,
we have made no independent factual investigation for the purpose of rendering
an opinion with respect to such matters.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications and exceptions set forth herein, we are
of the opinion that:
1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware.
2. The Company has the corporate power and authority to execute,
deliver, and perform the Agreement and to consummate the transactions
contemplated thereby. The Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms. The execution,
delivery and performance of the Agreement and the consummation of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of the Company.
3. Except as set forth in the Agreement, neither the execution,
delivery, nor performance of the Agreement nor the consummation of the
transactions contemplated thereby (i) conflicts with or violates any provisions
of the Certificate of Incorporation or By-laws of the Company, (ii) to our
knowledge, violates any judgment, decree, order, writ or injunction specifically
naming the Company, (iii) to our knowledge, requires on the part of the Company
any filing with, or permit, authorization, consent or approval of, any federal
or state governmental agency, or (iv) to our knowledge, violates any statute,
rule or regulation.
This opinion relates solely to the laws of the State of Nebraska, and
applicable Federal laws of the United States, and we express no opinion with
respect to the effect or applicability of the laws of other jurisdictions. We
have assumed that, and our opinions expressed in paragraph 2 above are based
upon our assumption that, the internal laws of the State of Nebraska and Federal
law govern the provisions of the Agreement and the transactions contemplated
thereby.
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Our opinions relating to validity, binding effect, and enforceability
of the Agreement are subject to (i) applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance, and other
similar laws or judicial decisions affecting the validity and enforcement of
creditors' rights generally, (ii) Nebraska law which may restrict your right to
collect attorneys' fees from a defaulting party, (iii) public policy
considerations or statutory provisions which may limit a party's rights to
indemnification against liability for its own wrongful or negligent acts and to
obtain certain remedies (iv) provisions of Nebraska law which restrict the
concurrent exercise of multiple remedies, (v) principles of equity which permit
the exercise of judicial discretion (regardless of whether such enforceability
is considered in a proceeding in equity or at law). In applying the principles
of equity referred to in the preceding clause (v) a court, among other things,
might not allow a contractual party to declare a default deemed immaterial; such
principles of equity, as applied by a court, also might include a requirement
that a contractual party act reasonably and in good faith. We express no opinion
as to the enforceability of provisions of the Agreement which involve
disclaimers, liability limitations with respect to third parties, releases of
legal or equitable defenses, liquidated damages, or waivers of notices, rights,
or remedies, or which impose penalties or forfeitures upon the occurrence of a
default. Certain remedial provisions of the Agreement may be unenforceable in
whole or in part, but the inclusion of such provisions does not affect the
validity of the Agreement; however, the unenforceability of such provisions may
result in delays in the enforcement of the Buyer's rights and remedies under the
Agreement (and we express no opinion as to the economic consequences, if any, of
such delays).
We are opining only as to the matters expressly set forth herein, and
no opinion should be inferred as to other matters. The opinions expressed herein
are furnished by us, as counsel for the Company, solely for your benefit in
connection with the transactions contemplated by the Agreement and upon the
understanding that we are not hereby assuming any responsibility to any other
person whatsoever. This opinion may not be quoted or relied upon by any other
person or used for any other purpose without our prior written consent. This
opinion is rendered as of the date hereof and we do not undertake to advise you
of matters which occur subsequent to the date hereof and which affect the
opinions expressed herein.
Very truly yours,
XXXXXXXX, XXXXXX & XXXXXXX
By:
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EXHIBIT B
(Opinion of Xxxxxx Xxxxxxx LLP)
Dated _______________ ,1998
Data Transmission Network Corporation
0000 Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Gentlemen:
We have acted as counsel to National Datamax, Inc. (the "Company"), a
California corporation, and certain of its shareholders, Xxxxxx X. Xxxxxx and
Charter Financial Holdings, LLC (collectively the "Shareholders"), in connection
with your purchase of all of the issued and outstanding capital stock of the
Company pursuant to that certain Stock Purchase Agreement dated as of May ___,
1998, among all of the stockholders of the Company and you (the "Agreement").
This opinion is being rendered to you pursuant to Section 5.03(g) of the
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Agreement.
