STOCK PURCHASE AGREEMENT
AMONG
CORILLIAN CORPORATION,
XXXXXXX ASSOCIATES, INC.,
AND
ALL THE SHAREHOLDERS OF XXXXXXX ASSOCIATES, INC.
DATED AS OF NOVEMBER 24, 2000
CONTENTS
ARTICLE I - DEFINITIONS .....................................................................................1
1.1 Certain Defined Terms......................................................................1
1.2 Certain Additional Defined Terms...........................................................7
ARTICLE II - STOCK PURCHASE..................................................................................9
2.1 Purchase of Shares.........................................................................9
2.2 The Closing................................................................................9
2.3 Delivery of Shares.........................................................................9
2.4 Redemption of Preferred Stock; Common Exchange Ratio; Escrow;
Cancellation of Notes.....................................................................10
2.4.1 Redemption of Preferred Stock..................................................10
2.4.2 Common Exchange Ratio; Escrow Shares; Options..................................10
2.4.3 Cancellation of Unsecured, Subordinated Notes..................................12
2.4.5 Receipt of Certificates........................................................14
2.4.6 No Fractional Shares...........................................................15
2.5 Working Capital Adjustment................................................................15
2.6 Shareholder Representative................................................................17
2.7 Tax Free Reorganization...................................................................18
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................18
3.1 Organization..............................................................................19
3.2 Enforceability............................................................................19
3.3 Capitalization............................................................................19
3.4 Subsidiaries and Affiliates...............................................................21
3.5 No Approvals; No Conflicts................................................................21
3.6 Financial Statements......................................................................22
3.7 Absence of Certain Changes or Events......................................................23
3.8 Taxes.....................................................................................25
3.9 Property..................................................................................27
3.10 Contracts.................................................................................29
3.11 Claims and Legal Proceedings..............................................................30
3.12 Labor and Employment Matters..............................................................31
3.13 Employee Benefit Plans....................................................................32
3.13.1 Employee Benefit Plan Listing..................................................32
3.13.2 Documents Provided.............................................................33
3.13.3 Compliance.....................................................................33
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3.13.4 Contributions and Premium Payments.............................................34
3.13.5 Related Employers..............................................................34
3.13.6 Multiemployer and Title IV Plans...............................................34
3.13.7 Post-Termination Welfare Benefits..............................................34
3.13.8 Suits, Claims and Investigations...............................................35
3.13.9 Payments Resulting From Transactions...........................................35
3.14 Intellectual Property.....................................................................35
3.14.1 General........................................................................35
3.14.2 Company Technology.............................................................36
3.14.3 Third Party Technology.........................................................36
3.14.4 Trademarks.....................................................................37
3.14.5 Intellectual Property Rights...................................................37
3.14.6 Maintenance of Rights..........................................................38
3.14.7 Third Party Infringement.......................................................38
3.14.8 Infringement by the Company....................................................38
3.14.9 Confidentiality................................................................39
3.14.10 Warranty Against Defects.......................................................39
3.14.11 Domain Names...................................................................39
3.14.12 Indemnification................................................................40
3.14.13 Restrictions on Intellectual Property..........................................40
3.15 Warranties and Maintenance................................................................40
3.16 Corporate Books and Records...............................................................41
3.17 Licenses, Permits, Authorizations, etc....................................................41
3.18 Compliance With Laws......................................................................41
3.19 Insurance.................................................................................41
3.20 Brokers or Finders........................................................................42
3.21 Absence of Questionable Payments..........................................................42
3.22 Bank Accounts.............................................................................43
3.23 Insider Interests.........................................................................43
3.24 Compliance With Environmental Laws........................................................43
3.25 Accounts Receivable.......................................................................44
3.26 Information to Shareholders...............................................................44
3.27 Full Disclosure...........................................................................44
3.28 Xxxx-Xxxxx-Xxxxxx.........................................................................45
3.29 Disclaimer Regarding Projections..........................................................45
ARTICLE IIIA - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...........................................45
3A.1 Accreditation.............................................................................45
3A.2 Ownership.................................................................................46
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3A.3 Enforceability; No Conflicts..............................................................46
3A.4 Claims Against the Company................................................................47
3A.5 Brokers or Agents.........................................................................47
3A.6 Xxxx-Xxxxx-Xxxxxx.........................................................................47
3A.7 Investment for Own Account................................................................47
3A.8 Residency.................................................................................47
3A.9 Litigation................................................................................48
3A.10 SEC Documents; Access to Information......................................................48
3A.11 Indemnity.................................................................................48
3A.12 Restricted Securities.....................................................................48
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................................................49
4.1 Organization..............................................................................49
4.2 Enforceability............................................................................49
4.3 Securities................................................................................50
4.4 No Approvals or Notices Required; No Conflicts With Instruments...........................50
4.5 Capitalization............................................................................51
4.6 SEC Documents.............................................................................51
4.7 Absence of Certain Changes................................................................51
4.8 Full Disclosure...........................................................................51
4.9 Shareholders Consent......................................................................52
4.10 Brokers or Finders........................................................................52
4.11 Litigation................................................................................52
4.12 Compliance With Laws......................................................................52
4.13 Xxxx Xxxxx Xxxxxx.........................................................................53
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER............................................53
5.1 Accuracy of Representations and Warranties................................................53
5.2 Performance of Agreements.................................................................53
5.3 Approvals and Consents....................................................................54
5.4 Secretary's Certificate...................................................................54
5.5 Nonforeign Affidavit......................................................................54
5.6 Compliance With Laws......................................................................54
5.7 Legal Proceedings.........................................................................54
5.8 Termination of Certain Agreements.........................................................55
5.9 Exercise of Stock Purchase Rights; Conversion of Convertible Securities...................55
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5.10 Stock Powers..............................................................................55
5.11 Nondisclosure Agreements..................................................................55
5.12 Escrow Agreement..........................................................................55
5.13 Noncompetition Agreement..................................................................56
5.14 Termination of Employment Agreements......................................................56
5.15 Termination of Management Agreement.......................................................56
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS........................56
6.1 Accuracy of Representations and Warranties................................................56
6.2 Performance of Agreements.................................................................56
6.3 Legal Proceedings.........................................................................57
6.4 Approvals and Consents....................................................................57
6.5 Compliance With Laws......................................................................58
6.6 Secretary's Certificates..................................................................58
6.7 Blue Sky Laws.............................................................................58
6.8 Escrow Agreement..........................................................................58
6.9 Severance Agreements; Employment Agreement................................................58
ARTICLE VII - COVENANTS.....................................................................................58
7.1 Conduct of Business by the Company Pending the Sale.......................................58
7.2 Access to Information; Confidentiality....................................................60
7.3 No Alternative Transactions...............................................................61
7.4 Notification of Certain Matters...........................................................61
7.5 Further Action; Commercially Reasonable Efforts...........................................62
7.6 The Purchaser Common Stock................................................................62
7.7 Publicity.................................................................................62
7.8 Option Grants.............................................................................63
7.9 Indemnification; Insurance................................................................63
7.10 Blue Sky Laws.............................................................................63
7.11 Repayment of Debt, Releases of Liens......................................................64
7.12 Termination of Employment Agreements......................................................64
7.13 Registration..............................................................................64
7.14 Execution of All Ancillary Documents......................................................71
ARTICLE VIIA - COVENANTS OF THE SHAREHOLDERS................................................................72
7A.1 Restrictions on Transfer..................................................................72
7A.2 Execution of All Ancillary Documents......................................................72
7A.3 No Alternative Transactions...............................................................72
7A.4 Limitation on Sales.......................................................................72
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7A.5 Taxes.....................................................................................72
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER............................................................73
8.1 Termination...............................................................................73
8.2 Effect of Termination.....................................................................73
8.3 Amendment.................................................................................74
8.4 Waiver....................................................................................74
ARTICLE IX - SURVIVAL AND INDEMNIFICATION...................................................................74
9.1 Survival..................................................................................74
9.2 Indemnification by the Shareholders.......................................................75
9.3 Indemnification by the Purchaser..........................................................75
9.4 Threshold and Limitations; Adjustment of Purchase Consideration...........................76
9.5 Procedure for Indemnification.............................................................77
9.6 Remedies; Specific Performance; No Contribution from the Company..........................79
ARTICLE X - GENERAL.........................................................................................80
10.1 Tax Matters...............................................................................80
10.2 Expenses..................................................................................80
10.3 Notices...................................................................................80
10.4 Severability..............................................................................82
10.5 Entire Agreement..........................................................................82
10.6 Assignment................................................................................82
10.7 Parties in Interest.......................................................................83
10.8 Governing Law.............................................................................83
10.9 Headings..................................................................................83
10.10 Counterparts..............................................................................83
10.11 Waiver of Jury Trial......................................................................83
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EXHIBITS
A - Employment Agreement
B - Escrow Agreement
C - Noncompetition Agreement
X - Xxxxxxxxx Agreement
E - Stock Power
F - Form of Notice of Assumption of Options
3.12 - Form of Company Employee Confidentiality Agreement
5.5 - Real Property Tax Affidavit
7.8 - Letter Regarding Rights to Options
SCHEDULES
1 - Key Employees
2 - Preferred Stock Redemption Schedule
2.3 - Share Allocation for Closing Distribution
A - Escrow Share Allocation
3 - Company Disclosure Schedule
3A - Shareholder Disclosure Schedule
5.6 - List of Consents, Approvals and Notices
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered
into as of November 24, 2000, by and among Corillian Corporation, an Oregon
corporation (the "PURCHASER"), Xxxxxxx Associates, Inc., a California
corporation (the "COMPANY"), and all the Shareholders of the Company (the
"SHAREHOLDERS").
RECITALS
A. The Purchaser, the Company and the Shareholders believe it advisable
and in their respective best interests to effect a sale of all capital stock of
the Company to the Purchaser pursuant to this Agreement (the "SALE").
B. The Board of Directors of the Company and the Shareholders have
approved this Agreement and the Sale as required by applicable law.
C. The Boards of Directors of the Purchaser has approved this Agreement
and the Sale as required by applicable law.
D. It is intended that the Sale will qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - DEFINITIONS
1.1 CERTAIN DEFINED TERMS
As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"ANCILLARY DOCUMENTS" means, collectively, the Non-Competition
Agreement, the Stock Powers, the Escrow Agreement, the Severance Agreements, the
Employment Agreement and the other agreements and certificates that are required
to be executed pursuant to this Agreement.
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"BASE AMOUNT" shall mean $20,000,000 (i) plus the Working Capital
Excess or minus the Working Capital Shortfall, as the case may be, (ii) minus
the aggregate of the Performance Note Amount and the Preferred Stock Redemption
Amount.
"BUSINESS" means the business of the Company as currently conducted.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or any
other day on which banks generally are required or authorized to be closed in
Los Angeles, California.
"CLOSING DATE SHARES" means the number of shares of the Purchaser
Common Stock determined by dividing the Base Amount by the Share Price.
"COMPANY CAPITAL STOCK" means the Company Common Stock and Preferred
Stock.
"COMPANY COMMON STOCK" means the Company Class A Common Stock and
Company Class B Common Stock.
"COMPANY CLASS A COMMON STOCK" means the Company's Class A Common
Stock, no par value per share.
"COMPANY CLASS B COMMON STOCK" means the Company's Class B Common
Stock, no par value per share.
"COMPANY MATERIAL ADVERSE EFFECT" means any material adverse effect on
the business, operations, assets, liabilities, condition (financial or
otherwise) or prospects of the Company.
"COMPANY'S ARTICLES" means the Company's Articles of Incorporation, as
amended.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds (other than surety or performance bonds), debentures,
notes or other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business, (iv) all capitalized lease
obligations of such Person, (v) all non-contingent reimbursement, indemnity or
similar obligations of such Person in respect of amounts paid under a letter of
credit, surety bond or similar instrument, other than letters of credit to
suppliers of the Company for property or services to be provided to the Company
in the ordinary course of business, (vi) all Debt of others secured by an
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Encumbrance on any asset of such Person, whether or not such Debt is assumed by
such Person, and (vii) all Debt of others guaranteed by such Person; provided,
however that debt shall exclude (A) up to $1 million under the Company's working
capital line of credit, which, for purposes of this Agreement, will constitute a
current liability within the definition of Working Capital, regardless of
whether or not it is short or long-term indebtedness, and (B) any other
liability that is included within current liabilities for purposes of the
determination of Working Capital.
"DEFERRED AMOUNT" means the greater of (a) $4 million minus $200,000
for each Key Employee less than 60 Key Employees remaining with the Company on
the Measurement Date, or (b) $0.
"DESIGNATED AMOUNT" means $10,000.
"EMPLOYMENT AGREEMENT" means the employment agreement attached to this
Agreement as Exhibit A and to be entered into between the Purchaser and Xxxxx
Xxxxxxx on the Closing Date.
"ENCUMBRANCE" means any lien, mortgage, pledge, deed of trust, security
interest, charge, encumbrance or other adverse claim or interest of any kind.
"ENVIRONMENTAL LAWS" means all State of California, local, and federal
laws, statutes, regulations, and ordinances of any kind relating to
environmental protection or compliance, including but not limited to, the
federal Clean Water Act; Clean Air Act; Toxic Substances Control Act;
Comprehensive Environmental Response, Compensation and Liability Act; Resource
Conservation and Recovery Act; Federal Insecticide, Fungicide, and Rodenticide
Act; Safe Drinking Water Act; Hazardous Materials Transportation Act; and common
law including, but not limited to, causes of action arising in tort.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" means an escrow agreement substantially in the form
attached to this Agreement as Exhibit B.
"ESCROW AMOUNT" means $2.7 million.
"ESTIMATED WORKING CAPITAL" means the Company's good faith estimate of
the Working Capital of the Company as of the close of business on the day
immediately preceding the Closing Date and delivered to the Purchaser 3 Business
Days before the Closing Date.
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"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended.
"FULLY DILUTED COMMON STOCK NUMBER" means the total number of shares of
Company Common Stock issued and outstanding immediately prior to the Closing
Date, including the total number of shares of Company Common Stock issuable upon
exercise of Options and other Stock Purchase Rights outstanding immediately
prior to the Closing Date and regardless of restrictions on exercise.
"GAAP" means United States generally accepted accounting principles.
"HAZARDOUS SUBSTANCES" means petroleum, petroleum products, hazardous
waste, pollutants, contaminants or substances that constitute hazardous
substances under the Comprehensive Environmental Response, Compensation and
Liability Act.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"KEY EMPLOYEE" means (i) an employee of the Company identified by the
Purchaser and listed on Schedule 1 or (ii) 2 New Key Employees.
"KNOWLEDGE" means, with respect to a corporation, all facts that at any
time were known to any officer or director of the corporation, or any agents
representing the corporation with respect to the Sale, or which could be
ascertained by a reasonably prudent search of the files and records of the
corporation, or by making inquiry to the officers, senior managers, project
managers or site managers of the corporation likely to have knowledge concerning
the facts or matter at issue. "To the knowledge of," or any similar phrase with
respect to, any other person or entity means that such other person or entity
has no actual knowledge contrary to the facts or matters so referenced.
"MANAGEMENT SHAREHOLDERS" means Xxxxxxx Family Trust, Shrimpton Family
Trust, X. Xxxxx Associates, Inc, Xxxxx Xxxxxx, Xxxxxx Xxxx, and Xxxxxx Xxxxxxxx,
and their respective permitted assignees.
"MEASUREMENT DATE" means the date that is 90 days from the Closing
Date.
"NONCOMPETITION AGREEMENT" means the noncompetition agreement attached
to this Agreement as Exhibit C and to be entered into between the Purchaser and
Xxxxx Xxxxxxx on the date of this Agreement.
"OPTION EXCHANGE RATIO" means the sum of (x) the number of Closing Date
Shares and (y) the number of Post-Closing Shares, divided by the Fully Diluted
Common Stock Number.
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"PERFORMANCE SHARES" means the Purchaser Common Stock to be issued to
the Company's management in exchange for the cancellation of Unsecured
Subordinated Notes issued by the Company on January 1, 1999, determined by
dividing the Performance Note Amount by the Share Price.
"PERFORMANCE NOTE AMOUNT " means the aggregate principal amount plus
accrued interest owed as of the Closing Date by the Company on the Unsecured
Subordinated Notes issued by the Company on January 1, 1999.
"PERSON" means a person, corporation, partnership, joint venture,
association, organization, limited liability company or other entity or a
governmental or regulatory authority.
"PIGGYBACK REGISTRABLE SHARES" means the Preferred Stock Redemption
Consideration, the Performance Shares, and the Purchase Consideration.
"PREFERRED STOCK" means the Company's Series A Redeemable Preferred
Stock, no par value per share.
"PREFERRED STOCK REDEMPTION AMOUNT" means the aggregate redemption
price for all outstanding shares of Preferred Stock, as set forth on Schedule 2.
"PREFERRED STOCK REDEMPTION CONSIDERATION" means the Purchaser Common
Stock to be issued to redeem the Preferred Stock under Section 2.4.1.
"PURCHASE CONSIDERATION" means (i) the Closing Date Shares plus (ii)
the Post-Closing Shares.
"PURCHASER COMMON STOCK" means the Purchaser's Common Stock, no par
value per share.
"PURCHASE PRICE" means $20 million (i) plus the Working Capital Excess
or minus the Working Capital Shortfall, as the case may be, (ii) plus the
Deferred Amount.
"PURCHASER MATERIAL ADVERSE EFFECT" means any material adverse effect
on the business, operations, assets, liabilities, condition (financial or
otherwise) or prospects of the Purchaser.
"REGISTERING SHAREHOLDERS" means the S-3 Registering Shareholders and
the Piggyback Registering Shareholders.
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"REGISTRABLE SHARES" means the S-3 Registrable Shares and the Piggyback
Registrable Shares.
"S-3 REGISTRABLE SHARES" means (i) the Purchase Consideration issued to
Summit, (ii) the Preferred Stock Redemption Consideration issued to Summit,
(iii) the Purchase Consideration issued to IT Capital Partners LLC, (iv) the
Purchase Consideration issued to each Shareholder receiving less than 50,000
shares of Purchaser Common Stock pursuant to the Sale, (v) 20% of the Purchase
Consideration issued to the Xxxxxxx Family Trust, (vi) 40% of the Purchase
Consideration issued to Xxxxx Xxxxxx, Xxxxxx Xxxx, Shrimpton Family Trust, X.
Xxxxx Associates, Inc. and Xxxxxx Xxxxxxxx, (vii) the Performance Shares, and
(viii) any shares of Purchaser Common Stock issued in connection with any stock
dividend, split, combination or recapitalization on, of or with respect to the
foregoing shares. Notwithstanding the foregoing, the S-3 Registrable Shares
exclude any Escrow Shares.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEVERANCE AGREEMENT" means a severance agreement with the Purchaser in
the form attached hereto as Exhibit D.
"SHARE PRICE" means $12.84. The Share Price shall be adjusted
appropriately to reflect any stock splits, recapitalizations or stock dividends
with respect to the Purchaser Common Stock that occur after the date of this
Agreement.
"STOCK POWER" means a stock power separate from certificate
substantially in the form attached hereto as Exhibit E.
"STOCK PURCHASE RIGHTS" means all rights, warrants or options, vested
or unvested, to acquire Company Capital Stock, regardless of restrictions or
exercise, and securities and notes convertible or exchangeable at any time, into
Company Capital Stock, regardless of restrictions on conversion.
"SUMMIT" means, collectively, Summit Ventures IV, L.P., Summit Ventures
V, L.P., Summit Investors III, L.P., Summit V Advisors Fund, L.P., Summit V
Advisors Fund (Q.P.), L.P. and Summit V Companion Fund, L.P.
"WORKING CAPITAL" means the excess of the total current assets over the
total current liabilities.
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"WORKING CAPITAL EXCESS" means the difference between $658,000 and the
Estimated Working Capital if the Estimated Working Capital is greater than
$658,000.
"WORKING CAPITAL SHORTFALL" means the difference between $658,000 and
the Estimated Working Capital if the Estimated Working Capital is less than
$658,000. The Working Capital Shortfall may be greater than $658,000 if the
Estimated Working Capital is negative.
