Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
QRS CORPORATION
AND
ROCKPORT TRADE SYSTEMS, INC.
DATED AS OF FEBRUARY 29, 2000
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS..........................................................................1
SECTION 1.01 Certain Defined Terms........................................................1
ARTICLE II THE REORGANIZATION..................................................................9
SECTION 2.01 Assets To Be Transferred.....................................................9
SECTION 2.02 Assets To Be Retained........................................................9
SECTION 2.03 Liabilities Not Assumed......................................................9
SECTION 2.04 Closing.....................................................................10
SECTION 2.05 Documents To Be Delivered by Company........................................10
SECTION 2.06 Tax Consequences............................................................10
ARTICLE III PAYMENT BY ACQUIROR...............................................................11
SECTION 3.01 Transfer of Acquiror Common Stock and Cash..................................11
SECTION 3.02 Dissenting Shares...........................................................11
SECTION 3.03 Assumption of the Company's Liabilities.....................................11
SECTION 3.04 Company Stock Option Plan...................................................11
SECTION 3.05 Fractional Shares...........................................................12
SECTION 3.06 No Transfers................................................................12
SECTION 3.07 Escrow Fund.................................................................12
SECTION 3.08 Withholding Rights..........................................................12
SECTION 3.09 Further Assurances..........................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................12
SECTION 4.01 Organization and Qualification; Subsidiaries................................13
SECTION 4.02 Charter; Corporate Books and Records........................................13
SECTION 4.03 Capitalization..............................................................13
SECTION 4.04 Authority Relative to this Agreement........................................14
SECTION 4.05 No Conflict; Required Filings and Consents..................................15
SECTION 4.06 Permits; Compliance with Laws...............................................15
SECTION 4.07 Financial Statements........................................................16
SECTION 4.08 Absence of Certain Changes or Events........................................16
SECTION 4.09 Accounts Receivable; Inventories............................................19
SECTION 4.10 Customers; Suppliers........................................................19
SECTION 4.11 Sales and Purchase Order Backlog............................................20
SECTION 4.12 Product and Service Warranties..............................................20
SECTION 4.13 Employee Benefit Plans; Labor Matters.......................................21
SECTION 4.14 Employee Matters............................................................24
SECTION 4.15 Material Contracts..........................................................26
SECTION 4.16 Guaranties..................................................................26
SECTION 4.17 Litigation..................................................................26
SECTION 4.18 Environmental Matters.......................................................26
SECTION 4.19 Intellectual Property.......................................................27
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TABLE OF CONTENTS
(continued)
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SECTION 4.20 Taxes.......................................................................29
SECTION 4.21 Properties and Assets.......................................................30
SECTION 4.22 Brokers.....................................................................31
SECTION 4.23 Certain Business Practices..................................................31
SECTION 4.24 Interested Party Transactions...............................................31
SECTION 4.25 Vote Required; Consents.....................................................32
SECTION 4.26 Board Approval..............................................................33
SECTION 4.27 Business Activity Restrictions..............................................33
SECTION 4.28 Tax Treatment...............................................................33
SECTION 4.29 Acquisition Consideration...................................................33
SECTION 4.30 Representations Complete....................................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR..........................................34
SECTION 5.01 Organization and Qualification; Subsidiaries................................34
SECTION 5.02 Authority Relative to this Agreement........................................34
SECTION 5.03 No Conflict; Required Filings and Consents..................................34
SECTION 5.04 Capitalization..............................................................35
SECTION 5.05 SEC Filings; Financial Statements...........................................35
SECTION 5.06 Absence of Undisclosed Liabilities..........................................36
SECTION 5.07 Brokers.....................................................................36
SECTION 5.08 Tax Treatment...............................................................36
SECTION 5.09 Representations Complete....................................................36
ARTICLE VI CONDUCT PRIOR TO CLOSING AND COVENANTS.............................................36
SECTION 6.01 Conduct of Business by the Company..........................................36
SECTION 6.02 Notices of Certain Events...................................................37
SECTION 6.03 Access to Information; Confidentiality......................................37
SECTION 6.04 No Solicitation of Transactions.............................................37
SECTION 6.05 Further Action; Consents; Filings...........................................38
SECTION 6.06 Public Announcements........................................................39
SECTION 6.07 Shareholder Approval........................................................39
SECTION 6.08 NNM Listing of Additional Shares Application................................39