In connection with this opinion, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion, including those relating to the authorization, execution and delivery
of the Agreement. We reviewed the following documents and agreements:
(i) the Agreement;
(ii) the Articles of Incorporation of the Company, as amended, as
certified by the Secretary of State of the State of California
(the "Articles of Incorporation");
(iii) the Bylaws of the Company, as amended, as certified by the
Secretary of the Company on the date of this opinion letter
(the "Bylaws");
(iv) the stock certificates and stock records of the Company; and
(v) actions taken by the stockholders and Board of Directors of
the Company to authorize the transactions contemplated by the
Agreement.
In such examination and review we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
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authenticity of the originals of such copies. As to any facts material to the
opinions hereafter expressed which we did not independently establish or verify,
we have relied without investigation upon certificates, statements and
representations of representatives of the Company. During the course of our
discussion with such representatives and our review of the documents described
above in connection with the preparation of these opinions, no facts were
disclosed to us that caused us to conclude that any such certificate, statement
or representation is untrue. In making our examination of the documents executed
by persons or entities other than the Shareholders and the Company, we have
assumed that each such other person or entity had the power and capacity to
enter into and perform all his, her or its obligations thereunder and the due
authorization of, and the due execution and delivery of, such documents by each
such person or entity.
As used in this opinion, the expression "to our knowledge" with
reference to matters of fact means that after an examination of documents in our
files or made available to us by the Company and after inquiries of officers of
the Company, and considering the actual knowledge of those attorneys in our firm
who have given substantive attention to legal matters for the Company, without
independent investigation or inquiry as to factual matters, but not including
any constructive or imputed notice of any information, we find no reason to
believe that the opinions expressed herein are factually incorrect. Beyond that,
we have made no independent factual investigation for the purpose of rendering
an opinion with respect to such matters.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications and exceptions set forth herein, we are
of the opinion that:
1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of California and has the corporate
power and authority and, to our knowledge, all franchises, licenses, and permits
from governmental authorities necessary to own and operate its properties and to
conduct its business as presently being conducted.
2. The Company is duly qualified to do business and is in good standing
in (i) the state of California, and (ii) to our knowledge, each jurisdiction in
which its ownership or lease of property or the conduct of its business requires
such qualification.
3. The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, $1.00 par value, of which 873,300 shares are outstanding
and no shares are held in the treasury of the Company. All of the outstanding
shares of Common Stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable with no personal liability
attaching to the ownership thereof. To our knowledge, except as disclosed in the
disclosure schedules to the Agreement, there are no outstanding subscriptions,
scrip, warrants, commitments, conversion rights, calls, options or agreements to
issue or sell additional securities of the Company, and no obligations
whatsoever requiring, or which might require, the Company to issue any
securities.
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4. To our knowledge, the parties to the Agreement other than you have
good title to all of the outstanding shares of Common Stock of the Company, free
and clear of all liens, encumbrances, security interests, options, claims,
charges and restrictions.
5. Each of the Shareholders has the power, authority, and capacity to
execute, deliver, and perform the Agreement and to consummate the transactions
contemplated thereby, and the Agreement and all documents and instruments
delivered by the Shareholders thereunder have been duly executed and delivered
by them and constitute legal, valid and binding obligations of the parties
thereto other than Buyer, enforceable in accordance with their terms.
6. The execution, delivery, and performance of the Agreement and the
consummation of the transactions contemplated thereby will not, except as
disclosed in the disclosure schedules to the Agreement, result in a breach or
violation of or constitute a default under, or accelerate any obligation under,
or give rise to a right of termination of, the Articles of Incorporation or
By-laws of the Company or, to our knowledge, any judgment, decree, order,
governmental permit or license, authorization, agreement, indenture, instrument,
or statute or regulation to which the Shareholders or the Company is a party or
by which the Shareholders or the Company or its business, assets, or properties
may be bound or affected, and, to our knowledge, will not, except as disclosed
in the disclosure schedules to the Agreement, result in the creation of any
lien, claim, encumbrance or restriction on any part of the business or assets of
the Company.