1.2 CERTAIN ADDITIONAL DEFINED TERMS
In addition to terms defined in Section 1.1, the following capitalized
terms are used as defined in the Sections set forth opposite such terms:
Defined Terms Section Reference
------------- -----------------
Adjusted Post-Closing Shares 2.4.4(a)
Audited Financial Statements 3.6
Agreement Introduction
Blue Sky Laws 7.13(iii)(4)
ChaseMellon 2.4.2(b)
Claim Notice 9.5(a)
Claims 9.4(a)
Closing 2.2
Closing Balance Sheet 2.5(a)
Closing Date 2.2
Code Recitals
Common Exchange Ratio 2.4.2(c)
Company Introduction
Company Accountants 2.5(a)
Company Balance Sheet 3.6
Company Disclosure Schedule Article III
Company Plan 2.4.2(c)
Company Technology 3.14.2
Confidentiality Agreement 7.2
DOL 3.13.8
Domain Names 3.14.11
Employee Benefit Plans 3.13.1
Escrow Agent 2.4.2(b)
Escrow Fund 9.4(d)
Escrow Shares 2.4.2(b)
Financial Statements 3.6
Indemnified Party 9.4(a)
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Defined Terms Section Reference
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Independent Accounting Firm 2.5(c)
IP Registrations 3.14.5
IP Rights 3.14.5
IRS 2.7(a)
Losses 9.2
Marks 3.14.4
New Key Employee 2.4.4(b)
Notes 2.4.3(a)
Option 2.4.2(c)
Nondisclosure Agreement 3.12
Personal Property 3.9(b)
Piggyback Registering Shareholders 7.13(v)
Post-Closing Shares 2.4.4(a)
Preferred Exchange Ratio 2.4.1
Primary Indemnitors 9.4(b)
Products 3.14.2
Purchaser Introduction
Purchaser Indemnified Parties 9.2
Purchaser 2000 Plan 7.8
Real Property 3.9(a)
Registration Claim 7.13
Registration Indemnified Person 7.13
Registration Indemnifying Person 7.13
Registration Statement 7.13
Risk Factors 3A.10
S-3 Registering Shareholders 7.13
Sale Recitals
SEC Documents 4.6
Shareholder Disclosure Schedule Article IIIA
Shareholder Indemnified Party 9.3
Shareholder Representative 2.6
Shareholders Introduction
Survival Period 9.1
Taxes 3.8
Tax Group 3.8
Tax Returns 3.8
Technology 3.14.2
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Defined Terms Section Reference
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Technology-Related Assets 3.14.1
Third Party Claim 9.5(a)
Third Party Licenses 3.14.3
Third Party Technologies 3.14.3
Threshold 9.4(a)
Transmitted Copies 10.10
Unaudited Financial Statements 3.6
ARTICLE II - STOCK PURCHASE
2.1 PURCHASE OF SHARES
Subject to the terms and conditions of this Agreement, the Purchaser
agrees to purchase, and the Shareholders agree to sell and deliver to the
Purchaser, at the Closing, all outstanding shares of Company Capital Stock.
2.2 THE CLOSING
Subject to the satisfaction or waiver of the conditions set forth in
Articles V and VI and the termination provisions of Article VIII, the closing of
the Sale pursuant to this Agreement (the "CLOSING") shall be deemed to take
place at 12:01 a.m. on November 24, 2000 (the "CLOSING DATE").
2.3 DELIVERY OF SHARES
At the Closing, each Shareholder shall deliver to the Purchaser
certificates representing the shares of Company Capital Stock held by such
Shareholder, and a Stock Power assigning such shares to the Purchaser, against
delivery to such Shareholder by the Purchaser of irrevocable instructions to the
Escrow Agent, as the Purchaser's transfer agent, to issue share certificates
representing the shares of Purchaser Common Stock to be issued to such
Shareholder pursuant to Sections 2.4.1, 2.4.2(a), and 2.4.3. The aggregate
number of such shares of Purchaser Common Stock allocable to each Shareholder,
net of any Escrow Shares allocable to such Shareholder, is set forth on Schedule
2.3.
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2.4 REDEMPTION OF PREFERRED STOCK; COMMON EXCHANGE RATIO; ESCROW;
CANCELLATION OF NOTES
2.4.1 REDEMPTION OF PREFERRED STOCK
On the Closing Date, the Purchaser shall issue irrevocable
instructions to the Escrow Agent, as its transfer agent, to issue to each
Shareholder that then holds of record any shares of Preferred Stock, for each
share of Preferred Stock held by such Shareholder, the number of fully paid and
nonassessable shares of the Purchaser Common Stock determined by dividing (i)
the aggregate redemption price of the Preferred Stock held by such Shareholder,
as set forth on Schedule 2, by (ii) the Share Price, with cash paid in lieu of
any fractional share of the Purchaser Common Stock pursuant to Section 2.4.6
hereof. Upon receipt of the Preferred Stock Redemption Consideration for a
Shareholder's shares of Preferred Stock, such Shareholder shall relinquish and
forfeit all rights or interests, including dividend and distribution rights,
that may have accrued with respect to such shares of Preferred Stock before the
date of such receipt, it being understood that the Purchaser succeeds to all
such rights and interests by virtue of the Sale. Any such forfeited rights shall
be excluded from current liabilities for purposes of the determination of
Working Capital.
2.4.2 COMMON EXCHANGE RATIO; ESCROW SHARES; OPTIONS
(a) On the Closing Date, the Purchaser shall issue
irrevocable instructions to the Escrow Agent, as its transfer agent, to issue to
each Shareholder, for each share of Company Common Stock held by such
Shareholder, the number of fully paid and nonassessable shares of the Purchaser
Common Stock determined by dividing (i) the number of Closing Date Shares by
(ii) the Fully Diluted Common Stock Number. The quotient as derived above shall
be referred to herein as the "COMMON EXCHANGE RATIO." The number of shares of
the Purchaser Common Stock to be issued to each Shareholder of the Company under
this Section 2.4.2(a) shall be calculated by aggregating all shares of Company
Common Stock held by such Shareholder, so that such number of shares of the
Purchaser Common Stock to be issued shall be equal to the aggregate number of
shares of Company Common Stock held by such Shareholder multiplied by the Common
Exchange Ratio, with cash paid in lieu of any fractional share of the Purchaser
Common Stock pursuant to Section 2.4.6 hereof. In addition, on the Closing Date,
each Shareholder shall be entitled to receive such Shareholder's PRO RATA
portion of the Post-Closing Shares, based upon the allocation of the Escrow
Shares among the Shareholders.
(b) Notwithstanding the foregoing, (i) that number of
Closing Date Shares equal to the quotient of the Escrow Amount divided by the
Share Price, and
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(ii) all of the Post-Closing Shares (collectively, the "ESCROW
SHARES") shall be deposited in escrow with ChaseMellon Shareholder Services
L.L.C. ("CHASEMELLON" or the "ESCROW AGENT"), to be held and administered in
accordance with the provisions of this Agreement and the Escrow Agreement, such
Escrow Shares to be withheld and deducted from the Shareholders in accordance
with Schedule A, from the Closing Date Shares and Post-Closing Shares otherwise
issuable to each Shareholder. Fractional shares of the Purchaser Common Stock
shall not be deposited in escrow. In lieu thereof, each Shareholder shall round
up such fractional share to the nearest whole number and deposit into escrow a
full share of the Purchaser Common Stock for such fractional share. The Escrow
Shares shall be held by the Escrow Agent in book entry form. Notwithstanding the
escrow of the Escrow Shares, dividends or other distributions declared and paid
on such shares shall continue to be paid by the Purchaser to the Shareholders
and all voting rights with respect to such shares shall inure to the benefit of
and be enjoyed by such Shareholders in accordance with their interest in the
Escrow Shares. Any securities received by the Escrow Agent in respect of any
Escrow Shares held in escrow as a result of any stock split or combination of
shares of the Purchaser Common Stock, payment of a stock dividend or other stock
distribution in or on shares of the Purchaser Common Stock, or change of the
Purchaser Common Stock into any other securities pursuant to or as a part of a
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation of the Purchaser, or otherwise, shall be held by
the Escrow Agent as, and shall be included within the definition of, Escrow
Shares. The Escrow Shares, excluding the Post-Closing Shares, shall be available
to satisfy any indemnification obligations pursuant to Article X and to satisfy
any adjustments to the Purchase Consideration in accordance with Section 2.5.
(c) Each outstanding option to purchase shares of Company
Common Stock issued pursuant to the Company's Amended and Restated 1998 Stock
Incentive Plan (the "COMPANY PLAN"), whether or not vested or exercisable (each
an "OPTION"), shall be assumed by the Purchaser and shall constitute an option
to acquire, on the same vesting terms, and on substantially the same other terms
and conditions as were applicable under such assumed Option, that number of
shares of the Purchaser Common Stock (rounded to the nearest whole share) equal
to the product of the Option Exchange Ratio and the number of shares of Company
Common Stock subject to such Option, at a price per share (rounded to the
nearest $0.01) equal to the aggregate exercise price for the shares of Company
Common Stock subject to such Option divided by the number of full shares of the
Purchaser Common Stock deemed to be purchasable pursuant to such Option. The
Purchaser shall use its best efforts to file a registration statement on Form
S-8 with the SEC to effect the registration under the Securities Act of the
Purchaser Common Stock for which the assumed Options may be
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exercised as soon as possible after the Purchaser has filed its Report of
Form 8-K pursuant to the Exchange Act relating to the Sale, together with all
financial statements required by such Form 8-K. At the Closing, the Purchaser
shall provide notice, by delivery to the Shareholder Representative of
notices in substantially the form attached hereto as Exhibit F, to each
holder of an assumed Option regarding the terms of such assumed Option.
(d) If, prior to the Closing Date, the Purchaser
recapitalizes through a split-up of its outstanding shares of capital stock into
a greater number, or a combination of its outstanding shares of capital stock
into a lesser number, reorganizes, reclassifies or otherwise changes its
outstanding shares of capital stock into the same or a different number of
shares of other classes of capital stock, or declares a dividend on its
outstanding shares of capital stock payable in shares or securities convertible
into shares, the number of shares of the Purchaser Common Stock into which the
shares of Company Common Stock are to be converted will be adjusted
appropriately so as to maintain the proportionate interests of the holders of
the Company Capital Stock and the holders of shares of capital stock of the
Purchaser.
2.4.3 CANCELLATION OF UNSECURED, SUBORDINATED NOTES
(a) On the Closing Date, subject to completion of the Sale, the
Purchaser shall issue irrevocable instructions to the Escrow Agent, as its
transfer agent, to issue to each holder of the Unsecured Subordinated Notes
issued by the Company on January 1, 1999 (the "NOTES"), in full satisfaction of
all of the Company's obligations under the Notes and in exchange for
cancellation of the Notes and all interest due pursuant to such notes, fully
paid and nonassessable shares of the Purchaser Common Stock. The number of
Performance Shares to be issued to each holder of the Notes under this Section
2.4.3 shall be calculated by aggregating the principal amount plus accrued
interest of all Notes held by such holder, so that such number of shares of the
Purchaser Common Stock to be issued to each holder of Notes shall be equal to
the aggregate principal amount plus accrued interest of such holder's Notes,
divided by the Share Price, with cash paid in lieu of any fractional share of
the Purchaser Common Stock pursuant to Section 2.4.6 hereof.
(b) On the Closing Date, subject to completion of the Sale, each holder
of the Notes shall deliver to the Purchaser the Notes, against delivery by the
Purchaser of irrevocable instructions to the Escrow Agent, as its transfer
agent, to issue to such holder certificates representing the Performance Shares
to be issued to such holder pursuant to Section 2.4.3(a).
2.4.4 RELEASE OF POST-CLOSING SHARES
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(a) At the Closing, Purchaser will deposit into escrow a number of
shares of Purchaser Common Stock determined by dividing $4 million by the Share
Price (the "POST-CLOSING SHARES"). Within five business days after the
Measurement Date the Purchaser shall calculate the quotient obtained by dividing
the Deferred Amount (as adjusted through the Measurement Date) by the Share
Price (such quotient hereinafter, the "ADJUSTED POST-CLOSING SHARES"). Each
Shareholder shall be entitled to receive such Shareholder's pro rata portion of
the Adjusted Post-Closing Shares, based on the number of Escrow Shares allocable
to such Shareholder (in accordance with Schedule A) relative to the total number
of Escrow Shares, with cash paid in lieu of any fractional share of the
Purchaser Common Stock pursuant to Section 2.4.6 hereof. Any Post-Closing Shares
remaining in escrow and not required to be distributed to the Shareholders in
accordance with the provisions of this Section 2.4.4 shall be forfeited by the
Shareholders and released to the Purchaser in accordance with the Escrow
Agreement.
(b) Commencing with the Closing Date and ending on the day immediately
preceding the Measurement Date, Xxxxx X. Xxxxxxx may propose to the Purchaser
(by written notice to its Chief Financial Officer or Chief Operating Officer) a
candidate ("Candidate") who is (i) a prospective new employee for the Company,
or (ii) an existing employee of the Company, who either has been trained
adequately to have qualified as a Key Employee before the Measurement Date, or
has the skills and experience comparable to Key Employees listed on Schedule 1
or New Key Employees previously determined in accordance with this provision;
provided, however, that as a condition to any new employee being considered for
classification as a New Key Employee, such employee must have been recruited and
hired in a manner consistent with the Company's past practices in the normal
course of business. Submission of a Candidate will be accompanied by information
of the comparable type and scope provided by the Company to the Purchaser with
respect to the Key Employees identified on Schedule 1. Within seven days
following submission by Xxxxx X. Xxxxxxx of a Candidate, the Purchaser will
either accept or reject such designation upon written notice to Xxxxx X.
Xxxxxxx. In the event that Purchaser does not reject such Candidate in writing
within the foregoing seven days, then the Candidate shall be and is deemed a New
Key Employee. Any employee so designated as a New Key Employee after the date of
the Agreement will count as one-half of a Key Employee.
2.4.5 RECEIPT OF CERTIFICATES
Provided that the Shareholder has fulfilled its delivery obligations
under Section 2.3, the Purchaser shall, on the Closing Date, issue irrevocable
instructions to the Escrow Agent, as its transfer agent, to issue certificates
representing the number of
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shares of the Purchaser Common Stock that such Shareholder is entitled to
receive pursuant to Sections 2.4.1 and 2.4.2(a) hereof; provided, however,
that the certificates representing the Escrow Shares shall (i) be retained by
the Escrow Agent in accordance with the provisions of the Escrow Agreement,
(ii) not be issued in certificated form and (iii) held by the Escrow Agent in
book entry form. In the event that any certificates representing shares of
Company Capital Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Shareholder claiming such
certificate to be lost, stolen or destroyed, the Purchaser shall issue in
exchange for such lost, stolen or destroyed certificate the shares of the
Purchaser Common Stock that such Shareholder is entitled to receive pursuant
to Section 2.4.2(a) hereof; provided, however, that the Purchaser may in its
discretion and as a condition precedent to the issuance thereof, require such
Shareholder to provide the Purchaser with an indemnity agreement against any
claim that may be made against the Purchaser with respect to the certificate
alleged to have been lost, stolen or destroyed. The shares of the Purchaser
Common Stock that each Shareholder of the Company shall be entitled to
receive in connection with the Sale pursuant to Section 2.4.1 and 2.4.2(a)
and the Escrow Shares shall be deemed to have been issued on the Closing
Date. If the Purchase Consideration (or any part thereof) or Preferred Stock
Redemption Consideration (or any part thereof) (or any portion thereof) is to
be delivered to any Person other than the Person in whose name the
certificate or certificates representing shares of Company Capital Stock
surrendered in exchange therefor is registered, it shall be a condition to
such exchange that the person requesting such exchange shall pay to the
Purchaser any transfer or other taxes required by reason of the payment of
the Purchase Consideration or Preferred Stock Redemption Consideration to a
Person other than the registered holder of the certificate or certificates so
surrendered, or shall establish to the satisfaction of the Purchaser that
such tax has been paid or is not applicable. Notwithstanding anything to the
contrary, neither the Purchaser nor any other party hereto shall be liable to
a holder of shares of Company Capital Stock for any Purchase Consideration or
Preferred Stock Redemption Consideration delivered to a public official
pursuant to applicable law, including, without limitation, abandoned
property, escheat and similar laws.
2.4.6 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of the
Purchaser Common Stock shall be issued by virtue of the Sale, and no dividend,
stock split or other distribution with respect to the Purchaser Common Stock
shall relate to any such fractional interest, and any such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder. In lieu thereof, the Purchaser shall pay to the holder of shares of
Company Capital Stock or Notes who would otherwise be
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entitled to a fraction of a share of the Purchaser Common Stock, as soon as
practicable after the Closing Date (and in the same timely manner required
for delivery of certificates of the Purchaser Common Stock provided in
Section 2.4.5) or the Post-Closing Issuance Date, as the case may be, an
amount in cash equal to such fraction multiplied by the Share Price.
2.5 WORKING CAPITAL ADJUSTMENT
The Purchase Consideration is subject to adjustment as provided below.
(a) As soon as practicable, but in any event within 30 calendar days
following the Closing Date, the Shareholder Representative shall deliver to the
Purchaser an unaudited balance sheet of the Company (the "Closing Balance
Sheet") as of the close of business on the date immediately preceding the
Closing Date.
During the preparation of the Closing Balance Sheet and the period of
any dispute referred to in Section 2.5(c), the Purchaser shall provide the
Shareholder Representative and Deloitte & Touche, independent accountants
("Company Accountants"), full access to the books, records and facilities
related to the Business and to the Company's employees and shall cooperate fully
with the Shareholder Representative and Company Accountants, in each case to the
extent reasonably required by the Shareholder Representative and Company
Accountants in order to prepare the Closing Balance Sheet and to investigate the
basis for any such dispute; PROVIDED, HOWEVER, that any such investigation shall
be conducted in such a manner as not to interfere unreasonably with the
operation of the Company's or the Purchaser's business.
(b) Subject to the resolution of any disputes pursuant to Section
2.5(c), within 15 Business Days after the date of receipt by the Purchaser of
the Closing Balance Sheet:
(i) in the event that the Working Capital reflected on
the Closing Balance Sheet exceeds the Estimated Working Capital by at least the
Designated Amount, the Purchaser shall issue to the Shareholders, as an upward
adjustment to the Purchase Consideration, shares of Purchaser Common Stock
having a value (based on the Share Price) equal to such excess, with such
additional shares issued to the Shareholders PRO RATA in accordance with their
distribution of the Closing Date Shares pursuant to Section 2.4.2(a); and
(ii) in the event that the Estimated Working Capital
exceeds the Working Capital reflected on the Closing Balance Sheet by at least
the Designated Amount, the Shareholders shall be obligated to surrender to the
Purchaser, as a
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downward adjustment to the Purchase Consideration, shares of Purchaser Common
Stock having a value (based on the Share Price) equal to such excess, such
shares to be surrendered first out of the Escrow Shares (excluding the
Post-Closing Shares), allocated pro rata among the Shareholders, based upon
the number of Escrow Shares allocable to each Shareholder on Schedule A, in
accordance with the Escrow Agreement and, if the Holdback Shares (as defined
in the Escrow Agreement) are not sufficient to provide such amount, from
Closing Date Shares previously received by the Shareholders, with each
Shareholder contributing such Shareholder's PRO RATA share of such Closing
Date Shares.
(c) The Purchaser may dispute any amounts reflected on the Closing
Balance Sheet to the extent that the net effect of such disputed amounts in the
aggregate would be to reduce the Working Capital reflected on the Closing
Balance Sheet by more than the Designated Amount; PROVIDED, HOWEVER, that the
Purchaser shall have notified the Shareholder Representative in writing of each
disputed item, specifying the amount thereof in dispute and setting forth, in
reasonable detail, the basis for such dispute, within 10 Business Days of the
Purchaser's receipt of the Closing Balance Sheet. In the event of such a
dispute, the Purchaser and the Shareholder Representative shall attempt to
reconcile their differences. If any such resolution by the Purchaser and the
Shareholder Representative leaves in dispute amounts the net effect of which in
the aggregate would not affect the Working Capital reflected on the Closing
Balance Sheet by more than the Designated Amount, all such amounts remaining in
dispute shall then be deemed to have been resolved in favor of the Closing
Balance Sheet delivered by the Shareholder Representative to the Purchaser. If
the Purchaser and the Shareholder Representative are unable to reach a
resolution with such effect within 10 Business Days after receipt by the
Shareholder Representative of the Purchaser's written notice of dispute, the
Purchaser and the Shareholder Representative shall submit the items remaining in
dispute for resolution to such independent accounting firm of national
reputation as may be mutually acceptable to the Shareholder Representative and
the Purchaser (the "INDEPENDENT ACCOUNTING FIRM"), which shall, within 30
Business Days of such submission, determine and report to the Shareholder
Representative and the Purchaser upon such remaining disputed items, and such
report shall be final, binding and conclusive, absent fraud or manifest error,
on the Shareholder Representative, the Shareholders and the Purchaser. The fees
and disbursements of the Independent Accounting Firm shall be allocated between
the Purchaser and the Shareholder Representative in the same proportion that the
aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm which is unsuccessfully disputed by each such party
(as finally determined by the Independent Accounting Firm) bears to the total
amount of such remaining disputed items so submitted; PROVIDED, HOWEVER,
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that if the net effect of the resolution of such disputed amounts does not
result in a reduction of Working Capital from the Working Capital reflected
on the Closing Balance Sheet by at least the Designated Amount, the Purchaser
shall pay all such fees and disbursements.
2.6 SHAREHOLDER REPRESENTATIVE
Each Shareholder hereby irrevocably authorizes and appoints Xxxxx X.