SECTION 6.09 FIRPTA Certificate..........................................................39
SECTION 6.10 Company and Stock Option Plan; Assumption of Employee and
Director Options..........................................................39
SECTION 6.11 Tax Covenant................................................................40
SECTION 6.12 Company Options.............................................................41
SECTION 6.13 Insurance...................................................................41
SECTION 6.14 Change of Company Name......................................................41
SECTION 6.15 Buyers and Shippers Agreement...............................................41
SECTION 6.16 Company Liquidation and Dissolution.........................................41
SECTION 6.17 Restrictions on Disposition of Shares.......................................41
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TABLE OF CONTENTS
(continued)
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SECTION 6.18 Employee Benefit Covenants..................................................42
ARTICLE VII CONDITIONS TO THE REORGANIZATION..................................................43
SECTION 7.01 Conditions to the Obligations of Each Party to Consummate
the Reorganization........................................................43
SECTION 7.02 Conditions to the Obligations of the Company................................43
SECTION 7.03 Conditions to the Obligations of Acquiror...................................44
ARTICLE VIII INDEMNIFICATION..................................................................46
SECTION 8.01 Survival of Representations and Warranties..................................46
SECTION 8.02 Indemnification.............................................................46
SECTION 8.03 Damage Threshold; Limitation................................................47
SECTION 8.04 Escrow Period...............................................................48
SECTION 8.05 Claims upon Escrow Fund.....................................................48
SECTION 8.06 Objections to Claims........................................................49
SECTION 8.07 Resolution of Conflicts; Arbitration........................................49
SECTION 8.08 Claims After Depletion of Escrow Fund.......................................50
SECTION 8.09 Shareholders'Agent..........................................................50
SECTION 8.10 Actions of the Shareholders'Agent...........................................51
SECTION 8.11 Third-Party Claims..........................................................51
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..................................................51
SECTION 9.01 Termination.................................................................51
SECTION 9.02 Effect Of Termination.......................................................52
SECTION 9.03 Amendment...................................................................52
SECTION 9.04 Waiver......................................................................53
SECTION 9.05 Expenses....................................................................53
ARTICLE X GENERAL PROVISIONS..................................................................53
SECTION 10.01 Notices....................................................................53
SECTION 10.02 Severability...............................................................55
SECTION 10.03 Assignment; Binding Effect; Benefit........................................55
SECTION 10.04 Incorporation Of Schedules.................................................56
SECTION 10.05 Governing Law..............................................................56
SECTION 10.06 Waiver of Jury Trial.......................................................56
SECTION 10.07 Headings...................................................................56
SECTION 10.08 Counterparts...............................................................56
SECTION 10.09 Entire Agreement...........................................................56
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SCHEDULES
1 Company Disclosure Schedule
2 Knowledge
3 Company Distribution of Acquiror Common Stock
4 Employee and Director Options
5 Consents
6 Key Employees
EXHIBITS
A Form of Escrow Agreement
B Acquisition Consideration
C Form of Shareholder Agreement
D Form of FIRPTA Notification Letter
E Form of Notice to the Internal Revenue Service
F Form of Retention and Noncompetition Agreement
G Consulting Services Agreement
H Form of Legal Opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
I Form of Registration Rights Agreement
J Form of Legal Opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx
xx
AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 29, 2000 (as
amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"), between QRS CORPORATION, a Delaware corporation ("ACQUIROR"), and
ROCKPORT TRADE SYSTEMS, INC., a Massachusetts corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the boards of directors of Acquiror and the Company have each
determined that it is fair to and in the best interests of their respective
shareholders to combine the respective businesses of Acquiror and the Company by
means of the Company's transfer of its business and substantially all of its
assets to Acquiror solely in exchange for shares of Acquiror's Common Stock (QRS
Common Stock, as defined below) and the assumption by Acquiror of certain
liabilities of the Company in a transaction intended to qualify as a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code (as
defined below), it being contemplated by Acquiror and the Company that the
Company will thereafter, as an integral part of the transaction, distribute the
shares of Acquiror Common Stock to the Company's shareholders in exchange for
the surrender by such shareholders for cancellation of certificates representing
all of the Company's Capital Stock (as defined below) in complete liquidation of
the Company and dissolve (the "REORGANIZATION") upon the terms and subject to
the conditions set forth herein and in accordance with the Massachusetts
Business Corporations Law (the "BCL");
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to be equally applicable to
the singular and plural number of the terms so defined, unless the context
otherwise requires):
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section
4.09(a).