7. To our knowledge, there is no legal action or governmental
proceeding or investigation pending or threatened against or affecting the
Company or its stockholders which prevents the parties other than Buyer from
entering into or being bound by the Agreement or from consummating the
transactions contemplated thereby or which questions the validity of the
Agreement or the transactions contemplated thereby.
8. To our knowledge, except as disclosed in the disclosure schedules to
the Agreement, there is no legal action or governmental proceeding or
investigation pending or threatened against or affecting the Company, which, if
decided adversely to the Company, would have a material adverse affect on the
properties, business, profits or condition (financial or otherwise) of the
Company, taken as a whole.
9. To our knowledge, except as disclosed in the disclosure schedules to
the Agreement, no consent, authorization or approval of, or exemption by, or
filing with, any court or administrative agency or authority of the United
States of America or the State of California is required in connection with the
delivery and performance by the Shareholders of the Agreement or any of the
instruments or agreements delivered by the Shareholders thereunder, or the
taking of any action therein contemplated.
10. All corporate proceedings required by the California General
Corporation Law to be taken by the Board of Directors or the stockholders of the
Company on or prior to the Closing Date in connection with the execution and
delivery of the Agreement and in connection with the sale of all of the capital
stock of the Company have been duly and validly taken.
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This opinion relates solely to the laws of the State of California, and
applicable Federal laws of the United States, and we express no opinion with
respect to the effect or applicability of the laws of other jurisdictions. We
have assumed that, and our opinions expressed in paragraph 5 above are based
upon our assumption that, the internal laws of the State of California and
Federal law govern the provisions of the Agreement and the transactions
contemplated thereby.
The opinion set forth in paragraph 5 above concerning the
enforceability of the obligations of the Shareholders under the Agreement is
subject to the effect of (i) bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally, and (ii) the discretion of any court of competent
jurisdiction in awarding equitable remedies, including, without limitation,
specific performance or injunctive relief, and the effect of general principles
of equity embodied in California statutes and common law.
We are opining only as to the matters expressly set forth herein, and
no opinion should be inferred as to other matters. The opinions expressed herein
are furnished by us, as counsel for the Company and the Shareholders, solely for
your benefit in connection with the transactions contemplated by the Agreement
and upon the understanding that we are not hereby assuming any responsibility to
any other person whatsoever. This opinion may not be quoted or relied upon by
any other person or used for any other purpose without our prior written
consent. This opinion is rendered as of the date hereof and we do not undertake
to advise you of matters which occur subsequent to the date hereof and which
affect the opinions expressed herein.
Very truly yours,
XXXXXX XXXXXXX LLP
By:
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EXHIBIT C
CONFIDENTIALITY AND
NON-COMPETITION AGREEMENT
THIS AGREEMENT is made and entered into as of the _____ day of
_________________, 1998, by Xxxxxx X. Xxxxxx ("Shareholder") for the benefit of
Data Transmission Network Corporation, a Delaware corporation, and its
subsidiaries and affiliated corporations (collectively, "DTN").
R E C I T A L S:
A. Prior to the date hereof, National Datamax, Inc. (the "Company") has
operated a business which licenses software and provides information services
regarding publicly traded securities and related financial information to
broker/dealers, financial planners, and other customers. For purposes of this
Agreement, all of the businesses of the Company are collectively referred to
herein as the "Business".
B. Pursuant to the terms and conditions of that certain Stock Purchase
Agreement dated _____________, 1998, effective today, Data Transmission Network
Corporation acquired all of the capital stock of the Company.
C. The Company has carried on the Business throughout the United States
of America (the "Territory"). DTN operates communication and information service
businesses which are currently conducted throughout the United States of America
and Canada.
D. Shareholder was the owner of a majority of the outstanding shares of
capital stock of the Company and President of the Company. As a result of
Shareholder's executive position with the Company, Shareholder was entrusted
with highly sensitive, confidential, and proprietary information relating to the
Business, including but not limited to knowledge regarding the future plans,
trade secrets, know-how, products, suppliers, clients, and employees of the
Business, which information DTN desires to protect.