Xxxxxxx (the "SHAREHOLDER REPRESENTATIVE"), as such Shareholder's representative
and true and lawful attorney-in-fact and agent to act in such Shareholder's
name, place and stead as contemplated by Sections 2.5, 5.15 and 7.7 and Articles
VI and IX, and to execute in the name and on behalf of such Shareholder the
Escrow Agreement and any other agreement, certificate, instrument or document to
be delivered by the Shareholders in connection with the Escrow Agreement. If the
Shareholder Representative or any successor shall resign, die, or become unable
to act as the Shareholder Representative, a replacement shall promptly be
appointed by a writing signed by Shareholders who initially received a majority
of the Closing Date Shares. Any such successor Shareholder Representative shall
have the same powers and duties as if appointed as the original Shareholder
Representative hereunder. The Shareholder Representative or the Shareholders
shall promptly notify the Purchaser of the appointment of a successor
Shareholder Representative. The Shareholders (other than the Shareholder
Representative) shall, jointly and severally, indemnify the Shareholder
Representative for, and hold him harmless against, any loss, liability, claim or
expense, including reasonable attorney's fees, arising out of or in connection
with his duties as Shareholder Representative under this Agreement and the
Escrow Agreement, including the costs and expenses of defending himself against
any such loss, liability, claim or expense in connection herewith, all in
accordance with the terms of the separate Shareholder Representative and
Contribution Agreement.
2.7 TAX FREE REORGANIZATION
(a) Except as otherwise required by the Internal Revenue Service (the
"IRS") pursuant to a determination (as defined in Section 1313 of the Code) or
otherwise, the parties shall not take a position on any tax returns inconsistent
with the treatment of the Sale for tax purposes as a reorganization within the
meaning of Section 368(a) of the Code.
(b) The Purchaser represents, solely for tax purposes, now, and as of
the Closing Date, (i) that it presently intends to continue the Company's
historic business or use a significant portion of the Company's business assets
in business in a manner that satisfies the continuity of business enterprise
requirement set forth in Treasury
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Regulation Section 1.368-1(d), and (ii) that it has no present plan or
intention following the Sale to issue additional shares of the Company that
would result in the Purchaser losing control of the Company. Neither such
representation nor anything else contained herein shall constitute a
representation, warranty or agreement with respect to any Tax consequences to
the Company or its Shareholders arising under this Agreement or as a result
of the transactions contemplated hereby.
(c) The Company represents, solely for tax purposes, that it has not
disposed of or committed itself to dispose of, any assets on or before the
Closing Date that would prevent the Sale from meeting the requirement that
"substantially all of the assets" of the Company must be acquired in the Sale.
Neither such representation nor anything else contained herein shall constitute
a representation or warranty with respect to any Tax consequences to the
Purchaser arising under this Agreement or as a result of the transactions
contemplated hereby.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is otherwise set forth with appropriate Section references in
the Company Disclosure Schedule attached as SCHEDULE 3 (the "COMPANY DISCLOSURE
SCHEDULE"), and in order to induce the Purchaser to enter into and perform this
Agreement and the Ancillary Documents, the Company represents and warrants to
the Purchaser as of the date of this Agreement and as of the Closing as follows
in this Article III.
3.1 ORGANIZATION
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as now conducted and as currently proposed
to be conducted, and to enter into and perform its obligations under this
Agreement and the Ancillary Documents to which the Company is a party, and to
consummate the transactions contemplated hereby and thereby. The Company is duly
qualified and licensed as a foreign corporation to do business and is in good
standing in each jurisdiction in which the character of the Company's properties
occupied, owned or held under lease or the nature of the business conducted by
the Company makes such qualification or licensing necessary, except where the
failure to be so qualified or in good standing would not have a Company Material
Adverse Effect.
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3.2 ENFORCEABILITY
The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the
Ancillary Documents to which it is a party and each of the certificates,
instruments and documents executed or delivered by it pursuant to the terms of
this Agreement. All corporate action on the part of the Company necessary for
the authorization, execution, delivery and performance of this Agreement and the
Ancillary Documents to which the Company is a party, the consummation of the
Sale, and the performance of all the Company's obligations under this Agreement
and the Ancillary Documents to which the Company is a party has been taken. This
Agreement has been, and each of the Ancillary Documents to which the Company is
a party at the Closing will have been, duly executed and delivered by the
Company, and this Agreement is, and, when executed and delivered by the Company,
each of the Ancillary Documents to which the Company is a party will be at the
Closing, a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as to the effect, if
any, of (a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally, (b) rules of law governing specific performance, injunctive
relief and other equitable remedies, and (c) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
3.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of 9,500,000
shares of Company Class A Common Stock, 500,000 shares of Company Class B Common
Stock and 2,000,000 shares of Preferred Stock, of which 52,000 shares are
designated as Series A Redeemable Preferred Stock.
(b) As of the date of this Agreement, the issued and outstanding
capital stock of the Company consists solely of 6,400,000 shares of Company
Class A Common Stock and 52,000 shares of Preferred Stock. All of such shares
are, and immediately prior to the Closing Date will be, held of record and, to
the knowledge of the Company, beneficially by the Shareholders of the Company as
set forth on Section 3.3(b) of the Company Disclosure Schedule. The outstanding
shares of Company Capital Stock as of the date hereof are, and immediately prior
to the Closing Date all then outstanding shares of Company Capital Stock will
be, duly authorized and validly issued, fully paid and nonassessable, and issued
in compliance with all applicable federal and state securities laws. To the
knowledge of the Company, no Person other than the Shareholders holds any
interest in any of the outstanding shares of Company Capital Stock. True and
correct copies of the stock records of the
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Company, showing all issuances and transfers of shares of capital stock of
the Company since inception, have been provided to the Purchaser or its
counsel.
(c) As of the date of this Agreement, other than Options to purchase up
to 212,700 shares of Company Common Stock which have been granted under the
Company Plan or other Stock Purchase Rights set forth in Section 3.3(c) of the
Company Disclosure Schedule, there are no outstanding rights of first refusal or
offer, co-sale rights, preemptive rights, Stock Purchase Rights or other
agreements, either directly or indirectly, for the purchase or acquisition from
the Company or, to the knowledge of the Company, any Shareholder of any shares
of Company Capital Stock or any securities convertible into or exchangeable for
shares of Company Capital Stock, and the Company is not committed to issue or
grant any such rights, Stock Purchase Rights or other agreements. Set forth in
Section 3.3(c) of the Company Disclosure Schedule is a spreadsheet accurately
reflecting the number of such Options and other Stock Purchase Rights
outstanding, the grant or issue dates, vesting schedules and exercise or
conversion prices thereof, and, in each case, the identities of the holders and
an indication of their relationships to the Company. The Company has delivered
to the Purchaser true and correct copies of the Company Plan, the form of stock
option agreements relating to Options granted thereunder, all other agreements
with respect to Stock Purchase Rights, and all material deviations therefrom.
Section 3.3(c) of the Company Disclosure Schedule also identifies all Options
and Stock Purchase Rights that have been offered in connection with any employee
or consulting agreement, arrangement or understanding but that, as of the date
hereof, have not been issued or granted.
(d) The Company is not a party or subject to any agreement or
understanding, and, to the knowledge of the Company, there is no agreement or
understanding between any Persons that affects or relates to the voting or
giving of written consents with respect to any securities of the Company or the
voting by any director of the Company. No Shareholder or any affiliate thereof
is indebted to the Company, and the Company is not indebted to any Shareholder
or any affiliate thereof. The Company is not under any contractual or other
obligation to register any of its presently outstanding securities or any of its
securities that may hereafter be issued.
(e) Section 3.3(e) of the Company Disclosure Schedule describes all
rights granted in favor of the Company to repurchase or to receive upon
forfeiture any securities of the Company.
(f) Except as described on Section 3.3(f) of the Company Disclosure
Schedule, all Options and Stock Purchase Rights have been granted or issued at
fair
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market value, as determined by the Company's Board of Directors at the date
of grant or issuance.
3.4 SUBSIDIARIES AND AFFILIATES
Except as set forth in Section 3.4 of the Company Disclosure Schedule,
(a) the Company does not own or control, and has not in the past owned or
controlled, directly or indirectly, any corporation, partnership, limited
liability company or other business entity and (b) the Company does not own,
directly or indirectly, any ownership, equity, or voting interest in, or
otherwise control, any corporation, partnership, limited liability company,
joint venture or other entity, and has no agreement or commitment to purchase
any such interest.
3.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance by the Company of this
Agreement and the Ancillary Documents to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby will not (a)
constitute a violation (with or without the giving of notice or lapse of time,
or both) of any provision of law or any judgment, decree, order, regulation or
rule of any court or other governmental authority applicable to the Company,
except for such violations which would not, both individually and in the
aggregate, have a Company Material Adverse Effect, (b) require any consent,
approval or authorization of, or declaration, filing or registration with, any
Person, except (i) compliance with applicable securities laws, and (ii) such
consents, approvals, authorizations, declarations, filings and registrations the
failure of which to obtain or effect would not, both individually and in the
aggregate, have a Company Material Adverse Effect, (c) result in a default (with
or without the giving of notice or lapse of time, or both) under, or
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, note or other
restriction, Encumbrance, obligation or liability to which the Company is a
party or by which it is bound or to which any assets of the Company are subject,
except for such defaults, accelerations, terminations, or creations of such
rights which would not, both individually and in the aggregate, have a Company
Material Adverse Effect, (d) result in the creation of any Encumbrance upon any
material assets of the Company or, to the knowledge of the Company, upon any
outstanding shares or other securities of the Company, (e) conflict with or
result in a breach of or constitute a default under any provision of the
Company's Articles or the Company's Bylaws, or (f) invalidate or, to the
Company's knowledge, adversely affect any permit, license or authorization
currently material to the conduct of the business of the Company.
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3.6 FINANCIAL STATEMENTS
The Company has delivered to the Purchaser (a) audited balance sheets,
statements of income and expense, statements of cash flow and statements of
shareholders' equity of the Company as of or for the fiscal years ended December
31, 1999 and 1998 (the "AUDITED FINANCIAL STATEMENTS"), (b) an unaudited
statement of income and expense, statement of cash flow and statement of
Shareholders' equity of the Company for the nine-month period ended September
30, 2000, (c) an unaudited consolidated balance sheet as of October 31, 2000 and
(d) an unaudited consolidated balance sheet of the Company as of June 30, 2000
(the financial statements in clauses (b)-(d) being referred to herein as the
"UNAUDITED FINANCIAL STATEMENTS"). All the foregoing financial statements are
herein referred to as the "FINANCIAL STATEMENTS"). The unaudited balance sheet
of the Company as of June 30, 2000 is herein referred to as the "COMPANY BALANCE
SHEET." The Financial Statements have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") (except as
described in the notes thereto or, with respect to the Unaudited Financial
Statements, normal year-end adjustments and the absence of footnotes and other
disclosures required solely for audited financial statements) on a basis
consistent with prior accounting periods and fairly present in all material
respects the financial position, results of operations and changes in financial
position of the Company as of the dates and for the periods indicated therein.
The Company has no liabilities or obligations of any nature (absolute,
contingent or otherwise) that are not fully reflected or reserved against in the
Financial Statements, except (x) liabilities or obligations incurred since the
date of the Company Balance Sheet in the ordinary course of business and
consistent with past practice that are not in excess of $25,000 in the aggregate
or $10,000 individually and (y) as otherwise set forth on Section 3.6 of the
Company Disclosure Schedule. To the Company's knowledge, there is no basis for
the assertion against the Company of any liability, obligation or claim that is
likely to result or cause a Company Material Adverse Effect, which is not fairly
reflected in the Financial Statements, or otherwise disclosed in Section 3.6 of
the Company Disclosure Schedule. The Company maintains standard systems of
accounting that are adequate for its business. The Company is not a guarantor,
indemnitor, surety or other obligor of any Debt of any other Person.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except for transactions specifically contemplated in this Agreement or
as set forth on Section 3.7 of the Company Disclosure Schedule, since the date
of the Company Balance Sheet, neither the Company nor any of its officers or
directors in their representative capacities on behalf of the Company have:
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(a) taken any action or entered into or agreed to enter
into any transaction, agreement or commitment other than in the ordinary course
of business;
(b) forgiven or canceled any Debt or waived any claims or
rights of material value (including, without limitation, any Debt owing by any
Shareholder, officer, director, employee or affiliate of the Company);
(c) granted, other than in the ordinary course of
business and consistent with past practice, any increase in the compensation of
directors, officers, employees or consultants (including any such increase
pursuant to any employment or consulting agreement or bonus, pension,
profit-sharing, lease payment or other plan or commitment) or any increase in
the compensation payable or to become payable to any director, officer, employee
or consultant;
(d) suffered any change having, or reasonably likely to have,
a Company Material Adverse Effect;
(e) borrowed or agreed to borrow any funds, incurred or
become subject to, whether directly or by way of assumption or guarantee or
otherwise, any Debt, obligations or liabilities (absolute, accrued, contingent
or otherwise) individually in excess of $10,000 or in excess of $25,000 in the
aggregate, except liabilities and obligations (i) that are incurred in the
ordinary course of business and consistent with past practice or (ii) that would
not be required to be reflected or reserved against in a balance sheet prepared
in accordance with GAAP, or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad Debt, contingency or
other reserves;
(f) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the Company Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since the date of
the Company Balance Sheet;
(g) permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
Encumbrance, restriction or charge which remains in existence on the date
hereof, except in the ordinary course of business and consistent with past
practice;
(h) purchased or sold, transferred or otherwise disposed
of any of its material properties or assets (real, personal or mixed, tangible
or intangible) other than as contemplated by this Agreement or in the ordinary
course of business;
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(i) disposed of or permitted to lapse any rights to the
use of any trademark, trade name, patent or copyright, or disposed of or
disclosed to any Person without obtaining an appropriate confidentiality
agreement from any such Person any trade secret, formula, process or know-how
not theretofore a matter of public knowledge, except for such dispositions,
lapses and disclosures which would not, both individually and in the aggregate,
have a Company Material Adverse Effect;
(j) made any single capital expenditure or commitment in
excess of $10,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures in excess of $25,000 for
additions to property, plant, equipment or intangible capital assets;
(k) made any change in accounting methods or practices or
internal control procedure;
(l) issued any capital stock or other securities, or
declared, paid or set aside for payment any dividend or other distribution in
respect of its capital stock, or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other securities of the
Company, or otherwise permitted the withdrawal by any of the holders of Company
Capital Stock of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, Debt or otherwise, other than payments of
compensation in the ordinary course of business and consistent with past
practice;
(m) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to any of the Company's Shareholders, officers,
directors, employees or consultants or any affiliate of any of the Company's
Shareholders, officers, directors, employees or consultants, except compensation
and expense allowances (for travel and other business-related expenses) in the
ordinary course of business paid to officers, directors, employees or
consultants of the Company; or
(n) agreed, whether in writing or otherwise, to take any
action described in this Section 3.7.
3.8 TAXES
(a) (i) All Tax Returns required to be filed by or on behalf of the
Company have been filed on a timely basis with the appropriate governmental
authority in all jurisdictions in which such Tax Returns are required to be
filed, and all such Tax Returns were (at the time they were filed) accurate and
complete in all material respects; (ii) all Taxes (as defined below) of the
Company (whether or not reflected on
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any Tax Return) have been fully and timely paid on or before the due date for
payment thereof; (iii) no waivers of statutes of limitation have been given
or requested with respect to the Company in connection with any Tax Returns
covering the Company with respect to any Taxes payable by it; (iv) no taxing
authority in a jurisdiction where the Company does not file Tax Returns has
made a written claim, assertion, or threat to the Company that the Company is
or may be subject to taxation by such jurisdiction; (v) the Company has duly
and timely withheld from employee and consultant salaries, wages and other
compensation and paid over to the appropriate governmental authority all
amounts required to be so withheld and paid over for all periods under all
applicable laws; (vi) there are no liens with respect to Taxes on any of the
Company's property or assets other than liens for current Taxes not yet
payable; (vii) to the Company's knowledge, there are no Tax rulings, requests
for rulings, or closing agreements relating to the Company which could affect
the liability for Taxes or the amount of taxable income of the Company for
any period (or portion of a period) after the date hereof; and (viii) any
adjustment of Taxes of the Company made by the IRS in any examination which
is required to be reported to the appropriate state, local or foreign taxing
authorities has been reported, and any additional Taxes due with respect
thereto have been paid.
(b) Neither the Company nor, to the Company's knowledge, any other
Person on behalf of the Company (i) has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company; (ii) has executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law; or
(iii) has agreed to or is required to make any adjustments pursuant to Section
481 (a) of the Code or any similar provision of state, local or foreign law by
reason of a change in accounting method initiated by the Company or has notice
that a governmental authority has proposed in writing any such adjustment or
change in accounting method.
(c) There is no dispute or claim concerning any Tax liability of the
Company claimed or raised by any authority in writing. Section 3.8 of the
Company Disclosure Schedule lists all Tax Returns filed with respect to the
Company for taxable periods ended on or after the Company's inception or the
inception of any predecessor that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Company has delivered to
the Purchaser correct and complete copies of all Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company since the Company's inception.
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(d) The Company will not pay or incur any obligation to make any
payments in connection with or as a result of the transactions contemplated
hereby and is not a party to any agreement that under certain circumstances
could obligate it to make any payments in connection with or as a result of the
transactions contemplated hereby that will not be deductible under Section 280G
of the Code (or any similar provision of state, local or foreign law).
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of a Tax Group filing a
consolidated income Tax Return under Section 1501 of the Code (or any similar
provision of state, local or foreign law) and (ii) does not have any liability
for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
by contract or otherwise.
(g) The unpaid Taxes of the Company (i) did not, as of December 31,
1999, exceed the reserve for Tax liability set forth on the face (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) of the Company Balance Sheet and (ii) do not exceed that
reserve as adjusted for the passage of time and operations in the ordinary
course of business through the Closing Date.
(h) The Company Disclosure Schedule sets forth the amount of any net
operating loss, net capital loss, net-unrealized built-in loss (as defined under
Section 382 of the Code), unused investment or other credit, unused foreign tax
or excess charitable contribution allocable to the Company. There is no
limitation on utilization of any such net operating loss or tax item by the
Purchaser under Section 382 of the Code (or any comparable provision of state,
local or foreign law).
(i) All Options that the Company has treated as incentive stock options
under Section 421 of the Code meet the requirements of Section 422 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"TAXES" means all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties, and other assessments, including, but
not limited to, any income, alternative minimum or add-on tax, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise,
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registration, title, license, capital, paid-up capital, profits, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, real
property, recording, personal property, federal highway use, commercial rent,
environmental (including, but not limited to, taxes under Section 59A of the
Code) or windfall profit tax, custom, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest, penalties or additions to tax; and "Tax" means any of the foregoing
Taxes.
"TAX GROUP" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"TAX RETURNS" means any return, declaration, report, claim or refund,
information return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
3.9 PROPERTY
(a) The Company owns no real property other than the leasehold
interests described on Section 3.9(a) of the Company Disclosure Schedule, which
contains a complete and accurate list of all real property owned, leased or
currently being used by the Company (the "REAL PROPERTY"). The Company has
delivered to the Purchaser or its counsel true and complete copies of all
written leases, subleases, rental agreements, contracts of sale, tenancies or
licenses relating to the Real Property and written summaries of the terms of any
oral leases, subleases, rental agreements, contracts of sale, tenancies or
licenses to which the Real Property is subject.
(b) Section 3.9(b) of the Company Disclosure Schedule contains a
complete and accurate list of each item of personal property having a net book
value in excess of $5,000 which is owned, leased, rented or used by the Company,
as of the date hereof (the "PERSONAL PROPERTY"); provided that such list need
not describe the Technology or the IP Rights listed in Section 3.14 to the
Company Disclosure Schedule. The Company has delivered to the Purchaser true and
complete copies of all leases, subleases, rental agreements, contracts of sale,
tenancies or licenses to which the Personal Property is subject.
(c) The Real Property and the Personal Property include all the
properties and assets (whether real, personal or mixed, tangible or
intangible) (other than, in the case of the Personal Property, property
rights with an individual value of less than $5,000 and the Technology and IP
Rights) reflected in the Company Balance Sheet (except for such properties or
assets sold since the date of the Company Balance Sheet
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in the ordinary course of business and consistent with past practice) and all
the properties and assets purchased or otherwise acquired by the Company
since the date of the Company Balance Sheet (other than, in the case of the
Personal Property, property rights with an individual value of less than
$5,000 and the Technology and the IP Rights). The Real Property and the
Personal Property include all material property used in the business of the
Company, other than the Technology and IP Rights. The Company's Real Property
and its Personal Property are in good operating condition and repair, normal
wear and tear excepted, are adequate for the uses to which they are being
put, and comply in all material respects with applicable safety and other
laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real
Property is free and clear of all Encumbrances, except for Encumbrances related
to Taxes not yet due and payable, and Encumbrances relating to the owner of any
such Real Property that do not adversely affect the Company's possession or use
thereof. Each lease of any portion of the Real Property is valid, binding and
enforceable in accordance with its terms against the Company and, to the
Company's knowledge, against each other party thereto, except as to the effect,
if any, of (i) applicable bankruptcy and other similar laws affecting the rights
of creditors generally and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. The Company has performed in all
material respects all obligations imposed upon it under each lease, and neither
the Company nor, to the Company's knowledge, any other party thereto is in
material default thereunder, nor is there any event which with notice or lapse
of time, or both, would constitute a material default thereunder by the Company
or, to the Company's knowledge, by any other party. The Company has not granted
any lease, sublease, tenancy or license of, or entered into any rental agreement
or contract of sale with respect to, any portion of the Real Property.