"ACQUIROR" shall have the meaning specified in the recitals to this
Agreement.
"ACQUIROR BALANCE SHEET" shall have the meaning specified in Section
5.06.
"ACQUIROR COMMON STOCK" shall mean the voting common stock of QRS
Corporation, no par value per share.
"ACQUIROR FINANCIAL STATEMENTS" shall have the meaning specified in
Section 5.05.
1
"ACQUIROR MATERIAL ADVERSE EFFECT" shall mean any change in or effect
on the business of Acquiror that, individually or in the aggregate with any
other circumstances, is, or could reasonably be expected to be, materially
adverse to the business, operations, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of Acquiror.
"ACQUIROR PREFERRED STOCK" shall have the meaning specified in Section
5.04.
"ACQUIROR SEC DOCUMENTS" shall have the meaning specified in Section
5.05.
"ACQUIROR STOCK OPTION" shall have the meaning specified in Section
5.04.
"ACQUIROR STOCK PRICE" shall mean the closing bid price for a share of
Acquiror Common Stock as quoted on the Nasdaq National Market on the Closing
Date, or, if the Closing Date is not a trading day, then on the trading day
immediately preceding the Closing Date.
"ACQUISITION CONSIDERATION" shall mean the number of shares of Acquiror
Common Stock that will be exchanged in consideration of the Company's transfer
of its business and substantially all of its assets as determined in accordance
with Section 3.01 and Exhibit B hereof.
"ACQUISITION DOCUMENTS" shall have the meaning specified in Section
8.01.
"AGREEMENT" shall have the meaning specified in the preamble to this
Agreement.
"AUDITED REPORT" shall have the meaning specified in Section 4.07(a).
"BCL" shall have the meaning specified in the recitals to this
Agreement.
"BUSINESS DAY" shall mean any day on which banks are not required or
authorized by law, regulation or executive order to close in San Francisco,
California or Boston, Massachusetts.
"CAPITAL STOCK EQUIVALENTS" shall mean options, warrants, convertible
debt and any other security or instrument exercisable, convertible, exchangeable
or otherwise related to the Company Capital Stock.
"CHARTER" means with respect to the Company, its Articles of
Organization, as amended and in effect under the laws of the Commonwealth of
Massachusetts, and with respect to Acquiror, its certificate of incorporation,
as amended and in effect under the laws of the State of Delaware, and with
respect to Company's Subsidiaries, their respective certificates of
incorporation as amended and in effect under the laws of the jurisdictions of
their organization.
"CLOSING" shall have the meaning specified in Section 2.04.
"CLOSING DATE" shall mean the calendar date on which Closing occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as amended through
the Closing Date, and all rules and regulations promulgated thereunder.
2
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"COMPANY BENEFIT PLANS" shall have the meaning specified in Section
4.13(a).
"COMPANY CAPITAL STOCK" shall mean the Company Common Stock and the
Company Preferred Stock.
"COMPANY COMMON STOCK" shall mean the common stock, $.001 par value, of
the Company.