E. In order to prevent the improper use of confidential and proprietary
information relating to the Business and the resulting unfair competition and
misappropriation and diminution of the goodwill and other proprietary interests
of the Business which were acquired by DTN, Shareholder agrees that limitations
must be imposed on Shareholder's right to compete with the Business, or use
confidential information of the Business or its clients.
NOW, THEREFORE, in consideration of the foregoing recitals and DTN
acquiring the Business, the parties agree as follows:
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SECTION 1 - NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) "Confidential Information" means information, not generally known,
that is proprietary to the Business, including without limitation:
1) the financial and accounting data, sales records, profit and
loss and other performance reports, pricing manuals, training
manuals, selling and pricing procedures, financing methods,
data processing and communication information, technical data,
securities information, agreements with insurers, banks, and
other service providers, and trade secrets and know-how
regarding the products and services of the Business;
2) the personnel and salary information of the Business,
including wages, bonuses, commissions, and fringe benefits of
the Business;
3) the production and processing procedures, formulae and systems
of the Business;
4) the vendor and supplier information of the Business;
5) the buying practices, sources of supply for components, the
quality, prices and usage of components, information and
materials, manner of vendor payment, profit margins, expense
ratios, pricing, lead time and other information concerning
the buying activities of the Business;
6) the client lists and prospect lists of the Business,
including, without limitation, names of contacts, products and
services purchased, quantities of products and services
purchased, pricing including discounts and add-ons, terms,
credit histories, timing of purchases, and payment histories,
special demands of particular clients, and current and
anticipated requirements of clients generally for products or
services of the Business;
7) the marketing information of the Business, including, without
limitation, research, development, testing and client surveys
and preferences regarding the current and new products or
services of the Business, and specifications of any new
products or services under development by or for the Business;
8) the business projections, strategic planning, marketing
planning, activity and practices, marketing systems and
procedures, pricing policies and practices, and inventory
procedures and systems of the Business; and
9) confidential information of the clients of the Business.
(b) Shareholder hereby agrees not to directly or indirectly disclose
any Confidential Information to any third party without the prior written
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consent of DTN or as required by applicable law. Shareholder further agrees not
to use, directly or indirectly, any Confidential Information for the benefit of
Shareholder or any third party. Confidential Information does not include any of
the items in this Section which have become publicly known and made generally
available through no wrongful act of Shareholder or of others who Shareholder
did not know and had no reasonable basis for knowing were under confidentiality
obligations as to the item or items involved.
SECTION 2 - RESTRICTIONS AGAINST COMPETITION.
In order to prevent the improper use of Confidential Information and
the resulting unfair competition and misappropriation and diminution of the
goodwill and other proprietary interests of the Business which were acquired by
DTN, Shareholder hereby agrees that for a period of three (3) years after the
date of this Agreement, Shareholder will not, directly or indirectly, on his own
behalf or in the service or on behalf of others:
a) solicit any client of the Business or DTN as of the date
hereof, for the purpose of obtaining the business of such
client, in competition with the Business;
b) advise or recommend to any other person that such person
solicit any client of the Business or DTN as of the date
hereof, for the purpose of obtaining the business of such
client, in competition with the Business;
c) solicit any prospective client of the Business or DTN as of
the date hereof, for the purpose of obtaining the business of
such client, in competition with the Business;
d) advise or recommend to any other person that such person
solicit any prospective client of the Business or DTN as of
the date hereof, for the purpose of obtaining the business of
such client, in competition with the Business;
e) work for himself or another, in an employee, managerial,
marketing, sales, consulting or other capacity, in carrying on
a business in competition with the Business within the
Territory or providing within the Territory other services now
currently provided by the Business or any prospective services
being developed by the Business during Shareholder's
employment with the Company, the details of which Shareholder
was privy to in Shareholder's position with the Company;
provided that notwithstanding the foregoing, Shareholder shall
thereafter still be restricted from using the Confidential
Information pursuant to Section 1 hereof; or
f) solicit or recruit for employment, or attempt to solicit or
recruit for employment, or advise or recommend to any other
person that such person solicit or recruit for employment, or
attempt to solicit or recruit for employment, any person who
was employed by the Company and worked in the Business during
the twelve (12) month period immediately preceding the
effective date of the acquisition of the Company by DTN and
who was employed by DTN after the effective date of such
acquisition.