(e) The Personal Property is free and clear of all Encumbrances, and,
other than leased Personal Property which is so noted on the list supplied
pursuant to Section 3.9(b) hereof, the Company owns such Personal Property. Each
lease, license, rental agreement, contract of sale or other agreement to which
the Personal Property is subject is valid, binding and enforceable in accordance
with its terms against the Company and, to the Company's knowledge, against each
other party thereto, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies. The Company has performed in all material respects all
obligations imposed upon it under each such agreement, and neither the Company
nor, to the Company's knowledge, any other party thereto is in material default
thereunder, nor is there any event which with notice or lapse of time,
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or both, would constitute a material default by the Company or, to the
Company's knowledge, any other party thereunder. The Company has not granted
any lease, sublease, tenancy or license of any portion of the Personal
Property, except in the ordinary course of business.
3.10 CONTRACTS
Section 3.10 of the Company Disclosure Schedule contains a complete and
accurate list (other than the IP Rights listed on Section 3.14 of the Company
Disclosure Schedule) of all contracts, agreements and understandings, oral or
written, to which the Company is currently a party or by which the Company is
currently bound providing for potential payments by or to the Company in excess
of $20,000, including, without limitation, consulting agreements, license
agreements, software development agreements, distribution agreements, joint
venture agreements, security agreements, reseller agreements, credit agreements
and instruments relating to the borrowing of money. All contracts set forth in
Section 3.10 of the Company Disclosure Schedule are valid, binding and
enforceable in accordance with their terms against the Company and, to the
Company's knowledge, each other party thereto, except as to the effect, if any,
of (a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies, and are in full force and
effect. The Company has performed in all material respects all obligations
imposed on it under the contracts set forth in Section 3.10 of the Company
Disclosure Schedule, and neither the Company nor, to the Company's knowledge,
any other party thereto is in material default thereunder, nor is there any
event which with notice or lapse of time, or both, would constitute a material
default by the Company or, to the Company's knowledge, any other party
thereunder. True and complete copies of each such written contract (or written
summaries of the terms of any oral contract) have been delivered to the
Purchaser by the Company. Except as set forth on Section 3.10 of the Company
Disclosure Schedule, the Company has no
(a) contracts with directors, officers, Shareholders,
employees, agents, consultants, advisors, salespeople, sales representatives or
resellers that cannot be canceled by the Company within 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings, or any
compensation agreement or arrangement affecting or relating to former employees
of the Company;
(b) employment agreement or any other agreement for services
that contains severance or termination pay liabilities or obligations;
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(c) noncompetition agreement or other arrangement that would
prevent the Company from carrying on its business anywhere in the world;
(d) notice or reason to believe that any party to a
contract listed in Section 3.10 of the Company Disclosure Schedule intends to
cancel, terminate or refuse to renew such contract (if such contract is
renewable);
(e) material dispute with any of its consultants, suppliers,
customers, distributors, licensors or licensees;
(f) product distribution agreement, development
agreement, or license agreement as licensor or licensee (except for standard
licenses purchased by the Company for off-the-shelf software);
(g) joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons;
(h) instrument evidencing Debt, except for trade
indebtedness incurred in the ordinary course of business, and except as
disclosed in the Financial Statements; and
(i) agreements or commitments to provide indemnification.
3.11 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth in Section 3.11 of the Company Disclosure Schedule,
there are no claims, actions, suits, arbitrations, investigations or proceedings
pending or involving or, to the Company's knowledge, threatened against the
Company before or by any court or governmental or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other Person. There
are no outstanding or unsatisfied judgments, orders, decrees or stipulations to
which the Company is a party. Section 3.11 of the Company Disclosure Schedule
sets forth a description of any material disputes that have been settled or
resolved by litigation or arbitration since the Company's inception. To the
Company's knowledge, there is no reasonable basis for the assertion against the
Company of any claims, actions, suits, arbitrations, investigations or
proceedings before any court or governmental or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other Person.
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3.12 LABOR AND EMPLOYMENT MATTERS
There are no labor disputes, employee or consultant grievances or
disciplinary actions pending or, to the Company's knowledge, threatened against
or involving the Company or, to the Company's knowledge, any of its present or
former employees or consultants. To the Company's knowledge, no employee or
consultant intends to terminate his or her employment or consulting relationship
with the Company within the next twelve months, other than in the ordinary
course if there shall be inadequate work for such employee or consultant. The
Company has complied in all material respects with all provisions of applicable
law relating to employment and employment practices, terms and conditions of
employment, wages and hours. The Company is not engaged in any unfair labor
practice as defined under applicable law and has no liability for any arrears of
wages or Taxes or penalties for failure to comply with any such provisions of
law. There is no labor strike, dispute, slowdown or stoppage pending or, to the
Company's knowledge, threatened against or affecting the Company, and the
Company has not experienced any work stoppage or other collective labor
difficulty since its incorporation. No collective bargaining agreement is
binding on the Company. The Company has no knowledge of any organizational
efforts presently being made or threatened by or on behalf of any labor union
with respect to employees or consultants of the Company. Except as set forth in
Section 3.12 of the Company Disclosure Schedule, each employee and officer of
and consultant to the Company has executed an Employee Agreement Regarding
Inventions, Confidentiality and Competitive Activities in the form attached as
Exhibit 3.12 to the Company Disclosure Schedule (a "NONDISCLOSURE AGREEMENT")
and, as of the Closing, each current employee and officer of and each current
consultant to the Company who has not executed a Nondisclosure Agreement as of
the date hereof shall have executed and delivered to the Company such an
agreement. To the Company's knowledge, each Nondisclosure Agreement is, and as
of the Closing will be, a valid, binding and enforceable obligation of the
employee, officer or consultant named therein. To the Company's knowledge, no
employee (or person performing similar functions) of the Company is in violation
of any such agreement or any employment agreement, noncompetition agreement,
patent disclosure agreement, invention assignment agreement, proprietary
information agreement or other contract or agreement relating to the
relationship of such employee with the Company or any other party. Section 3.12
of the Company Disclosure Schedule sets forth a true and complete list of (a)
the names and current compensation amounts of all directors and officers of the
Company; (b) the names of and wage rates for all nonsalaried and nonofficer
salaried employees of the Company by classification, and all union contracts (if
any); (c) all group insurance programs in effect for employees of the Company;
and (d) the names and current compensation packages of all independent
contractors and consultants of
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the Company. Except as set forth in Section 3.12 of the Company Disclosure
Schedule, the Company is not in material default with respect to any of its
obligations referred to in clauses (a) - (d) above and has no, and will not
incur any, material obligation or liability for severance or back pay owed
through or by virtue of the Sale. Except as disclosed in Section 3.12 of the
Company Disclosure Schedule, all employees of the Company are employed on an
"at will" basis.
3.13 EMPLOYEE BENEFIT PLANS
3.13.1 EMPLOYEE BENEFIT PLAN LISTING
Section 3.13.1 of the Company Disclosure Schedule sets forth a true,
accurate and complete list and description of all retirement, pension, profit
sharing, deferred compensation, savings, bonus, incentive, cafeteria, flexible
benefits, medical, dental, vision, hospitalization, life insurance, group
insurance, medical expense reimbursement, dependent care assistance, tuition
reimbursement, disability, accident, sick pay, holiday, vacation, severance,
stock purchase, stock option, stock appreciation rights, fringe benefit and
other employee benefit plans, funds, policies, programs, contracts, arrangements
and payroll practices (including, but not limited to, all "employee benefit
plans," as defined in Section 3(3) of ERISA and all employment, consulting and
personal service contracts and agreements, whether formal or informal, whether
written or unwritten, and whether legally binding or not), (a) sponsored,
maintained or contributed to by the Company, (b) covering or benefiting any
current or former officer, employee, agent, director or independent contractor
of the Company (or any dependent or beneficiary of any such individual), or (c)
with respect to which the Company has (or could have) any obligation or
liability (such plans, funds, policies, programs, contracts, arrangements and
payroll practices are hereinafter referred to collectively as "EMPLOYEE BENEFIT
PLANS" and each individually as an "EMPLOYEE BENEFIT PLAN"). The Company does
not have any agreement, arrangement, commitment or obligation, whether formal or
informal, whether written or unwritten and whether legally binding or not, to
create (or contribute to) any additional Employee Benefit Plan or payroll
practice or to modify or amend any existing Employee Benefit Plan. There has
been no amendment, written interpretation or announcement (whether or not
written) by the Company relating to, or change in participation or coverage
under, any Employee Benefit Plan that, either alone or together with other such
items or events, could materially increase the expense of maintaining the
Employee Benefit Plans above the level of expense incurred with respect thereto
for the most recent fiscal year included in the Financial Statements.
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3.13.2 DOCUMENTS PROVIDED
The Company has delivered to the Purchaser true, correct and complete
copies (or, in the case of unwritten Employee Benefit Plans, descriptions) of
all Employee Benefit Plans (and all amendments thereto), along with, to the
extent applicable to the particular Employee Benefit Plan, the following
information: (a) copies of the last three annual reports (Form 5500 series)
filed with respect to such Employee Benefit Plan; (b) copies of the summary plan
descriptions, summaries of material modifications and all material employee
manuals or communications filed or distributed with respect to such Employee
Benefit Plan during the last three years; and (c) copies of all contracts (and
any amendments thereto) relating to such Employee Benefit Plan, including, but
not limited to, service provider agreements, administrative service agreements,
insurance contracts, annuity contracts, investment management agreements and
record-keeping agreements.
3.13.3 COMPLIANCE
With respect to each Employee Benefit Plan, (a) such Employee Benefit
Plan is, and at all times since its inception has been, maintained, administered
and operated in accordance with its terms and in compliance in all material
respects with all applicable laws, statutes, orders, rules and regulations, and
all requirements prescribed thereby, including, but not limited to, ERISA and
the Code; (b) all amendments and actions required to bring such Employee Benefit
Plan into conformity with the applicable provisions of ERISA, the Code and other
applicable laws and regulations have been made or taken within the time
prescribed by law, except to the extent that such amendments or actions are not
required by law to be made or taken until after the Closing Date; (c) the
Company and, to the Company's knowledge, each fiduciary of such Employee Benefit
Plan and all other Persons have, at all times, properly performed all
obligations, whether arising by operation of law or by contract, required to be
performed by each of them in connection with such Employee Benefit Plan; (d) all
returns, reports and other disclosures relating to such Employee Benefit Plan
required to be filed with any governmental entity or agency or furnished to any
participant or beneficiary have been properly completed or prepared and timely
filed or furnished in accordance with applicable law; (e) neither the Company
nor any other fiduciary of such Employee Benefit Plan has engaged in any
transaction or acted or failed to act in a manner that violates the fiduciary
requirements of ERISA or any other applicable law; and (f) no event has occurred
or, to the Company's knowledge, is threatened or about to occur that constitutes
or could constitute a nonexempt prohibited transaction under Section 406 or 407
of ERISA or under Section 4975 of the Code. Each Employee Benefit Plan that
constitutes a "group health plan," as defined in Section 607(1) or 733(a)(1) of
ERISA or Section 4980B(g)(2) of the Code, has been
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maintained, administered and operated at all times since its inception in
compliance in all material respects with the requirements of Parts 6 and 7 of
Subtitle B of Title I of ERISA, Section 4980B(f) of the Code, any regulations
under such ERISA and Code sections and any other applicable federal, state,
local or foreign law regarding the provision or continuation of health
insurance coverage or other welfare benefits (within the meaning of Section
3(1) of ERISA). No event or omission has occurred, or is reasonably expected
by the Company to occur (including, but not limited to, any of the
transactions contemplated in or by this Agreement), with respect to any
Employee Benefit Plan that has or could subject, directly or indirectly, the
Company or any other Person to a tax under Chapter 43 of Subtitle D of the
Code or a penalty under Part 5 of Subtitle B of Title I of ERISA.
3.13.4 CONTRIBUTIONS AND PREMIUM PAYMENTS
All contributions, premiums and other payments due or required to be
made to each Employee Benefit Plan under the terms of such Employee Benefit
Plan, ERISA, the Code or other applicable law have been timely paid, or, if not
yet due, have been properly recorded on the books of the Company.
3.13.5 RELATED EMPLOYERS
The Company is not, and has never been, a member of (a) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (b) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (c) an affiliated service group, within the meaning
of Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
3.13.6 MULTIEMPLOYER AND TITLE IV PLANS
The Company does not sponsor, maintain or contribute to, and has never
sponsored, maintained or contributed to (or been obligated to contribute to),
any multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of
ERISA or 414(f) of the Code, any multiple employer plan within the meaning of
Section 4063 or 4064 of ERISA or Section 413(c) of the Code, or any employee
benefit plan, fund, program, contract or arrangement that is covered by or
subject to Section 408 or 412 of the Code, Section 302 of ERISA or Title IV of
ERISA, or any employee benefit plan, fund, program or arrangement that is
intended to be qualified under Section 401(a) of the Code.
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3.13.7 POST-TERMINATION WELFARE BENEFITS
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) health, severance or
any other welfare benefits (within the meaning of Section 3(1) of ERISA) with
respect to any current or former officer, employee, agent, director or
independent contractor of the Company or any other entity beyond such
individual's retirement or other termination of service, other than continuation
coverage mandated by Sections 601 through 608 of ERISA or Section 4980B(f) of
the Code.
3.13.8 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the Company's knowledge, threatened with respect to (or
against the assets of) any Employee Benefit Plan. No Employee Benefit Plan is
currently under investigation, audit or review, directly or indirectly, by the
IRS, the Department of Labor (the "DOL") or any other governmental entity or
agency, and, to the Company's knowledge, no such action is contemplated or under
consideration by the IRS, the DOL or any other governmental entity or agency.
3.13.9 PAYMENTS RESULTING FROM TRANSACTIONS
Neither the execution and delivery of this Agreement or any of the
Ancillary Documents nor the consummation of the transactions contemplated in (or
by) this Agreement or any of the Ancillary Documents will (a) entitle any
current or former officer, employee, agent, director or independent contractor
of the Company to severance pay, unemployment compensation or any other payment
from the Company or any other Person, or otherwise increase the amount of
compensation due to any such individual, or (b) result in any benefit or right
becoming established or increased, or accelerate the time of payment or vesting
of any benefit, under any Employee Benefit Plan, whether or not some other
subsequent action or event would be required to trigger any of the items
specified in (a) or (b) above.
3.14 INTELLECTUAL PROPERTY
3.14.1 GENERAL
The Company owns or is licensed and has all rights in and to the
following as required to conduct its business as now conducted, except where the
failure to own or have such rights would not have a Company Material Adverse
Effect: (a) all products, tools, computer programs, specifications, source code,
object code, graphics, devices, techniques, algorithms, methods, processes,
procedures, packaging, trade dress,
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formulae, drawings, designs, improvements, discoveries, concepts, user
interfaces, "look and feel," software, development and other tools, content,
inventions (whether or not patentable or copyrightable and whether or not
reduced to practice), designs, logos, themes, know-how, concepts and other
technology that are now, during the two years prior to the date of this
Agreement have been or are currently proposed in written materials furnished
by the Company to the Purchaser to be developed, produced, used, marketed or
sold by the Company (collectively, the "TECHNOLOGY-RELATED ASSETS"); and (b)
all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade names,
trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights, and domestic and foreign letters
patent, and the registrations, applications, renewals, extensions and
continuations (in whole or in part) thereof, all goodwill associated
therewith, and all rights and causes of action for infringement,
misappropriation, misuse, dilution or unfair trade practices associated
therewith.
3.14.2 COMPANY TECHNOLOGY
Section 3.14.2 of the Company Disclosure Schedule sets forth a list of
all products and tools developed, produced, used, marketed or sold by the
Company during the two years prior to the date of this Agreement (collectively,
the "PRODUCTS"). Except for the Third Party Technologies, the Company owns all
right, title and interest in and to the following (collectively, the
"TECHNOLOGY"), free and clear of all Encumbrances: (a) the Products developed,
produced, used, marketed or sold by the Company, together with any and all
codes, techniques, software tools, formats, designs, user interfaces, content
and "look and feel" related thereto; (b) any and all updates, enhancements,
corrections, modifications, improvements and new releases developed, produced,
used, marketed or sold by the Company related to the items set forth in clause
(a) above; (c) any and all technology and work in progress related to the items
set forth in clauses (a) and (b) above developed, produced, used, marketed or
sold by the Company; and (d) all inventions, discoveries, processes, designs,
trade secrets, know-how and other confidential or proprietary information
related to the items set forth in clauses (a), (b) and (c) above developed,
produced, used, marketed or sold by the Company. The Technology, excluding the
Third Party Technologies, is sometimes referred to herein as the "COMPANY
TECHNOLOGY."
3.14.3 THIRD PARTY TECHNOLOGY
Section 3.14.3 of the Company Disclosure Schedule sets forth a list
that is complete in all material respects of all Technology used in the
Company's business for which the Company does not own all right, title and
interest (collectively, the "THIRD PARTY TECHNOLOGIES"), and all license
agreements or other contracts pursuant to which
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the Company has the right to use (in the manner used by the Company, or
intended or necessary for use with the Company Technology) the Third Party
Technologies other than license agreements included in shrink-wrapped
software packages for software which is readily and generally commercially
available to the Purchaser (the "THIRD PARTY LICENSES"), indicating, with
respect to each of the Third Party Technologies listed therein, the owner
thereof and the Third Party License applicable thereto. The Company has the
lawful right to use under the terms of the applicable Third Party License
(free of any material restriction not expressly set forth in the Third Party
Licenses) (a) all Third Party Technology that is incorporated in or used in
the development or production of the Company Technology, and (b) all other
Third Party Technology necessary for the conduct of the Company's business as
now conducted and as proposed to be conducted in any written materials
furnished by the Company to the Purchaser. All Third Party Licenses are
valid, binding on the Company and in full force and effect, the Company and,
to the Company's knowledge, each other party thereto have performed in all
material respects their obligations thereunder, and neither the Company nor,
to the Company's knowledge, any other party thereto is in material default
thereunder, nor to the Company's knowledge has there occurred any event or
circumstance which with notice or lapse of time or both would constitute a
material default or event of default on the part of the Company or, to the
Company's knowledge, any other party thereto or give to any other party
thereto the right to terminate or modify any Third Party License. The Company
has not received notice that any party to any Third Party License intends to
cancel, terminate or refuse to renew (if renewable) such Third Party License
or to exercise or decline to exercise any option or right thereunder.
3.14.4 TRADEMARKS
Section 3.14.4 of the Company Disclosure Schedule sets forth a list of
all trademarks, trade names, brand names, service marks, logos or other
identifiers for the Products or otherwise used in a material way by the Company
in its business (the "MARKS"). The Company has full legal and beneficial
ownership, free and clear of any Encumbrances, of all rights conferred by use of
the Marks in connection with the Products or otherwise in the Company's business
and, as to those Marks that have been registered in the United States Patent and
Trademark Office, by federal registration of the Marks.
3.14.5 INTELLECTUAL PROPERTY RIGHTS
Section 3.14.5 of the Company Disclosure Schedule sets forth all
patents, patent applications, copyright registrations (and applications
therefor) and trademark registrations (and applications therefor) (collectively,
the "IP REGISTRATIONS") associated
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with the Company Technology and the Marks. The Company owns all right, title
and interest, free and clear of any Encumbrances, in and to the IP
Registrations, together with any other rights in or to any copyrights
(registered or unregistered), rights in the Marks (registered or
unregistered), trade secret rights and other intellectual property rights
(including, without limitation, rights of enforcement) contained or embodied
in the Company Technology and the Marks (collectively, the "IP RIGHTS").
3.14.6 MAINTENANCE OF RIGHTS
Except as set forth in Section 3.14.6 of the Company Disclosure
Schedule, the Company has not conducted its business, and has not used or
enforced (or, to its knowledge, failed to use or enforce) the IP Rights, in a
manner that would result in the abandonment, cancellation or unenforceability of
any item of the IP Rights or the IP Registrations, and the Company has not taken
(or, to its knowledge, failed to take) any action that would result in the
forfeiture or relinquishment of any IP Rights or IP Registrations, in each case
where such abandonment, cancellation, unenforceability, forfeiture or
relinquishment would have a Company Material Adverse Effect. Except as set forth
in Section 3.14.6 of the Company Disclosure Schedule, the Company has not
granted to any third party any rights or permissions to use any of the
Technology or the IP Rights. To the Company's knowledge, except pursuant to
reasonably prudent safeguards, (a) no third party has received any confidential
information relating to the Technology or the IP Rights, and (b) the Company is
not under any contractual or other obligation to disclose to any third party any
Company Technology.