"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure schedule
attached hereto as Schedule 1 and forming a part hereof.
"COMPANY INTELLECTUAL PROPERTY" shall have the meaning specified in
Section 4.19(a).
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or effect on
the business of the Company that, individually or in the aggregate with any
other circumstances: (a) is, or could reasonably be expected to be, materially
adverse to business, operations, employee relationships, customer or supplier
relationships, assets (including intangible assets), liabilities (contingent or
otherwise), condition (financial or otherwise) or results of operations of the
Company or (b) could reasonably be expected to adversely affect the ability of
Acquiror to operate or conduct the business of the Company in substantially the
manner that it is currently operated or conducted by the Company.
"COMPANY PREFERRED STOCK" shall mean the preferred stock, $.01 par
value, of the Company.
"COMPANY REPORTS" shall have the meaning specified in Section 4.07(a).
"COMPANY STOCK OPTION PLAN" shall mean the Company's Stock Option Plan
adopted by the combined consent of the stockholders and Directors of the Company
on July 22, 1996, that provides for the issuance of up to 1,375,000 shares of
Company Common Stock.
"DAMAGES" shall have the meaning specified in Section 8.02(a).
"DISSENTING SHAREHOLDER" shall have the meaning specified in Section
3.02.
"DISSENTING SHARES" shall have the meaning specified in Section 3.02.
"$" shall mean United States Dollars.
"EMPLOYEE AND DIRECTOR OPTIONS" shall mean options granted pursuant to
the Company Stock Option Plan.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge, adverse
claim , preferential arrangement or restriction of any kind or encumbrance,
including, without limitation, any restriction on voting, transfer, receipt of
income or other exercise of any attributes of ownership.
3
"ENVIRONMENTAL LAW" shall mean any Law and any enforceable judicial or
administrative interpretation thereof by any Governmental Entity having
jurisdiction over the Company, including any judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material, now or hereafter in effect.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
applicable Environmental Law.
"ERISA AFFILIATE" shall have the meaning specified in Section 4.13(a).
"ESCROW AGENT" shall have the meaning specified in Section 3.07.
"ESCROW AGREEMENT" shall mean an escrow agreement substantially in the
form attached hereto as Exhibit A.
"ESCROW FUND" shall have the meaning specified in Section 3.01.
"ESCROW SHARES" shall have the meaning specified in Section 3.07.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"EXPENSES" shall mean, with respect to any party hereto, all
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its Affiliates, but excluding any allocation of overhead) incurred by
such party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of its obligations pursuant
to this Agreement and the consummation of the Reorganization.
"FORMER COMPANY EQUITYHOLDERS" shall mean the holders of Company
Capital Stock as of the Effective Date.
"GOVERNMENTAL ENTITY" shall mean any United States Federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.
"HAZARDOUS MATERIAL" shall mean (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, radon gas or polychlorinated biphenyls, (ii) any chemical, material
or substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law or (iii) any other
chemical, material or substance the use, handling, generation, treatment,
storing, release or exposure to which is regulated by any Governmental Entity.
4
"INDEBTEDNESS" shall mean, with respect to any person, (i) any
liability, contingent or otherwise, of such person (A) for borrowed money, (B)
evidenced by a note, debenture or similar instrument, or (C) for the payment of
any money under a lease required to be capitalized on the balance sheet of the
lessee under U.S. GAAP; (ii) any liability of others of the kind described in
clause (i) which the person has guaranteed or which is otherwise its legal
liability; (iii) any obligation secured by an Encumbrance on such person's
property, whether or not the obligation secured thereby shall have been assumed
by or shall otherwise be such person's legal liability, the amount of such
obligation if not assumed by or otherwise such person's legal liability not to
exceed the fair market value of such property; and (iv) any and all deferrals,
renewals, exercises and refundings of, or amendments, modifications or
supplements to any liability of the kind described in any of the preceding
clauses (i), (ii) or (iii).