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The phrase "prospective client" shall mean those businesses with whom
any representative of the Company had substantial and extended actual and
personal contact during the twelve (12) month period immediately preceding any
such act to develop new business for the Business, including developing sales
strategies, marketing information and proposals, and negotiating providing
services to such prospective clients.
Shareholder agrees that it is reasonable to restrict the Shareholder's
competition during the time period described above in the entire geographic area
in which the Company or DTN operates and that the restrictions set forth in this
Agreement (including, but not limited to, the period of restriction, activity
and geographic area set forth) are fair and reasonable and are necessarily
required for the protection of the interests of DTN and to prevent the improper
use of Confidential Information and the resulting unfair competition and
misappropriation and diminution of the goodwill and other proprietary interests
of the Business acquired by DTN.
SECTION 3 - ENFORCEMENT OF RESTRICTIONS.
Shareholder understands and agrees that his access to the Confidential
Information and clients of the Business makes such restrictions both necessary
and reasonable.
Shareholder agrees with DTN that if Shareholder shall violate or
threaten to violate any of the terms of this Agreement, then DTN shall be
entitled to injunctive relief; such remedy shall be in addition to and not in
limitation of any rights or remedies to which DTN is or may be entitled to at
law or in equity.
The parties agree that the covenants contained in Sections 1 and 2 of
this Agreement are independent of one another and are severable. In the event
any part of the covenants contained in Section 1 or 2 of this Agreement shall be
held to be invalid or unenforceable, the remaining parts thereof shall
nevertheless continue to be valid and enforceable as though the invalid and
unenforceable part had not been included herein. If any provisions of these
covenants relating to the time period, activity and/or area of restriction shall
be declared by a court of competent jurisdiction to exceed the maximum time
periods, activities or areas which such court deems reasonable and enforceable,
the parties agree that the court making such a determination shall have the
power to reduce the time period, activity and/or area of restriction to the
maximum time period, activity and/or area which such court deems reasonable and
enforceable.
SECTION 4 - CONSIDERATION.
As consideration for the performance and compliance by Shareholder
hereunder, DTN hereby covenants and agrees to pay Shareholder the sum of One
Million Dollars ($1,000,000) payable on the date of this Agreement.
44
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SECTION 5 - ATTORNEY REVIEW.
Shareholder was advised and encouraged to review this Agreement with
his private attorneys before signing it. To the extent, if any, that the
Shareholder desired, Shareholder has taken advantage of this right. Shareholder
has carefully read and fully understands all of the provisions of this Agreement
and is voluntarily entering into this Agreement.
SECTION 6 - SUCCESSORS, ASSIGNS AND THIRD PARTY BENEFICIARIES.
This Agreement and all rights under this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective personal or legal representatives, executors, administrators,
heirs, distributees, devisees, legatees, successors, and assigns.
SECTION 7 - MISCELLANEOUS.
This writing constitutes the entire agreement between the parties
hereto and supersedes any prior understanding or agreements among them
respecting the subject matter. Except as otherwise set forth in this Agreement,
there are no extraneous representations, arrangements, understandings, or
agreements, oral or written, among the parties hereto, except those fully
expressed herein. No amendments or modifications to the terms of this Agreement
shall be made unless made in writing and signed by all the parties hereto. The
failure of either party to enforce at any time any of the provisions of this
Agreement shall not be construed as a waiver of such provisions or of the right
of such party thereafter to enforce any such provisions. The existence of any
claim or cause of action by Shareholder against DTN, whether based upon this
Agreement or otherwise, shall not constitute a defense to the enforcement of
this Agreement by DTN.
SECTION 8 - HEADINGS.
The headings of the paragraphs contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of any provision of this Agreement.
SECTION 9 - APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the internal substantive laws, and not the conflicts of law principles, of the
State of California.
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE PAGE TO
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, Shareholder
DATA TRANSMISSION NETWORK
CORPORATION , a Delaware corporation
By:_____________________________________
Its:____________________________________
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