3.14.7 THIRD PARTY INFRINGEMENT
Except as set forth on Section 3.14.7 of the Company Disclosure
Schedule, (a) the Company has not received any written or transmitted notice or
claim or, to the Company's knowledge, any oral claim challenging the Company's
ownership or rights in the Company Technology or the IP Rights or claiming that
any other person or entity has any legal or beneficial ownership with respect
thereto; (b) all the IP Rights are legally valid and enforceable (except as to
the effect, if any, of (1) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, and (2) rules of law governing
specific performance, injunctive relief and other equitable remedies), without
any material qualification, limitation or restriction on their use which would
have a Company Material Adverse Effect, and the Company has not received any
written or transmitted notice or claim or, to the Company's knowledge, any oral
claim challenging the validity or enforceability of any of the IP Rights; and
(c) to the Company's knowledge, no other person or entity is infringing or
misappropriating any part of the IP Rights or otherwise making any unauthorized
use of the Company Technology.
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3.14.8 INFRINGEMENT BY THE COMPANY
Except as set forth in Section 3.14.8 of the Company Disclosure
Schedule, to the Company's knowledge, (a) the use of any of the Company
Technology in the Company's business does not and will not infringe, violate or
interfere with or constitute an appropriation of any right, title or interest
(including, without limitation, any patent, copyright, trademark or trade secret
right) held by any other person or entity, and there have been no claims made
with respect thereto; (b) the use of any of the Marks and other IP Rights in the
Company's business will not infringe, violate or interfere with or constitute an
appropriation of any right, title or interest (including, without limitation,
any patent, copyright, trademark or trade secret right) held by any other person
or entity, and there have been no claims made with respect thereto; and (c) the
Company has not received any written, transmitted, or oral notice or claim
regarding any infringement, misappropriation, misuse, abuse or other
interference with any third party intellectual property or proprietary rights
(including, without limitation, infringement of any patent, copyright, trademark
or trade secret right of any third party) by the Company, the Technology or the
Marks or other IP Rights or claiming that any other entity has any claim of
infringement with respect thereto.
3.14.9 CONFIDENTIALITY
Except as set forth in Section 3.14.9 of the Company Disclosure
Schedule, (a) the Company has not disclosed any source code regarding the
Technology to any person or entity other than an employee of or consultant to
the Company and under a written nondisclosure agreement; (b) the Company has at
all times maintained and enforced commercially reasonable procedures to protect
all confidential information relating to the Technology; (c) neither the Company
nor any escrow agent under any existing escrow agreement to which the Company is
a party is under any contractual or other obligation to disclose the source code
or any other proprietary information included in or relating to the Technology;
and (d) the Company has not deposited any source code relating to the Technology
into any source code escrows or similar arrangements. If, as disclosed in
Section 3.14.9 of the Company Disclosure Schedule, the Company has deposited any
source code to the Technology into source code escrows or similar arrangements,
no event has occurred that has or could reasonably form the basis for a release
of such source code from such escrows or arrangements.
3.14.10 WARRANTY AGAINST DEFECTS
Except as set forth in Section 3.14.10 of the Company Disclosure
Schedule, the Technology is free from known material defects and substantially
conforms to the applicable specifications and documentation for such Technology.
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3.14.11 DOMAIN NAMES
Section 3.14.11 of the Company Disclosure Schedule sets forth a list of
all Internet domain names used by the Company in its business (collectively, the
"DOMAIN NAMES"). The Company has a valid registration and all material rights
(free of any material restriction) in and to the Domain Names.
3.14.12 INDEMNIFICATION
The Company has not entered into any agreement or offered to indemnify
any Person against any charge of infringement by the Technology or IP Rights, or
any other intellectual property or right. The Company has not entered into any
agreement granting any Person the right to bring any infringement action with
respect to, or otherwise to enforce, any of the Technology or IP Rights.
3.14.13 RESTRICTIONS ON INTELLECTUAL PROPERTY
To the knowledge of the Company, none of the Company's officers,
employees, consultants, agents or representatives, during his or her term of
employment or engagement with the Company, has entered into any agreement
regarding know-how, trade secrets, assignment of rights in inventions, or
prohibition or restriction of competition or solicitation of customers, or any
other similar restrictive agreement or covenant, whether written or oral, in
connection with Company Technology, with any Person other than the Company.
3.15 WARRANTIES AND MAINTENANCE
(a) Section 3.15(a) of the Company Disclosure Schedule sets forth a
list of all contracts, agreements or arrangements in which the Company warrants
or guarantees the performance or operation of software, computer systems or
programs, hardware, processes, algorithms or Technology-Related Assets. Except
as set forth in Section 3.15(a) of the Company Disclosure Schedule, the
Company's warranties with respect to the services it performs for third parties
are limited to using industry standards, and the remedies for a breach of such
warranties are limited to the fees collected by the Company from such third
parties. Except as set forth in Section 3.15(a) of the Company Disclosure
Schedule, all of the Company's contracts and agreements with its customers
provide that the Company shall not be liable for consequential damages.
(b) Other than as disclosed in Section 3.15(b) of the Company
Disclosure Schedule, the Company has not, during the past three years, had any
claims, actions, suits, disputes, arbitrations, proceedings or payments
involving or relating to the
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breach of any representations or warranties (express or implied) made by the
Company, other than in the ordinary course of business, which individually or
in the aggregate would not have a Company Material Adverse Effect.
(c) Section 3.15(c) of the Company Disclosure Schedule sets forth a
list of all contracts, agreements or arrangements in which the Company is
obligated to support or maintain for a third party any software, computer
systems or programs, hardware, processes, algorithms or other Technology-Related
Assets after the completion of a project for such third party.
3.16 CORPORATE BOOKS AND RECORDS
The Company has furnished to the Purchaser or its representatives for
its examination true and complete copies of (a) the Company Articles and the
Company's Bylaws of the Company as currently in effect, including all amendments
thereto, (b) the minute books of the Company, and (c) the stock transfer books
of the Company. Such stock transfer books accurately reflect all issuances and
transfers of shares of capital stock of the Company since its inception.
3.17 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified in Sections 3.1 and 3.5 of the Company Disclosure
Schedule, the Company has received all currently required governmental
approvals, authorizations, consents, licenses, orders, registrations and permits
of all agencies, whether federal, state, local or foreign, the failure to obtain
of which would have a Company Material Adverse Effect. The Company has not
received any notifications of any asserted present failure by it to have
obtained any such governmental approval, authorization, consent, license, order,
registration or permit, or past and unremedied failure to obtain such items.
3.18 COMPLIANCE WITH LAWS
Except as described in Section 3.18 of the Company Disclosure Schedule,
the Company is in compliance with all federal, state, local and foreign laws,
rules, regulations, ordinances, decrees and orders applicable to it, to its
employees and consultants or to the Real Property and the Personal Property,
including, without limitation, all such laws, rules, regulations, ordinances,
decrees and orders relating to intellectual property protection, antitrust
matters, consumer protection, currency exchange, environmental protection, equal
employment opportunity, health and occupational safety, pension and employee
benefit matters, securities and investor protection matters, labor and
employment matters and trading-with-the-enemy matters, except where the failure
of the Company to so comply would not have a Company
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Material Adverse Effect. The Company has not received any notification of any
asserted present or past unremedied failure by the Company to comply with any
of such laws, rules, regulations, ordinances, decrees or orders.
3.19 INSURANCE
Section 3.19 of the Company Disclosure Schedule sets forth a true and
correct list of all insurance policies maintained by the Company. The Company
maintains commercially reasonable levels of (a) insurance on its property
(including leased premises) that insures against loss or damage by fire or other
casualty and (b) insurance against liabilities, claims and risks of a nature and
in such amounts as are normal and customary in the Company's industry for
companies of similar size and financial condition. All insurance policies of the
Company are in full force and effect, all premiums with respect thereto covering
all periods up to and including the Closing Date have been paid, and no notice
of cancellation or termination has been received with respect to any such policy
or binder. Such policies or binders are sufficient for compliance in all
material respects with all requirements of law currently applicable to the
Company and of all agreements to which the Company is a party, will remain in
full force and effect through the respective expiration dates of such policies
or binders without the payment of additional premiums, and will not in any way
be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. The Company has not been refused any insurance
with respect to its assets or operations, nor has its coverage been limited, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance.
3.20 BROKERS OR FINDERS
Except as disclosed in Section 3.20 of the Company Disclosure Schedule,
the Company has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by or on behalf of the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Sale, this Agreement or any transaction contemplated hereby.
3.21 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor, to the Company's knowledge, any director,
officer, agent, employee or other Person acting on behalf of the Company has
used any Company funds for improper or unlawful contributions, payments, gifts
or entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign government officials or others. The
Company has reasonable financial controls to prevent such improper or unlawful
contributions,
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payments, gifts, entertainment or expenditures. Neither the Company nor, to
the Company's knowledge, any current director, officer, agent, employee or
other Person acting on behalf of the Company has accepted or received any
improper or unlawful contributions, payments, gifts or expenditures. The
Company has at all times complied, and is in compliance, in all material
respects with the Foreign Corrupt Practices Act and all foreign laws and
regulations relating to prevention of corrupt practices and similar matters.
3.22 BANK ACCOUNTS
Section 3.22 of the Company Disclosure Schedule sets forth the names
and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains safe deposit boxes
or accounts of any nature and the names of all Persons authorized to draw
thereon, make withdrawals therefrom or have access thereto.
3.23 INSIDER INTERESTS
Except as set forth in Section 3.23 of the Company Disclosure Schedule,
no Shareholder, employee, consultant, officer or director of the Company has any
interest (other than as a Shareholder of the Company) (a) in any Real Property,
Personal Property, Technology or IP Rights used in or pertaining to the business
of the Company, including, without limitation, inventions, patents, trademarks
or trade names, or (b) in any agreement, contract, arrangement or obligation
relating to the Company, its present or prospective business or its operations.
Except as set forth in Section 3.23 of the Company Disclosure Schedule, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, Shareholders, affiliates or any affiliate
thereof. Except as set forth in Section 3.23 of the Company Disclosure Schedule,
the Company and its officers and directors have no interest, either directly or
indirectly, in any entity, including, without limitation, any corporation,
partnership, joint venture, proprietorship, firm, licensee, business or
association (whether as an employee, officer, director, Shareholder, agent,
independent contractor, security holder, creditor, consultant or otherwise) that
presently (i) provides any services, produces and/or sells any products or
product lines, or engages in any activity that is the same, similar to or
competitive with any activity or business in which the Company is now engaged or
proposes to engage; (ii) is a supplier, customer or creditor; or (iii) has any
direct or indirect interest in any asset or property, real or personal, tangible
or intangible, of the Company or any property, real or personal, tangible or
intangible, that is necessary or desirable for the present or currently
anticipated future conduct of the Company's business.
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3.24 COMPLIANCE WITH ENVIRONMENTAL LAWS
Neither the Company nor, to the Company's knowledge, any other Person
(including, without limitation, any previous owner, lessee or sublessee) has
treated, stored or disposed of any material amounts of petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on the Real
Property, or any real property previously owned, leased, subleased or used by
the Company in the operation of its business, in violation of any applicable
foreign, federal, state or local statutes, regulations or ordinances, or common
law, in each case as in existence at or prior to the Closing. To the Company's
knowledge, there have been no releases of any material amounts of Hazardous
Substances on, at or from any assets or properties, including, without
limitation, the Real Property, owned, leased, subleased or used by the Company
in the operation of its business during the time such assets or properties were
owned, leased, subleased or used by the Company (or, to the Company's knowledge,
prior to such time), including, without limitation, any releases of any material
amounts of Hazardous Substances in violation of any law.
3.25 ACCOUNTS RECEIVABLE
Except as set forth in Section 3.25 of the Company Disclosure Schedule,
all accounts receivable of the Company reflected on the Financial Statements
represent bona fide transactions made in the ordinary course of business of the
Company and, in the aggregate, to the Company's knowledge, are collectible in
the ordinary course of business consistent with past practices of the Company,
subject to applicable reserves and to credits in accordance with the Company's
policies. Section 3.25 of the Company Disclosure Schedule contains a complete
and accurate aging report of such accounts receivable as of the date hereof.
3.26 INFORMATION TO SHAREHOLDERS
Any information supplied by the Company to the Shareholders to consider
in connection with the Sale, other than information supplied to Company by
Purchaser for such purpose, shall not, on the date any such information is sent
to the Shareholders and on the Closing Date, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein, not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the Sale.
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3.27 FULL DISCLOSURE
No information furnished by the Company to the Purchaser or its
representatives in connection with this Agreement (including, but not limited
to, the Financial Statements and all information in the Company Disclosure
Schedule and the other Exhibits hereto) or the Ancillary Documents contains any
untrue statement of a material fact, and all such information, taken as a whole,
does not omit to state a material fact necessary in order to make the statements
so made or information so delivered, taken as a whole, not misleading, except
that no representation is made as to the omission of any fact or circumstance
which affects the industry in general or the economy of the United States or
foreign countries in which the Company conducts business, in general, and which
is not, in any such case, peculiar to the Company.
3.28 XXXX-XXXXX-XXXXXX
The Company is not a $100 million person as defined under the HSR Act.
The Company has no ultimate parent entity that is a $100 million person as
defined under the HSR Act.
3.29 DISCLAIMER REGARDING PROJECTIONS
In connection with the Purchaser's investigation of the Company,
certain projections and certain business plan information for succeeding fiscal
years have been made available to the Purchaser. The Purchaser acknowledges that
there are uncertainties inherent in attempting to make such projections and
other forecasts and plans, and that the Company makes no representations and
warranties with respect to such projections, forecasts or plans, except that
such projections, forecasts and plans were prepared in good faith based upon
assumptions that the Company believed to be reasonable when made.
ARTICLE IIIA - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as is otherwise set forth with appropriate Section references in
the Shareholder Disclosure Schedule attached hereto as SCHEDULE 3A (the
"SHAREHOLDER DISCLOSURE SCHEDULE"), and in order to induce the Purchaser to
enter into and perform this Agreement and the Ancillary Documents to be entered
into as of the Closing among the Purchaser and the Shareholders, each
Shareholder, individually and not jointly, represents and warrants to the
Purchaser as of the date of this Agreement and as of the Closing as follows in
this Article IIIA:
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3A.1 ACCREDITATION
Such Shareholder is (a) either alone or with the assistance of a
professional advisor, a sophisticated investor, able to fend for himself,
herself or itself in the transactions contemplated by this Agreement and the
Ancillary Documents to which such Shareholder is a party and has such knowledge
and experience in financial and business matters that he, she or it is capable
of evaluating the merits and risks of the prospective investment in the
Purchaser Common Stock, and (b) an "accredited investor" as defined in
Regulation D of the Securities Act. Section 3A.1 of the Shareholder Disclosure
Schedule lists all Shareholders who are accredited investors.
3A.2 OWNERSHIP
Such Shareholder owns beneficially and of record the Company Capital
Stock set forth in Section 3.3(b) of the Company Disclosure Schedule, free and
clear of any Encumbrance.
3A.3 ENFORCEABILITY; NO CONFLICTS
(a) Such Shareholder has full power or capacity (as the case may be)
and authority to execute this Agreement and the Ancillary Documents to which
such Shareholder is a party, to make the representations, warranties and
covenants herein and therein contained and to perform such Shareholder's
obligations hereunder and thereunder.
(b) This Agreement has been, and each of the Ancillary Documents to
which such Shareholder is a party at the Closing will have been, duly executed
and delivered by such Shareholder, and this Agreement is, and, when executed and
delivered by such Shareholder, each of the Ancillary Documents to which such
Shareholder is a party at the Closing will be, the legal, valid and binding
obligations of such Shareholder, enforceable in accordance with their terms,
except as to the effect, if any, of (i) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies, and (iii)
the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities.
(c) The execution, delivery and performance by such Shareholder of this
Agreement and the Ancillary Documents to which he, she or it is a party, the
consummation of the transactions contemplated hereby and thereby, and the
fulfillment of the terms hereof and thereof will not (i) constitute a violation
(with or without the giving of notice or lapse of time or both) of any provision
of any law applicable to the such Shareholder; (ii) require any consent,
approval or authorization of, or notice to,
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any Person that has not been obtained or made; (iii) result in a default
under, an acceleration or termination of, or the creation in any party of the
right to accelerate, terminate, modify or cancel, any agreement, lease, note
or other restriction, encumbrance, obligation or liability to which such
Shareholder is a party or by which he, she or it is bound; or (iv) result in
the creation or imposition of any Encumbrance on any of such Shareholder's
shares of Company Capital Stock.
3A.4 CLAIMS AGAINST THE COMPANY
Such Shareholder does not have any claims against the Company other
than any rights or claims arising with respect to such Shareholder's ownership
of Company Capital Stock.
3A.5 BROKERS OR AGENTS
Except as set forth in Section 3A.5 of the Shareholder Disclosure
Schedule, such Shareholder has not employed any broker or agent in connection
with the transactions contemplated by this Agreement and agrees to indemnify the
Purchaser against all losses, damages or expenses relating to or arising out of
claims for fees or commission of any broker or agent employed by such
Shareholder.
3A.6 XXXX-XXXXX-XXXXXX
Except as set forth in Section 3A.6 of the Shareholder Disclosure
Schedule, each Shareholder is not subject to, or is exempt from, the
jurisdictional elements of the HSR Act.
3A.7 INVESTMENT FOR OWN ACCOUNT
The Purchaser Common Stock is being acquired by such Shareholder for
investment for his, her or its respective account, not as a nominee or agent;
such Shareholder has no present intention of selling, granting any
participation in or otherwise distributing any of the Purchaser Common Stock
in a manner contrary to the Securities Act or to any applicable state
securities or Blue Sky law, nor does such Shareholder have any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer or grant a participation to such person or entity with respect to
any of the Purchaser Common Stock. Notwithstanding the foregoing, Summit and
IT Capital Partners, LLC may distribute Purchaser Common Stock to its
partners, provided that any such distribution is not done in a manner
contrary to the Securities Act, the Exchange Act, or to any applicable state
securities or Blue Sky law
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3A.8 RESIDENCY
For purposes of the application of state securities laws, such
Shareholder is a resident of the state as set forth in Section 3A.8 of the
Shareholder Disclosure Schedule.
3A.9 LITIGATION
There is no litigation, claim, proceeding or governmental investigation
pending or threatened against the Shareholder which seeks to delay or prevent
the consummation of, or which would be reasonably likely to adversely affect the
Shareholder's ability to consummate, the Sale contemplated by this Agreement or
the Ancillary Documents.
3A.10 SEC DOCUMENTS; ACCESS TO INFORMATION
Such Shareholder has received and read the SEC Documents and fully
understands the risks of investing in the Purchaser Common Stock, including,
without limitation, those risks identified in the SEC Documents under the
heading "Risk Factors." Such Shareholder believes it has been given access to
all information requested by it regarding the Purchaser, including, in
particular, the current financial condition of the Purchaser and the risks
associated therewith, and has utilized such access to its satisfaction for the
purpose of obtaining information about the Purchaser; particularly, such
Shareholder has been given reasonable opportunity to ask questions of, and
receive answers from, the Purchaser concerning the terms and conditions of the
Purchaser Common Stock to be issued pursuant to this Agreement.
3A.11 INDEMNITY
Such Shareholder makes the representations and warranties contained in
this Article IIIA in such Shareholder's capacity as a Shareholder only, and any
rights of contribution or indemnity contained in the Company's Articles or
Bylaws pertaining to such Shareholder when acting in a capacity other than as a
Shareholder shall not apply to the representations and warranties contained in
this Article IIIA.
3A.12 RESTRICTED SECURITIES
Such Shareholder realizes that the shares of Purchaser Common Stock
issued pursuant to this Agreement have not been registered under the Act, are
characterized under the Act as "restricted securities" and, therefore, cannot be
sold or transferred unless they are subsequently registered under the Act or an
exemption from such registration is available. In this connection, such
Shareholder represents that it is
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familiar with Rule 144 of the SEC, as presently in effect, and understands
the resale limitations imposed thereby and by the Act.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce the Company and Shareholders to enter into and
perform this Agreement and the Ancillary Documents, the Purchaser represents and
warrants to the Company and Shareholders as follows in this Article IV:
4.1 ORGANIZATION
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oregon. The Purchaser has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as now conducted, and as proposed to be
conducted and to enter into and perform its obligations under this Agreement and
the Ancillary Documents to which the Purchaser is a party, and to consummate the
transactions contemplated hereby and thereby. The Purchaser is duly qualified
and licensed as a foreign corporation to do business and is in good standing in
each jurisdiction in which the character of properties occupied, owned or held
under lease by the Purchaser or the nature of the business conducted by the
Purchaser makes such qualification or licensing necessary, except where the
failure to be so qualified or in good standing would not have a Purchaser
Material Adverse Effect. The Purchaser has full corporate power and authority to
execute, deliver and perform this Agreement and the Ancillary Documents to which
it is a party, and to carry out the transactions contemplated hereby and
thereby.
4.2 ENFORCEABILITY
The Purchaser has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the Ancillary Documents to which it is a party and each of the certificates,
instruments and documents executed or delivered by it pursuant to the terms of
this Agreement. All corporate action on the part of the Purchaser and its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the other applicable Ancillary
Documents to which the Purchaser is a party, the consummation of the Sale and
the performance of all of its obligations under this Agreement and the other
applicable Ancillary Documents to which the Purchaser is a party has been taken
or will be taken prior to the Closing Date. This Agreement has been, and each of
the Ancillary Documents to which the Purchaser is a party will have been at the
Closing,
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duly executed and delivered by the Purchaser, and this Agreement is, and,
when executed and delivered by the Purchaser, each of the Ancillary Documents
to which the Purchaser is a party will be at the Closing, a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as to the effect, if any, of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors
generally, (b) rules of law governing specific performance, injunctive relief
and other equitable remedies, and (c) the enforceability of provisions
requiring indemnification in connection with the offering, sale or issuance
of securities.
4.3 SECURITIES
The Purchaser Common Stock to be issued pursuant to this Agreement
including, without limitation, the Closing Date Shares, the Post-Closing Shares,
the Preferred Stock Redemption Consideration, and the Performance Shares, has
been, or will be prior to the Closing Date, duly reserved and authorized for
issuance, and such Purchaser Common Stock, when issued and delivered to the
Shareholders pursuant to this Agreement, shall be validly issued, fully paid and
nonassessable and, assuming the accuracy of the representations and warranties
contained in Article IIIA, issued in compliance with applicable federal and
state securities laws.
4.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the
Ancillary Documents by the Purchaser and the consummation by it of the
transactions contemplated hereby and thereby will not (a) constitute a violation
(with or without the giving of notice or lapse of time, or both) of any
provision of law or any judgment, decree, order, regulation or rule of any court
or other governmental authority applicable to the Purchaser, except for such
violations which would not, both individually and in the aggregate, have a
Purchaser Material Adverse Effect; (b) require any consent, approval or
authorization of, or declaration, filing or registration with, any Person,
except (i) compliance with applicable securities laws, and (ii) such consents,
approvals, authorizations, declarations, filings and registrations the failure
of which to obtain or effect would not, both individually and in the aggregate,
have a Purchaser Material Adverse Effect; (c) result in a default (with or
without the giving of notice or lapse of time, or both) under, or acceleration
or termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any agreement, lease, note or other restriction,
encumbrance, obligation or liability to which the Purchaser is a party or by
which it is bound or to which any assets of the Purchaser are subject, except
for such defaults, accelerations, terminations or creations of such rights which
would not, both individually and in the aggregate, have
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a Purchaser Material Adverse Effect; or (d) conflict with or result in a
breach of or constitute a default under any provision of the Articles of
Incorporation or Bylaws of the Purchaser.
4.5 CAPITALIZATION
As of November 20, 2000, the authorized capital stock of the Purchaser
consists of 150,000,000 shares of the Purchaser Common Stock, of which
32,198,730 shares were issued and outstanding and 6,905,615 of which were
reserved for future issuance to employees pursuant to Corillian's stock option
plan, 250,000 of which were reserved for issuance under a warrant, 242,547 of
which were reserved for issuance under the Purchaser's Employee Stock Purchase
Plan, and 40,000,000 shares of preferred stock, no par value per share, none of
which is issued or outstanding. Such issued and outstanding shares of the
Purchaser Common Stock are validly issued, fully paid and nonassessable.
4.6 SEC DOCUMENTS
The Purchaser has furnished the Shareholders with true and complete
copies of its Quarterly Reports on Form 10-Q for the quarters ended June 30,
2000 and September 30, 2000, any Reports on Form 8-K filed by Purchaser, and its
Registration Statement on Form S-1 declared effective on April 11, 2000, as
amended (collectively, the "SEC DOCUMENTS"). As of their respective filing
dates, each of the SEC Documents complied in all material respects with the
requirements of the Exchange Act, and the rules and regulations of the SEC
promulgated thereunder. Since April 12, 2000, there have been no filings with
the SEC by the Purchaser except those described in this Section 4.6.
4.7 ABSENCE OF CERTAIN CHANGES
Since the date of the financial statements included in the SEC
Documents, there has not been any change which by itself or in conjunction with
all other such changes, has had or could reasonably be expected to have a
Purchaser Material Adverse Effect, except as disclosed in the SEC Documents.
4.8 FULL DISCLOSURE
No information furnished by the Purchaser to the Company, the
Shareholders or their respective representatives in connection with this
Agreement or the Ancillary Documents (including, without limitation, the
information contained in the SEC Documents) contains any untrue statement of a
material fact, taken as a whole, or omits to state a material fact necessary in
order to make the statements so made or
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information so delivered not misleading. The information furnished by the
Purchaser does not include any reports or analyses prepared by third parties
(e.g. analysts), regardless of whether or not the Purchaser provided such
reports and analyses to the Shareholders, the Company or their respective
representatives at their request.
4.9 SHAREHOLDERS CONSENT
No consent or approval of the Shareholders of the Purchaser is required
or necessary for the Purchaser to enter into this Agreement or the Ancillary
Documents to which it is a party or to consummate the transactions contemplated
hereby and thereby.
4.10 BROKERS OR FINDERS
Except for the fees due to Xxxxxxxxx, Xxxxxx & Xxxxxxxx from the
Purchaser, the Purchaser has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Purchaser,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with the Sale, this Agreement, or any transaction
contemplated hereby and agrees to indemnify the Shareholders against all losses,
damages or expenses relating to or arising out of claims for fees or commission
of any broker or agent employed by the Purchaser.
4.11 LITIGATION
There is no material litigation, claim, proceeding or governmental
investigation pending or threatened against the Purchaser, other than as
disclosed in the SEC Documents, and there is no litigation, claim, proceeding,
or governmental investigation pending or threatened against Purchaser that seeks
to delay or prevent the consummation of, or which would be reasonably likely to
adversely affect the Purchaser's ability to consummate, the Sale.
4.12 COMPLIANCE WITH LAWS
The Purchaser is in material compliance with all federal, state, local
and foreign laws, rules, regulations, ordinances, decrees and orders applicable
to it, to its employees and consultants or to its properties, including, without
limitation, all such laws, rules, regulations, ordinances, decrees and orders
relating to intellectual property protection, antitrust matters, consumer
protection, currency exchange, environmental protection, equal employment
opportunity, health and occupational safety, pension and employee benefit
matters, securities and investor protection matters, labor and employment
matters and trading-with-the-enemy matters, except as disclosed in the SEC
Documents, and except where the failure of the Purchaser to so comply would not
have a Purchaser Material Adverse Effect. The Purchaser has not received any
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notification of any asserted present or past unremedied failure by the Purchaser
to comply with any of such laws, rules, regulations, ordinances, decrees or
orders, other than as disclosed in the SEC Documents.
4.13 XXXX XXXXX XXXXXX
The Purchaser is not a $100 million person as defined under the HSR
Act. The Purchaser has no ultimate parent entity that is a $100 million person
as defined under the HSR Act.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by it at or before
the Closing shall be subject to the satisfaction of the following conditions,
which may be expressly waived only in writing signed by the Purchaser:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company and the Shareholders
contained herein and in the Ancillary Documents shall have been true and correct
when made and, except (a) for changes contemplated by this Agreement and the
Ancillary Documents and (b) to the extent that such representations and
warranties speak as of an earlier date, shall be true and correct as of the
Closing Date as though made on that date.
5.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement or any Ancillary Agreement to be performed
and complied with by it at or prior to the Closing.
5.3 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby
and by the Ancillary Documents, or for the continued operation of the Company as
now operated, shall have been obtained, and all waiting periods specified by law
shall have passed. All
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consents, approvals and notices set forth on SCHEDULE 5.6 shall have been
obtained or delivered.
5.4 SECRETARY'S CERTIFICATE
The Purchaser shall have received a certificate of the Secretary of the
Company, in form and substance satisfactory to the Purchaser, as to the
authenticity and effectiveness of the actions of the Board of Directors and
Shareholders of the Company authorizing the Sale and the transactions
contemplated by this Agreement and the Ancillary Documents. Copies of the
Company's Articles, certified by the California Secretary of State, and Bylaws,
certified by the Secretary of the Company, shall be attached to such
certificate.
5.5 NONFOREIGN AFFIDAVIT
The Purchaser shall have received from the Company, pursuant to Section
1445 of the Code, a Foreign Investment in Real Property Tax Act Affidavit,
substantially in the form of EXHIBIT 5.5.
5.6 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the Ancillary Documents shall be legally permitted by all laws and regulations
to which the Purchaser or the Company is subject.
5.7 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of the transactions
contemplated by this Agreement or any Ancillary Document, and no litigation,
investigation or administrative proceeding shall be pending or threatened which
would enjoin, restrain, condition or prevent consummation of the transactions
contemplated by this Agreement or any Ancillary Document.
5.8 TERMINATION OF CERTAIN AGREEMENTS
Any and all rights of refusal, co-sale rights and registration rights,
if any, for the benefit of the holders of Company Capital Stock or Stock
Purchase Rights of the Company shall have been terminated or shall terminate
upon consummation of the Sale.
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5.9 EXERCISE OF STOCK PURCHASE RIGHTS; CONVERSION OF CONVERTIBLE SECURITIES
Any and all Stock Purchase Rights and any and all securities and notes
convertible at any time into Company Capital Stock, vested and unvested, and
regardless of restrictions on exercise or conversion, shall have been exercised
or converted (or, with respect to the Preferred Stock, deemed to be converted
pursuant to Section 2.4.1) for shares of Company Capital Stock prior to the
Closing Date, except for Options assumed by the Purchaser pursuant to Section
2.4.2(c) and rights to options held by certain Company employees.
5.10 STOCK POWERS
All holders of the Company Capital Stock shall have executed Stock
Powers assigning to the Purchaser all shares of Company Capital Stock held by
such holders.
5.11 NONDISCLOSURE AGREEMENTS
The Company shall have delivered to the Purchaser true and correct
copies of all Nondisclosure Agreements entered into by employees or officers of
or consultants to the Company after the date hereof, and no such Nondisclosure
Agreement shall contain any exceptions to the terms thereof, including, without
limitation, to the exclusive ownership by the Company of all Company-related
inventions and intellectual property developments.
5.12 ESCROW AGREEMENT
The Escrow Agreement shall have been executed and delivered by the
Shareholder Representative, on behalf of the Shareholders, and by the Escrow
Agent.
5.13 NONCOMPETITION AGREEMENT
Xxxxx Xxxxxxx shall have executed the Noncompetition Agreement.
5.14 TERMINATION OF EMPLOYMENT AGREEMENTS
All employment agreements of the Company with the Management
Shareholders shall have been terminated by the Company without any obligations
or liabilities of the Company after the Closing Date arising from such
agreements, except for accrued vacation, salary, and other accrued benefits of
Company employees, which shall be included as current liabilities in the
calculation of Estimated Working Capital and Working Capital, and which
liabilities will be assumed by the Purchaser.
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5.15 TERMINATION OF MANAGEMENT AGREEMENT
The management agreement between the Company and IT Capital Partners,
LLC, dated June 3, 1998, shall have been mutually terminated by the parties
thereto as of the Closing Date, and the management fee accrued up to the Closing
Date under such management agreement shall have been either paid or accrued by
the Company as a current liability.
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS
The obligations of the Company and the Shareholders to perform and
observe the respective covenants, agreements and conditions hereof to be
performed and observed by them at or before the Closing shall be subject to the
satisfaction of the following conditions, which may be expressly waived only in
writing signed by the Company and the Shareholder Representative, on behalf of
the Shareholders.
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Purchaser contained herein
and in the Ancillary Documents shall have been true and correct when made and,
except for (a) changes contemplated by this Agreement and the Ancillary
Documents and (b) to the extent that such representations and warranties speak
as of an earlier date, shall be true and correct as of the Closing Date as
though made on that date.
6.2 PERFORMANCE OF AGREEMENTS
The Purchaser shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement or any Ancillary Document to be performed
and complied with by it at or prior to the Closing.
6.3 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of the transactions
contemplated by this Agreement or any Ancillary Document, and no litigation,
investigation or administrative proceeding shall be pending or threatened which
would enjoin, restrain, condition or prevent consummation of the transactions
contemplated by this Agreement or any Ancillary Document.
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6.4 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby
and by the Ancillary Documents or for the continued operation of the Company as
now operated, shall have been obtained, and all waiting periods specified by law
shall have passed. All other consents, approvals and notices referred to in this
Agreement shall have been obtained or delivered.
6.5 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the Ancillary Documents shall be legally permitted by all laws and regulations
to which the Purchaser or the Company is subject.
6.6 SECRETARY'S CERTIFICATES
The Company shall have received a certificate of the Secretary of the
Purchaser, in form and substance satisfactory to the Company, as to the
authenticity and effectiveness of the actions of the Board of Directors of the
Purchaser authorizing the Sale and the transactions contemplated by this
Agreement and the Ancillary Documents. Copies of the Purchaser's Articles of
Incorporation, certified by the Oregon Secretary of State, and Bylaws, certified
by the Secretary of the Purchaser, shall be attached to such certificate.
6.7 BLUE SKY LAWS
The Purchaser shall have received all state securities or blue sky
permits and other authorizations necessary to issue the Closing Date Shares
pursuant to the Sale.
6.8 ESCROW AGREEMENT
The Escrow Agreement shall have been executed and delivered by the
Purchaser and the Escrow Agent.
6.9 SEVERANCE AGREEMENTS; EMPLOYMENT AGREEMENT
The Purchaser shall have executed the Severance Agreements with Xxxxx
Xxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxxx, Xxxx Xxxxx and Xxxxxx Xxxx. The
Purchaser shall have executed the Employment Agreement with Xxxxx Xxxxxxx.
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ARTICLE VII - COVENANTS
Between the date of this Agreement and the Closing Date, or such later
period as set forth in Sections 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11,7.12, and
7.13, the parties covenant and agree as set forth in this Article VII.
7.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE SALE
Unless the Purchaser shall otherwise agree in writing, the business of
the Company shall be conducted in and only in, and the Company shall not take
any action except in, the ordinary course of business and in a manner consistent
with past practice and in accordance with applicable law; and the Company shall
use its best efforts to preserve intact the business organization of the
Company, to keep available the services of the current officers, employees and
consultants of the Company and to preserve the current relationships of the
Company with, and the goodwill of, customers, suppliers and other Persons with
which the Company has significant business relations. By way of amplification
and not limitation, except as otherwise contemplated by this Agreement, the
Company shall not, between the date of this Agreement and the Closing Date,
directly or indirectly do, or propose to do, any of the following without the
prior written consent of the Purchaser:
(a) amend or otherwise change the Company's Articles or
Bylaws;
(b) except for the issuance of shares of Company Capital
Stock upon the exercise or conversion of currently outstanding Stock Purchase
Rights or the issuance of shares of Company Common Stock upon the exercise of
Options assumed pursuant to Section 2.4.2(c), issue, sell, contract to issue or
sell, pledge, dispose of, grant, encumber or authorize the issuance, sale,
pledge, disposition, grant or Encumbrance of (i) any assets of the Company,
except in the ordinary course of business and in a manner consistent with past
practice, (ii) any shares of capital stock of any class of the Company, or (iii)
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest) of the Company;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other securities, property or otherwise,
with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide, redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock
or other securities;
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(e) (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or division thereof or any material
amount of assets; (ii) incur any Debt or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, any obligations of any
Person, or make any loans or advances, except in the ordinary course of business
and consistent with past practice; (iii) enter into any contract or agreement
other than in the ordinary course of business, consistent with past practice;
(iv) authorize any single capital expenditure which is in excess of $10,000 or
capital expenditures which are, in the aggregate, in excess of $25,000 for the
Company taken as a whole; (v) enter into any agreement in which the obligation
of the Company exceeds $10,000 or which shall not terminate or be subject to
termination for convenience within 30 days following execution; (vi) license any
Technology or IP Rights; or (vii) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in this
subsection (e);
(f) enter into or amend any employment, consulting or
agency agreement, or increase the compensation payable or to become payable to
any of its officers, employees, agents or consultants, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer, employee or consultant of the Company, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance, Employee Benefit Plan
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer, employee or consultant;
(g) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice,
with respect to accounting methods, policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable and
collection of accounts receivable);
(h) make any Tax election or settle or compromise any Tax
liability;
(i) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice;
(j) take any action that would or is reasonably likely to
result in any of the representations or warranties of the Company set forth in
this Agreement being untrue in any material respect, or in any covenant of the
Company set forth in this
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Agreement being breached, or in any of the conditions to the Sale specified
in Article V hereof not being satisfied; or
(k) agree to do any of the foregoing.
7.2 ACCESS TO INFORMATION; CONFIDENTIALITY
Subject to the terms of the Confidentiality Agreement between the
Purchaser and the Company (the "CONFIDENTIALITY AGREEMENT"), from the date
hereof to the Closing Date, the Company shall, and shall cause the officers,
directors, employees and agents of the Company to, afford the officers,
employees and agents of the Purchaser access at all reasonable times to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of the Company and shall furnish the Purchaser with all
financial, operating and other data and information as the Purchaser, through
its officers, employees or agents, may reasonably request. Until the Closing
Date, the Purchaser shall not visit the Company's facilities or contact the
Company's customers, software vendor partners or employees (other than the
Company's senior management, as identified by Xxxxx Xxxxxxx) unless and until
the Purchaser receives the specific written approval of Xxxxx Xxxxxxx. From the
date hereof until the Closing Date, the Company shall provide the Purchaser with
monthly and other financial statements of the Company as they become available
internally at the Company, all of which financial statements shall fairly
present the financial position and results of operations of the Company as of
the dates and for the periods therein specified. No investigation pursuant to
this Section 7.2 shall affect any representation or warranty in this Agreement
of any party hereto or any condition to the obligations of the parties hereto.
The parties shall continue to comply with and to perform their respective
obligations under the Confidentiality Agreement.
7.3 NO ALTERNATIVE TRANSACTIONS
Unless this Agreement shall have been terminated in accordance with its
terms, the Company and the Shareholders shall not, directly or indirectly,
through any officer, director, agent or otherwise, solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
any acquisition or purchase of all or any material portion of the assets of, or
any equity interest in, the Company or any business combination with the Company
or participate in any negotiations regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate or negotiate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to do or seek any of the foregoing. The Company and
the Shareholders shall notify the Purchaser promptly if any such proposal or
offer, or any inquiry or contact with any Person with respect thereto, is made
and shall, in any
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such notice to the Purchaser, indicate in reasonable detail the identity of
the Person making such proposal, offer, inquiry or contact and the terms and
conditions of such proposal, offer, inquiry or contact. The Company and the
Shareholders agree not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement (e.g. agreement not
to invest in or seek change of control of the Company) to which the Company
is a party.
7.4 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the other parties of (a) the
occurrence or nonoccurrence of any event which would be likely to cause any
representation or warranty made by such party contained in this Agreement to be
untrue or inaccurate in any material respect and (b) any material failure by
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder; provided, however, that the
delivery of any notice pursuant to this Section 7.4 shall not limit or otherwise
affect the rights or remedies available to the parties hereunder.
7.5 FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate 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 hereby, including,
without limitation, using its commercially reasonable efforts to obtain all
waivers, licenses, permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and of other Persons as are necessary for
the consummation of the transactions contemplated hereby and to fulfill the
conditions to the Sale. In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement or
the Ancillary Documents, each party to this Agreement shall use commercially
reasonable efforts to promptly take all such action. After the Closing, each
party hereto, at the request of the other parties, will take any further actions
necessary or desirable to carry out the purposes of this Agreement or any
Ancillary Document, to vest in the Purchaser full title to all properties,
assets and rights of the Company, and to effect the issuance of the Purchaser
Common Stock to the Shareholders pursuant to the terms and conditions hereof.
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7.6 THE PURCHASER COMMON STOCK
The Purchaser agrees to list on the Nasdaq National Market, on or prior
to the Closing Date, the Closing Date Shares, the Post-Closing Shares, the
Performance Shares, and the shares constituting the Preferred Stock Redemption
Consideration.
7.7 PUBLICITY
No party to this Agreement shall make, or cause to be made, any press
release or public announcement or otherwise communicate with any news media in
respect of this Agreement or the transactions contemplated hereby without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld (and the Purchaser, the Company and the Shareholder Representative, on
behalf of the Shareholders, shall cooperate as to the timing and content of any
such press release, announcement or communication), except as such release,
announcement or communication may be required by governmental authorities,
regulations, a court of competent jurisdiction or applicable law (including,
without limitation, securities laws affecting the Purchaser's public disclosure
obligations), in which case the party releasing the information shall use its
best efforts to provide the information contained therein to the Purchaser, the
Company and the Shareholder Representative in advance of its disclosure.
7.8 OPTION GRANTS
Promptly following the Closing Date, the Purchaser will act to grant
stock options to certain employees and consultants of the Company (including the
Key Employees) at an exercise price per share equal to the Purchaser Common
Stock fair market value as determined under the Purchaser 2000 Stock Incentive
Plan (the "PURCHASER 2000 PLAN") at the first date the plan administrator of the
Purchaser 2000 Plan acts following the Closing Date. Unless otherwise agreed by
the Purchaser and the Company in writing, all such stock options granted by the
Purchaser shall vest in accordance with the standard vesting schedule under the
Purchaser 2000 Plan. In addition, following the Closing Date, the Purchaser will
grant options for 1,000 shares of Purchaser Common Stock, with an exercise price
equal to the fair market value of such stock on the date of such grant, and
having such other terms as are set forth in the Purchaser 2000 Plan, and subject
to such grantee being employed by the Company at the time of such grant, to each
of the Company's employees listed on Section 3.3(c) of the Company Disclosure
Schedule as having a post-closing right to receive Company options for 1,000
shares of Company Common Stock, in each case subject to such employee having
executed a letter in form satisfactory to the Purchaser accepting the
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Purchaser's agreement to issue such options in replacement of such employee's
right to receive Company options.
7.9 INDEMNIFICATION; INSURANCE
The Purchaser agrees that all rights to indemnification existing in
favor, and all limitations on the personal liability, of a director or officer
of the Company provided for in the Company's Articles or Bylaws, as in effect of
the date hereof with respect to matters occurring prior to the Closing Date,
shall, subject to the terms thereof, (a) survive the Sale and (b) continue in
full force and effect for a period of not less than five years from the Closing
Date; provided, however, that all rights to indemnification in respect of any
claim asserted or made within such period shall continue until the disposition
of such claim. The Purchaser shall, during the Survival Period, maintain
liability insurance in such types and at least such amounts as currently
maintained by the Company for its Business.
7.10 BLUE SKY LAWS
The Purchaser shall take such steps as may be necessary to comply with
the securities and blue sky laws of all jurisdictions which are applicable to
the issuance of the Purchaser Common Stock in connection with the Sale. The
Company and the Shareholders shall use commercially reasonable efforts to assist
the Purchaser as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of the Purchaser Common Stock in connection with the Sale.
7.11 REPAYMENT OF DEBT, RELEASES OF LIENS
Prior to the Closing Date, the Company shall pay all Debt and cause any
lenders under such Debt to release all Encumbrances with respect to any of the
Company's assets.
7.12 TERMINATION OF EMPLOYMENT AGREEMENTS
The Company and each Shareholder that is party to an employment or
consulting agreement with the Company hereby agree that such agreement is
terminated and shall be of no further force or effect, effective upon Closing.
7.13 REGISTRATION
The Purchaser shall use its best efforts to file on April 12, 2001, and
shall in any event file by April 30, 2001, a short-form registration statement
on Form S-3 (the
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"REGISTRATION STATEMENT") with the SEC to effect the registration under the
Securities Act of the S-3 Registrable Shares for sale by the Shareholders
(collectively, the "S-3 REGISTERING SHAREHOLDERS") in accordance with the
following:
(i) The Purchaser shall not be required to conduct an underwritten
offering.
(ii) The Purchaser shall have no obligation to include the S-3
Registrable Shares owned by any Shareholder in a Registration Statement unless
and until such Shareholder has furnished the Purchaser with all information and
statements about or pertaining to such Shareholder in such reasonable detail and
on such timely basis as is reasonably deemed by the Purchaser to be necessary or
appropriate for the preparation of the Registration Statement.
(iii) The Purchaser shall, subject to the other provisions of this
Section 7.13:
(1) use its reasonable best efforts to cause the
Registration Statement to become effective as soon as
practicable after the filing thereof;
(2) prepare and file with the SEC as promptly as is
commercially reasonably practicable such amendments
and supplements to the Registration Statement and the
prospectus contained therein as may be necessary to
keep such Registration Statement effective and to
comply with the provisions of the Securities Act
until the earlier to occur of (A) six months after
the effective date of such Registration Statement or
the first anniversary of the Closing Date, whichever
occurs later, or (B) the completion by the S-3
Registering Shareholders of the distribution
described in such Registration Statement;
(3) furnish to the S-3 Registering Shareholders the
number of copies of such Registration Statement, each
amendment and supplement thereto and each prospectus
contained therein as the S-3 Registering Shareholders
may reasonably request;
(4) use reasonable efforts to register or qualify such
shares under the state blue sky or securities laws
("BLUE SKY LAWS") of such jurisdictions as the S-3
Registering Shareholders reasonably request (and to
keep such registrations and qualifications effective
for so long as the Registration Statement is
maintained effective), and to do any and all other
acts and things that may be reasonably necessary or
advisable to enable the S-3 Registering Shareholders
to consummate the disposition of such shares in such
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jurisdictions; provided, however, that the Purchaser
will not be required to do any of the following: (i)
qualify generally to do business in any jurisdiction
where it would not be required but for this Section
7.13, (ii) subject itself to taxation in any such
jurisdiction, or (iii) file any general consent to
service of process in any such jurisdiction;
(5) promptly notify the S-3 Registering Shareholders at
any time during the period that the Purchaser is
required to keep the Registration Statement
effective, of the occurrence of any event as a result
of which such Registration Statement or the
prospectus contained therein contains an untrue
statement of a material fact or omits any fact
necessary to make the statements therein in the light
of the circumstances under which they were made, not
misleading, and prepare a supplement or amendment to
the Registration Statement or such prospectus so
that, as thereafter delivered to the purchasers of
such shares, the Registration Statement will not
contain an untrue statement of a material fact or
omit to state any fact necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading;
(6) use commercially reasonable efforts to cause all such
shares to be listed on the Nasdaq National Market
System or such other exchanges on which shares of
Purchaser Common Stock are then traded; and
(7) have the right to defer such filing for a period of
up to ninety (90) days, or such shorter period as may
be required, if the Purchaser shall furnish to the
Shareholders a certificate signed by the Chairman of
the Board of Directors of the Purchaser stating that
the Board of Directors of the Purchaser has
determined that (a) a material event has occurred or
is likely to occur that has not been publicly
disclosed and if disclosed could have a material
adverse effect on the Purchaser or (b) the
registration could materially interfere with any
public offering of primary shares issued by the
Purchaser or of secondary shares being registered
pursuant to any registration rights in existence on
the date of this Agreement, acquisition, disposition,
corporate reorganization or other material
transaction involving the Purchaser or its
subsidiaries; provided, however, that this right to
defer such filing may only be used
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once; and, PROVIDED, FURTHER, that this right to
defer such filing may be used with respect to a
proposed public offering only if such public
offering is the first public offering effected after
the date of this Agreement.
(v) The Purchaser shall notify the Shareholders in
writing at least fifteen (15) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Purchaser (including, but not limited to, registration
statements relating to secondary offerings of securities of the Purchaser, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford each Shareholder an opportunity to include in
such registration statement all or part of such Piggyback Registrable Shares
held by such Shareholder. Each Shareholder desiring to include in any such
registration statement all or any part of the Piggyback Registrable Shares held
by it (a "PIGGYBACK REGISTERING SHAREHOLDER") shall, within fifteen (15) days
after the above-described notice from the Purchaser, so notify the Purchaser in
writing. Such notice shall state the intended method of disposition of the
Piggyback Registrable Shares by such Shareholder. If the registration statement
under which the Purchaser gives notice under this subsection (v) is for an
underwritten offering, the Purchaser shall so advise the Shareholder. In such
event, the right of any such Piggyback Registering Shareholder to be included in
a registration pursuant to this subsection (v) shall be conditioned upon such
Shareholder's participation in such underwriting and the inclusion of such
Shareholder's Piggyback Registrable Shares in the underwriting to the extent
provided herein. All Piggyback Registering Shareholders proposing to distribute
their Piggyback Registrable Shares through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Purchaser. If the underwriter determines
in good faith that marketing factors require a limitation of the number of
shares to be underwritten, the number of shares that may be included in the
underwriting shall be allocated, first, to the Purchaser; second, to the holders
of shares of Purchaser Common Stock that are contractually entitled to include
such shares in such registration statement based on agreements in existence
prior to the date hereof in accordance with the terms and cut-back provisions of
such agreements (including, but not limited to, Holders as defined in the
Registration Rights Agreement dated as of April 11, 2000, between the Purchaser
and certain investors named therein and the investors parties to the Amended and
Restated Investor Rights Agreement dated as of October 20, 1999); third, to the
Piggyback Registering Shareholders on a PRO RATA basis based on the total number
of shares of Purchaser Common Stock held by such Piggyback Registering
Shareholders; and fourth, to any other shareholder of the
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Company (other than a Shareholder) on a PRO RATA basis. No such reduction
shall reduce the securities being offered by the Purchaser for its own
account to be included in the registration and underwriting. If any Piggyback
Registering Shareholder disapproves of the terms of any such underwriting,
such Piggyback Registering Shareholder may elect to withdraw therefrom by
written notice to the Purchaser and the underwriter, delivered at least ten
(10) Business Days prior to the effective date of the registration statement.
Any Piggyback Registrable Shares excluded or withdrawn from such underwriting
shall be excluded and withdrawn from the registration. For any Shareholder
which is a partnership or corporation, the partners, retired partners and
shareholders of such Shareholder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of
the foregoing person shall be deemed to be a single Shareholder, and any PRO
RATA reduction with respect to such Shareholder shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such Shareholder as defined in this sentence. The
Purchaser shall have the right to terminate or withdraw any registration
initiated by it under this subsection (v) prior to the effectiveness of such
registration whether or not any Shareholder has elected to include securities
in such registration. All rights of the Shareholders and obligations of the
Purchaser under this subsection (v) terminate upon the second anniversary of
the Closing Date.
(vi) If, pursuant to this Section 7.13, the Registrable
Shares owned by the Registering Shareholders are included in a registration
statement, then the Registering Shareholders shall pay all transfer taxes, if
any, relating to the sale of the Registrable Shares and the fees and expenses of
its own counsel.
(vii) Except for the fees and expenses specified in
paragraph (vi) of this Section 7.13 and except as provided in this paragraph
(vii), the Purchaser shall pay all expenses incident to the registration and to
the Purchaser's performance of or compliance with this Section 7.13, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with Blue Sky Laws, printing expenses, messenger and delivery
expenses, and fees and expenses of counsel for the Purchaser and all independent
certified public accountants and other persons retained by the Purchaser.
(viii) In the event that the Registrable Shares owned by the
Registering Shareholders are sold by means of a registration statement pursuant
to this Section 7.13, each Registering Shareholder (for the purposes of this
paragraph (viii), individually the "REGISTRATION INDEMNIFYING PERSON") agrees to
indemnify and hold harmless the other Registering Shareholders, the Purchaser,
each of the Purchaser's and such other Registering Shareholders' officers and
directors, and each Person, if
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any, who controls or may control the Purchaser or such other Registering
Shareholders within the meaning of the Securities Act (for the purposes of
this paragraph (viii), the other Registering Shareholders, the Purchaser,
such officers and directors, and any such other Persons being referred to
individually as a "REGISTRATION INDEMNIFIED PERSON") from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, and expenses, including, without limitation, interest,
penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon, or incurred by such Registration
Indemnified Person, directly or indirectly (collectively, referred to for
purposes of this paragraph (viii) and the corresponding provision of
paragraph (viii) below in the singular as a "REGISTRATION CLAIM"), based
upon, arising out of, or resulting from (x) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
(including any preliminary or final prospectus contained therein or any
amendments or supplements thereto) or any omission or alleged omission to
state therein a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, or (y) any violation or alleged violation of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with such registration and sale of securities,
in each case to the extent (but only to the extent) that such Registration
Claim is based upon, arises out of or results from any untrue statement or
omission based upon information furnished to the Purchaser by such
Registering Shareholder in a written document for use in connection with the
registration statement; and each such Registering Shareholder will pay, as
incurred, any legal or other expenses reasonably incurred by any Person
intended to be indemnified pursuant to this subsection (viii) in connection
with investigating or defending any such Registration Claim.
(ix) The Purchaser (for the purposes of this paragraph
(ix), the "REGISTRATION INDEMNIFYING PERSON") agrees to indemnify and hold
harmless each Registering Shareholder participating in the distribution of
Registrable Shares pursuant to a registration statement, (for the purposes of
this paragraph (ix), the Registering Shareholders and any such other persons
also being referred to individually as an "REGISTRATION INDEMNIFIED PERSON")
from and against all Registration Claims based upon, arising out of, or
resulting from (x) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or any omission or alleged
omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, or (y) any violation or alleged violation of the
Securities Act or the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act or the Exchange Act or any state
securities law in connection with such
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registration and sale of securities, provided that Purchaser will not be
liable in any such case to the extent that any such Registration Claim arises
out of or results from any untrue statement or omission based upon
information furnished to the Purchaser by the Registering Shareholders in a
written document provided by the Registering Shareholders for use in
connection with the registration statement; and the Purchaser will pay to
each such Registering Shareholder or controlling Person, as incurred, any
legal or other expenses reasonably incurred thereby in connection with
investigating or defending any such Registration Claim. The foregoing
indemnity will not inure to the benefit of any Registering Shareholder to the
extent that a prospectus relating to the Registrable Shares was required to
be delivered by such Registering Shareholder under the Securities Act and the
Claim results from the fact that there was not sent or given to the purchaser
of the Registrable Shares, at or prior to the written confirmation of the
sale of such Registrable Shares to such purchaser, a copy of the prospectus
if the Purchaser had previously furnished copies thereof to such Registering
Shareholder.
(x) The indemnification set forth herein shall be in
addition to any liability the Purchaser or the Registering Shareholders may
otherwise have in connection with any registration of the Registrable Shares.
Within a reasonable time after receiving definitive notice of any Registration
Claim in respect of which a Registration Indemnified Person may seek
indemnification under this Section 7.13, such Registration Indemnified Person
shall submit written notice thereof to such Registration Indemnifying Person(s).
The failure of the Registration Indemnified Person so to notify the Registration
Indemnifying Person(s) of any such Registration Claim shall not relieve the
Registration Indemnifying Person(s) from any liability it may have hereunder
except to the extent that (a) such liability was caused or increased by such
omission, or (b) the ability of the Registration Indemnifying Person(s) to
reduce such liability was materially adversely affected by such omission. In
addition, the omission of the Registration Indemnified Person so to notify the
Registration Indemnifying Person(s) of any such Claim shall not relieve the
Registration Indemnifying Person(s) from any liability it may have otherwise
than hereunder. The Registration Indemnifying Person(s) shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise, or settlement (without admitting liability of the Registration
Indemnifying Person(s)) of any such Registration Claim asserted, such defense,
compromise, or settlement to be undertaken at the expense and risk of the
Registration Indemnifying Person(s), and the Registration Indemnified Person
shall have the right to engage separate counsel, at its own expense, which
counsel for the Registration Indemnifying Person(s) shall keep informed and
consult with in a reasonable manner; provided, however, that the Registration
Indemnified Person(s) shall have the right to retain separate counsel, with
reasonable fees and expenses to be paid by the Registration Indemnifying
Person(s), if
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representation of the Registration Indemnified Person(s) by the counsel
retained by the Registration Indemnifying Person(s) would be inappropriate
due to potential or actual differing interests between the Registration
Indemnified Person(s) and the Registration Indemnifying Person(s) in such
proceeding. In the event the Registration Indemnifying Person(s) shall fail
to undertake such defense by its own representatives, the Registration
Indemnifying Person(s) shall give prompt written notice of such election not
to undertake such defense to the Registration Indemnified Person, and the
Registration Indemnified Person shall undertake, at the Registration
Indemnifying Person(s)' expense, the defense, compromise, or settlement
(without admitting liability of the Registration Indemnified Person) thereof
on behalf of and for the account and risk of the Registration Indemnifying
Person(s) by counsel or other representatives designated by the Registration
Indemnified Person. In the event that any Registration Claim shall arise out
of a transaction or cover any period or periods wherein the Purchaser and the
Registering Shareholders shall each be liable hereunder for part of the
liability or obligation arising therefrom, then the parties shall, each
choosing its own counsel and bearing its own expenses, defend such
Registration Claim, and no settlement or compromise of such Registration
Claim may be made without the joint consent or approval of the Purchaser and
the Registering Shareholders, which shall not be unreasonably withheld.
Notwithstanding the foregoing, no Registration Indemnifying Person(s) shall
be obligated hereunder with respect to amounts paid in settlement of any
Registration Claim if such settlement is effected without the consent of such
Registration Indemnifying Person(s) (which consent shall not be unreasonably
withheld).
(xi) If the indemnification provided for in this Section
7.13 is held by a court of competent jurisdiction to be unavailable to an
Registration Indemnified Party (as defined in either paragraph (viii) or (ix))
with respect to any Registration Claim, then the Registering Shareholders or the
Purchaser, as applicable and as the case may be (each a "REGISTRATION
INDEMNIFYING PARTY"), in lieu of indemnifying an Registration Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Registration
Indemnified Party as a result of such Registration Claim in such proportion as
is appropriate to reflect the relative fault of the Registration Indemnifying
Party on the one hand and of the Registration Indemnified Party on the other in
connection with the statements, omissions or violations which resulted in such
Registration Claim, as well as any other relevant equitable considerations. The
relative fault of the Registration Indemnifying Party and of the Registration
Indemnified Party shall be determined by a court of law by reference to, among
other things, whether the untrue or allegedly untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Registration Indemnifying Party or by the
Registration Indemnified Party and the parties' relative
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intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(xii) The obligations of the Purchaser and the Registering
Shareholders under this Section 7.13 shall survive the completion of any
offering of Registrable Shares in a registration statement under this Section
7.13, and otherwise.
(xiii) For a period of one (1) year, commencing on the
Closing Date, all sales of Registrable Shares shall be made through a market
maker of Purchaser Common Stock as designated in advance by the Purchaser,
provided, however, that the Shareholders may submit additional market makers to
the Purchaser for the Purchaser's approval, which shall not be unreasonably
withheld. Notwithstanding the foregoing, (a) any Shareholder that is an
investment fund and that distributes Registrable Shares to its partners or
members and (b) any of such partners or members that receive distributed
Registrable Shares will not be held liable if such partners or members do not
use the Purchaser's designated or approved market makers, but such Shareholder
will request that such partners or members use the Purchaser's designated or
approved market makers.
7.14 EXECUTION OF ALL ANCILLARY DOCUMENTS
The Purchaser and the Company will execute at or prior to Closing each
of the Ancillary Documents to which it is a party and all instruments or
documents contemplated thereby.
ARTICLE VIIA - COVENANTS OF THE SHAREHOLDERS
7A.1 RESTRICTIONS ON TRANSFER
Each Shareholder will not sell, transfer, or otherwise dispose of, or
make any offer or agreement relating to any of the foregoing with respect to,
any shares of the Purchaser Common Stock that the undersigned may acquire in
connection with the Sale, except: (i) in a transaction permitted pursuant to
Rule 145 under the Securities Act; (ii) in a transaction otherwise exempt from
the registration requirements of the Securities Act; or (iii) pursuant to a
registration statement under the Securities Act.
7A.2 EXECUTION OF ALL ANCILLARY DOCUMENTS
Each Shareholder will execute at or prior to Closing each Ancillary
Document to which it is a party and all instruments or documents contemplated
thereby.
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7A.3 NO ALTERNATIVE TRANSACTIONS
(a) Each Shareholder shall vote or cause to be voted, or execute a
written consent with respect to, his, her or its shares of Company Capital Stock
against any proposal by a party other than the Purchaser to merge or consolidate
with the Company or any subsidiary of the Company or to sell all or
substantially all the assets of the Company or any subsidiary of the Company at
every meeting of the Shareholders of the Company at which such matters are
considered and at every adjournment thereof and in connection with every
proposal to take action by written consent with respect thereto.
(b) Each Shareholder agrees that he, she or it will not, nor will such
Shareholder permit any entity under such Shareholder's control to, deposit any
shares of Company Capital Stock in a voting trust or subject the shares to any
agreement, arrangement or understanding with respect to the voting of the shares
inconsistent with this Agreement.
7A.4 LIMITATION ON SALES
During the term of this Agreement and prior to the Closing, each
Shareholder agrees not to sell, assign, transfer, pledge, encumber or otherwise
dispose of any of his, her or its shares of Company Capital Stock.
7A.5 TAXES
Each Shareholder shall timely pay all transfer, documentary, sales,
use, stamp, registration and other Taxes arising from or relating to the
transactions contemplated by this Agreement, to the extent they relate
specifically to the issuance of shares of the Purchaser Common Stock to such
Shareholder, and such Shareholder shall, at his, her or its own expense, file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration, and other Taxes.
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION
This Agreement may be terminated and the Sale may be abandoned at any
time prior to the Closing Date:
(a) by mutual written consent of the Purchaser, the Company,
and the Shareholders' Representative;
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(b) by either the Company or the Purchaser, if the Sale
has not been consummated by December 15, 2000; provided, however, that the right
to terminate this Agreement under this subsection (b) shall not be available to
any party whose failure to fulfill or cause to be fulfilled any obligation under
this Agreement has been the cause of, or resulted in, the failure of the Closing
Date to occur on or before such date;
(c) by either the Company or the Purchaser, if there
shall be any law or regulation that makes consummation of the Sale illegal or if
any judgment, injunction, order or decree enjoining the Purchaser or the Company
from consummating the Sale is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this subsection (c) shall have
used all reasonable efforts to remove such judgment, injunction, order or
decree;
(d) by the Company, in the event of a material breach by
the Purchaser of any representation, warranty or agreement contained herein
which has not been cured or is not curable by December 15, 2000;
(e) by the Purchaser, in the event of a material breach by the
Company or by the Shareholders of any representation, warranty or agreement
contained herein which has not been cured or is not curable by December 15,
2000.
8.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section
8.1 hereof, there shall be no further obligation on the part of any party
hereto, except that nothing herein shall relieve any party from liability for
any breach hereof before the termination date. Notwithstanding the foregoing,
the Confidentiality Agreement between the Purchaser and the Company shall
survive the termination of this Agreement and remain in full force and effect.
8.3 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by the Purchaser, the Company and Shareholders holding an aggregate of at
least 60% of the Company Common Stock then outstanding.
8.4 WAIVER
At any time prior to the Closing Date, the Purchaser may (a) extend the
time for the performance of any obligation or other act of the Company or the
Shareholders,
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(b) waive any inaccuracy in the representations and warranties of
the Company or the Shareholders contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any agreement of the Company or
the Shareholders or any condition to the obligations of the Purchaser contained
herein. At any time prior to the Closing Date, the Company may (a) extend the
time for the performance of any obligation or other act of the Purchaser, (b)
waive any inaccuracy in the representations and warranties of the Purchaser
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any agreement of the Purchaser or any condition to the
obligations of the Company contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
ARTICLE IX - SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL
All representations and warranties contained in this Agreement or in
the Ancillary Documents or in any certificate delivered pursuant hereto or
thereto shall survive the Closing for a period of eighteen months after the
Closing Date (the "SURVIVAL PERIOD"), and shall not be deemed waived or
otherwise affected by any investigation made or any knowledge acquired with
respect thereto, or by any notice delivered pursuant to Section 7.4 hereof;
PROVIDED, HOWEVER, that any claim based on fraud or relating to title to the
Company Capital Stock shall survive the Closing indefinitely and any claim
relating to Taxes shall survive for the applicable statute of limitations. The
covenants and agreements contained in this Agreement or in the Ancillary
Documents shall survive the Closing and shall continue until all obligations
with respect thereto shall have been performed or satisfied or shall have been
terminated in accordance with their terms.
9.2 INDEMNIFICATION BY THE SHAREHOLDERS
Subject to the provisions and limitations set forth in this Article IX,
from and after the Closing, each Shareholder shall indemnify and hold the
Purchaser, its officers, directors and affiliates (as "affiliate" is defined in
Rule 12b-2 of the Exchange Act) (the "PURCHASER INDEMNIFIED PARTIES") harmless
from and against, and shall reimburse, on a net after-tax, after-insurance basis
(after taking into account any Taxes imposed on the receipt of the reimbursement
and any Tax benefits actually utilized in reducing its Taxes and without
duplicating any amounts previously reflected in the Working Capital calculation
used to determine the Base Amount or any adjustment thereto pursuant to Section
2.5), the Purchaser Indemnified Parties for, any and all losses, damages, debts,
liabilities, obligations, judgments, orders, awards, writs, injunctions,
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decrees, fines, penalties, Taxes, costs or expenses ("LOSSES") arising out of
(i) any inaccuracy or misrepresentation in, or breach of, any representation
or warranty made by the Company or such Shareholder in this Agreement or in
any Ancillary Document; (ii) any failure by the Company or such Shareholder
to perform or comply, in whole or in part, with any covenant or agreement in
this Agreement or in any Ancillary Document; (iii) any claim by any employee
or former employee listed on Section 3.3(c) of the Company Disclosure
Schedule to the extent based upon such employee's or former employee's having
an option, right or interest in, or any right to receive an option, right or
interest in any equity securities of the Company, PROVIDED, HOWEVER, that any
claim under this clause (iii) shall be conditioned upon the Purchaser having
complied with its covenant under Section 7.8; or (iv) any liability for
withholding Taxes imposed with respect to any Purchase Consideration payable
to such Shareholder.
9.3 INDEMNIFICATION BY THE PURCHASER
Subject to the limitations set forth in this Article IX, from and after
the Closing, the Purchaser shall indemnify and hold the Shareholders, their
officers, directors and affiliates (as "affiliate" is defined in Rule 12b-2 of
the Exchange Act) (the "SHAREHOLDER INDEMNIFIED PARTIES") harmless from and
against, and shall reimburse the Shareholders for, any and all Losses arising
out of (i) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by the Purchaser in this Agreement or in any
Ancillary Document; or (ii) any failure by the Purchaser to perform or comply,
in whole or in part, with any covenant or agreement in this Agreement or in any
Ancillary Document.
9.4 THRESHOLD AND LIMITATIONS; ADJUSTMENT OF PURCHASE CONSIDERATION
(a) No Purchaser Indemnified Party or Shareholder Indemnified Party
shall be entitled to receive any indemnification payment with respect to any
claim for indemnification under this Article IX ("CLAIMS") until the aggregate
Losses for which the Purchaser Indemnified Parties or the Shareholder
Indemnified Parties, as the case may be, would otherwise be entitled to receive
indemnification exceed $50,000 (the "THRESHOLD"). Once such aggregate Losses
exceed the Threshold, the Purchaser Indemnified Parties or the Shareholder
Indemnified Parties, as the case may be, shall be entitled to indemnification
for the aggregate amount of all Losses, minus the Threshold. Notwithstanding the
foregoing, the Purchaser Indemnified Parties and the Shareholder Indemnified
Parties (collectively, the "INDEMNIFIED PARTIES") shall be entitled to
indemnification for all Losses based upon a claim of fraud or relating to title
to Company Capital Stock, authority to enter into this Agreement, Taxes, the
representations in Section 3.2, Section 4.2 and Section 4.10, the covenants set
forth in
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Section 7.11 and Section 10.2 hereof, or clause (iii) of Section 9.2, without
regard to the Threshold.
(b) Except for Losses based upon a claim of fraud or relating to Taxes,
title to Company Capital Stock or authority to enter into this Agreement, the
aggregate liability of all Shareholders under this Article IX shall be limited
to 20% of the Purchase Price. With respect to any Claim other than those
referenced in the last sentence of this Section 9.4(b), each of Summit, IT
Capital Partners LLC and Xxxxxxx Family Trust (the "Primary Indemnitors") shall
be severally liable for any liability of the Shareholders under this Article IX
on a PRO RATA basis in accordance with the number of Closing Date Shares each
such Primary Indemnitor (or, in the case of Summit, group of Primary
Indemnitors) is entitled to receive as compared to all other Primary
Indemnitors, and (ii) each other Shareholder shall be severally liable, in
accordance with the number of Closing Date Shares such Shareholder is entitled
to receive as compared to all other Shareholders; PROVIDED, HOWEVER, that
indemnification obligations that are satisfied by release of Escrow Shares or
cash from the Escrow Fund shall be allocated among the Shareholders in
accordance with Section 9.4(d). In the event of any Claim based upon fraud by a
Shareholder (but not based on fraud by the Company) or upon a Shareholder's lack
of title to Company Capital Stock or authority to enter into this Agreement, the
Purchaser Indemnified Parties shall be entitled to pursue the Claim only against
such Shareholder.
(c) An indemnifying party shall not be obligated to defend and hold
harmless an Indemnified Party, or otherwise be liable to such party, with
respect to any claims made by the Indemnified Party after the expiration of the
applicable time period as set forth in Section 9.1 hereof. Notwithstanding the
foregoing, indemnity may be sought after the expiration of the Survival Period
pursuant to this Article IX if a Claim Notice shall have been delivered to the
Shareholder Representative, on behalf of the Shareholders, or to the Purchaser,
as the case may be, prior to the expiration of the Survival Period.
(d) The indemnification obligations of the Shareholders under this
Article IX shall be satisfied, first, by means of the release from escrow to the
Purchaser Indemnified Parties of Escrow Shares or cash from the Escrow Fund (as
defined in the Escrow Agreement), in accordance with the provisions of the
Escrow Agreement. The number of Escrow Shares to be released from escrow to the
Purchaser Indemnified Parties in payment of any Claims shall be determined by
dividing (x) the aggregate dollar amount of such Claims by (y) the Share Price.
The aggregate value of Claims paid by means of such release of Escrow Shares or
cash from the Escrow Fund shall be deemed to reduce the total Purchase
Consideration otherwise payable to the Shareholders pursuant to Section 2.4 of
this Agreement. Any such Claims shall be
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deemed to reduce the Escrow Shares, PRO RATA with respect to each
Shareholder, on the basis of the number of Escrow Shares allocated to such
Shareholder on Schedule A relative to the total number of Escrow Shares on
such Schedule; provided, however, that any Claims paid with respect to any
Loss related to any representation, warranty, covenant or agreement of a
Shareholder or based upon fraud by a Shareholder shall not result in such a
PRO RATA reduction of the Escrow Shares but shall reduce only the Escrow
Shares of such Shareholder.
9.5 PROCEDURE FOR INDEMNIFICATION
(a) An Indemnified Party shall give written notice (the "CLAIM NOTICE")
of any Claim for indemnification under this Article IX to the Shareholder
Representative, on behalf of the Shareholders, or to the Purchaser, as the case
may be, reasonably promptly after the assertion against the Indemnified Party of
any claim by a third party (a "THIRD PARTY CLAIM") or, if such Claim is not in
respect of a Third Party Claim, reasonably promptly after the discovery of facts
upon which the Indemnified Party intends to base a Claim for indemnification
pursuant to this Article IX; provided, however, that the failure or delay to so
notify the Shareholder Representative or the Purchaser, as the case may be,
shall not relieve the indemnifying party of any obligation or liability that the
indemnifying party may have to the Indemnified Party except to the extent that
the indemnifying party demonstrates that his, her or its ability to defend or
resolve such Claim is adversely affected thereby. Any such Claim Notice shall
describe the facts and circumstances on which the asserted Claim for
indemnification is based and shall include the amount of the indemnifiable
Losses (or, if such amount is not then determined, a good faith estimate
thereof) and the basis for the determination of the amount of such Losses.
(b) (i) (A) Subject to the rights of or duties to any insurer
or other third party having potential liability therefor, the Shareholder
Representative, on behalf of the Shareholders, shall have the right, upon
written notice given by the Shareholder Representative to the Purchaser
Indemnified Party within 30 days after receipt by the Shareholder Representative
of the notice from the Purchaser Indemnified Party of any Third Party Claim, to
assume the defense or handling of such Third Party Claim, at the Shareholders'
sole expense, in which case the provisions of Section 9.5(b)(ii) hereof shall
govern; provided, however, that, notwithstanding the foregoing, the Purchaser
may elect to assume the defense and handle any such Third Party Claim if it
determines in good faith that the resolution of such Third Party Claim could
result in an adverse impact on the business, operations, assets, liabilities
(absolute, accrued, contingent or otherwise), condition (financial or otherwise)
or prospects of the Purchaser, in which case the provisions of Section
9.5(c)(ii) hereof shall govern.
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(B) Subject to the rights of or duties to any insurer
or other third party having potential liability therefor, the Purchaser shall
have the right, upon written notice given by the Purchaser to the Shareholder
Representative within 30 days after receipt by the Purchaser of the notice
from a Shareholder Indemnified Party of any Third Party Claim, to assume the
defense or handling of such Third Party Claim, at the Purchaser's sole
expense, in which case the provisions of Section 9.5(b)(ii) hereof shall
govern
(ii) The Shareholder Representative, on behalf of the
Shareholders, or the Purchaser, as the case may be, shall select counsel
reasonably acceptable to the Indemnified Party in connection with conducting the
defense or handling of such Third Party Claim, and the Shareholder
Representative or the Purchaser, as the case may be, shall defend or handle the
same in consultation with the Indemnified Party and shall keep the Indemnified
Party timely apprised of the status of such Third Party Claim. Neither the
Shareholder Representative nor the Purchaser, as the case may be, shall, without
the prior written consent of the Indemnified Party, agree to a settlement of any
Third Party Claim, unless (A) the settlement provides an unconditional release
and discharge of the Indemnified Party and the Indemnified Party is reasonably
satisfied with such discharge and release and (B) with respect to any Claim by a
Purchaser Indemnified Party, the Purchaser shall not have reasonably objected to
any such settlement on the ground that the circumstances surrounding the
settlement could result in an adverse impact on the business, operations,
assets, liabilities (absolute, accrued, contingent or otherwise), condition
(financial or otherwise) or prospects of the Purchaser. The Indemnified Party
shall cooperate with the Shareholder Representative or the Purchaser, as the
case may be, and shall be entitled to participate in the defense or handling of
such Third Party Claim with its own counsel and at its own expense.
(c) (i) (A) If (x) the Shareholder Representative does not
give written notice to the Purchaser Indemnified Party pursuant to Section
9.5(b)(i)(A) within 30 days after receipt of the notice from the Purchaser
Indemnified Party of any Third Party Claim of the Shareholder Representative's
election to assume the defense or handling of such Third Party Claim or (y) the
Purchaser elects to assume the defense and the handling of such Third Party
Claim pursuant to the proviso in Section 9.5(b)(i)(A), the provisions of Section
9.5(c)(ii) hereof shall govern.
(B) If the Purchaser does not give written
notice to the Shareholder Representative pursuant to Section 9.5(b)(i)(B) within
30 days after receipt of the notice from a Shareholder Indemnified Party of any
Third Party Claim of the Purchaser's election to assume the defense or handling
of such Third Party Claim, the provisions of Section 9.5(c)(ii) hereof shall
govern.
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(ii) The Indemnified Party may, at the indemnifying
party's expense, select counsel reasonably acceptable to the indemnifying
party in connection with conducting the defense or handling of such Third
Party Claim and defend or handle such Third Party Claim in such manner as the
Indemnified Party may deem appropriate and in consultation with the
indemnified party; provided, however, that the Indemnified Party shall keep
the Shareholder Representative or the Purchaser, as the case may be, timely
apprised of the status of such Third Party Claim and shall not settle such
Third Party Claim without the prior written consent of the Shareholder
Representative or the Purchaser, as the case may be, which consent shall not
be unreasonably withheld. If the Indemnified Party defends or handles such
Third Party Claim, the indemnifying party shall cooperate with the
Indemnified Party and shall be entitled to participate in the defense or
handling of such Third Party Claim with its own counsel and at its own
expense.
9.6 REMEDIES; SPECIFIC PERFORMANCE; NO CONTRIBUTION FROM THE COMPANY
Except as otherwise provided, the indemnification provisions of this
Article IX are the sole and exclusive remedy of any party to this Agreement for
a breach of any representation, warranty or covenant contained herein.
Notwithstanding the preceding sentence, each of the parties acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties hereto shall be entitled to an injunction
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof (including the
indemnification provisions hereof) in any competent court having jurisdiction
over the parties, in addition to any other remedy to which they may be entitled
at law or in equity. Notwithstanding any provisions to the contrary, after the
Closing Date, the Shareholders shall have no right against the Company based on
or arising from the covenants, representations and warranties being made under
this Agreement by the Company or the Shareholders arising hereunder or
otherwise, whether by direct claim, cross-claim, in respect of indemnity or
contribution rights, or otherwise.
ARTICLE X - GENERAL
10.1 TAX MATTERS
All of the parties hereto shall cooperate, as and to the extent
reasonably requested, in connection with the preparation of any Tax Return and
any audit,
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investigation, litigation or other action with respect to Taxes that may be
instituted after the Closing.
10.2 EXPENSES
The cost of the Company's and the Shareholder's investment banking,
legal and accounting fees incurred on behalf of the Company and the Shareholders
in connection with the transactions contemplated by this Agreement will be paid
or accrued by the Company at the Closing (with all such accrued and unpaid
amounts being deemed accrued as of the close of business on the day immediately
preceding the Closing Date, and included in the calculation of Estimated Working
Capital and Working Capital; PROVIDED, HOWEVER, that the Company or the
Shareholders shall pay any such expenses in excess of $900,000 prior to the
Closing. The Purchaser agrees to pay the remaining accrued expenses immediately
after the Closing. Except for the provisions of the preceding two sentences,
each party shall pay its own fees and expenses incident to the negotiation,
preparation and execution of this Agreement and the Ancillary Documents,
regardless of whether the transactions contemplated by this Agreement are
consummated; provided, however, that, should any action be brought hereunder,
the reasonable attorneys' fees and expenses of the prevailing party shall be
paid by the other party to such action.
10.3 NOTICES
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile
transmission, or overnight courier service, in each case addressed as
respectively set forth below or to such other address as any party shall have
previously designated by such a notice. The Closing Date of any notice, request
or demand shall be the date of personal delivery, the date on which successful
facsimile transmission is confirmed or the date actually delivered by a
reputable overnight courier service, as the case may be, in each case properly
addressed as provided herein and with all charges prepaid.
TO THE PURCHASER:
Corillian Corporation
0000 XX Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxx
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with a copy to:
Xxxxxxx Coie LLP
0000 XX Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Attention: Xxx X. Xxxxxx
TO THE COMPANY:
Xxxxxxx Associates Inc.
1801 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxx, Xxxxx & Davidoff Incorporated
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxxx
TO THE SHAREHOLDER REPRESENTATIVE:
Xxxxx X. Xxxxxxx
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
and to:
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Xxxxxx, Xxxxx & Davidoff Incorporated
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxxx
10.4 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
10.5 ENTIRE AGREEMENT
This Agreement, the Confidentiality Agreement and the Ancillary
Documents constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof, including, without limitation,
the Letter of Intent (and accompanying Term Sheet), dated October 6, 2000, sent
from the Purchaser to the Company.
10.6 ASSIGNMENT
This Agreement shall not be assigned prior to the Closing by operation
of law or otherwise; provided, however, that the Purchaser's rights and
obligations may be assigned to and assumed by the Purchaser or by any other
corporation wholly owned (directly or through intermediate wholly-owned
subsidiaries) by the Purchaser.
10.7 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their respective successors, heirs, legal representatives
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
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10.8 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California applicable to contracts executed in and to
be performed in that state.
10.9 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.10 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Agreement,
the parties acknowledge that Transmitted Copies of this Agreement will be
equivalent to original documents until such time as original documents are
completely executed and delivered. "TRANSMITTED COPIES" will mean copies that
are reproduced or transmitted via photocopy, facsimile or other process of
complete and accurate reproduction and transmission.
10.11 WAIVER OF JURY TRIAL
The Purchaser, the Company and each of the Shareholders hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement, the transactions contemplated hereby or the actions
of such parties in the negotiation, administration, performance and enforcement
hereof.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Stock Purchase Agreement as of the date and year first above written.
CORILLIAN CORPORATION
By
-----------------------------------
Its
----------------------------------
XXXXXXX ASSOCIATES INC.
By:
-----------------------------------
Xxxxx X. Xxxxxxx
President and CEO
SHAREHOLDERS:
Xxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx
Family Trust
By:
-----------------------------------
Its:
---------------------------------
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.
Its General Partner
By: Stamps, Xxxxxxx & Co. IV,
Its General Partner
By:
-----------------------------------
General Partner
S-1
SUMMIT VENTURES V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By:
----------------------------
Member
SUMMIT INVESTORS III, L.P.
By:
-----------------------------------
General Partner
SUMMIT V ADVISORS FUND, L.P.
By: Summit Partners, LLC
Its General Partner
By:
----------------------------------
Member
SUMMIT V ADVISORS FUND (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By:
----------------------------------
Member
S-2
SUMMIT V COMPANION FUND, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By:
----------------------------
Member
IT CAPITAL PARTNERS LLC
By:
-----------------------------------
Its:
---------------------------------
SHRIMPTON FAMILY TRUST
By:
-----------------------------------
Its:
---------------------------------
X. XXXXX ASSOCIATES, INC.
By:
-----------------------------------
Its:
---------------------------------
-------------------------------------
Xxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxx
S-3
-------------------------------------
Xxxxxx Xxxxxxxx
S-4
SCHEDULE 2
PREFERRED STOCK REDEMPTION AMOUNTS
PREFERRED STOCK
SHAREHOLDER REDEMPTION AMOUNT
----------- -----------------
Summit Ventures IV, L.P. $2,908,508
Summit Ventures V, L.P. $2,491,837
Summit Investors III., L.P. $258,646
Summit V Advisors Fund, L.P. $50,933
Summit V Advisors Fund (Q.P.), L.P. $166,669
Summit V Companion Fund, L.P. $416,671
------------------------------------------------------- -----------------------------
Total $6,293,264
1
SCHEDULE 2.3
SHAREHOLDER SHARES DELIVERED AT CLOSING
SUMMIT VENTURES IV, L.P. 392,320
SUMMIT VENTURES V, L.P. 336,120
SUMMIT INVESTORS III, L.P. 34,889
SUMMIT V ADVISORS FUND, L.P 6,873
SUMMIT V ADVISORS FUND (QP), L.P. 22,480
SUMMIT V COMPANION FUND, L.P. 56,200
IT CAPITAL PARTNERS LLC 89,688
XXXXXXX FAMILY TRUST 273,223
SHRIMPTON FAMILY TRUST 14,064
X. XXXXX ASSOCIATES, INC. 14,406
XXXXX XXXXXX 29,534
XXXXXX XXXX 35,764
XXXXXX XXXXXXXX 1,818
------------------------------------------------------------------------------------------------------------
TOTAL: 1,307,379
2