"INDEMNIFIED PERSON" shall have the meaning specified in Section
8.02(a).
"INDEMNIFIED PERSONS" shall have the meaning specified in Section
8.02(a).
"INTERIM REPORT" shall have the meaning specified in Section 4.07(a).
"INVENTORIES" shall mean all inventory, merchandise, finished goods,
raw materials, packaging, supplies and other personal property related to the
business of the Company or maintained, held or stored by or for and under the
control of the Company.
"IRREVOCABLE PROXY" shall have the meaning specified in Section
4.25(b).
"IRS" shall mean the Internal Revenue Service of the United States.
"KNOWLEDGE OF ACQUIROR" or words or phrases of similar effect shall
mean the knowledge, after reasonable inquiry, of any of the chief executive
officer, president and chief financial officer of Acquiror.
"KNOWLEDGE OF THE COMPANY" or words or phrases of similar effect shall
mean the knowledge, after reasonable inquiry, of any of the individuals listed
on Schedule 2.
"LAW" shall mean any United States Federal, state or local or foreign
statute, law, ordinance, regulation, rule, code, order, judgment or decree.
"LEASED PROPERTIES" shall have the meaning specified in Section
4.21(b).
"MATERIAL CONTRACTS" shall mean the following contracts and agreements
(including, without limitation, oral contracts and agreements) of the Company
and each of its Subsidiaries now in effect:
(i) each contract, agreement, invoice, purchase order and
other arrangement, for the purchase of Inventory, spare parts, other
materials or personal property with any supplier or for the furnishing
of services to the Company or any of its Subsidiaries under the terms
of which the Company or any of its Subsidiaries (A) is likely to pay or
otherwise give consideration of more than $25,000 in the aggregate
during the calendar year ended December 31, 2000, (B) is likely to pay
or otherwise give consideration of
5
more than $50,000 in the aggregate over the remaining term of such
contract, or (C) cannot be cancelled by the Company or any of its
Subsidiaries without penalty or further payment and without more than
30 days' notice;
(ii) each contract, agreement, invoice, sales order and
other arrangement, for the sale of Inventory or other personal property
or for the furnishing of services by the Company or any of its
Subsidiaries which: (A) is likely to involve consideration of more than
$25,000 in the aggregate during the calendar year ended December 31,
2000, (B) is likely to involve consideration of more than $50,000 in
the aggregate over the remaining term of the contract, or (C) cannot be
cancelled by the Company or any of its Subsidiaries without penalty or
further payment and without more than 30 days' notice;
(iii) all broker, distributor, label group, dealer,
manufacturer's representative, franchise, agency, sales promotion,
market research, marketing, consulting and advertising contracts and
agreements to which the Company or any of its Subsidiaries is a party
and which are not cancelable without penalty or further payment and
without more than 30 days' notice;
(iv) all management and employee contracts and contracts
with independent contractors or consultants (or similar arrangements)
to which the Company or any of its Subsidiaries is a party and which
are not cancelable without penalty or further payment and without more
than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness
of the Company or any of its Subsidiaries;
(vi) all agreements relating to Company Intellectual
Property, including any technology, source code or other similar escrow
agreement and all licenses and sublicenses thereof;
(vii) all contracts and agreements with any Government Entity
to which the Company or any of its Subsidiaries is a party;
(viii) all contracts and agreements that limit or purport to
limit the ability of the Company or any of its Subsidiaries to compete
in any line of business or with any Person or in any geographic area or
during any period of time;
(ix) all contracts and agreements between or among the
Company, any of its Subsidiaries and any Affiliate of the Company,
including any shareholder agreements;
(x) all contracts and agreements for providing benefits
under any Company Benefit Plan; and
(xi) all other contracts and agreements, whether or not made
in the ordinary course of the business, which are material to the
Company or any of its Subsidiaries or the conduct of the business, or
the absence of which would have a Company Material Adverse Effect.
6
"NONDISCLOSURE AGREEMENT" shall mean the Agreement, dated as of October
1, 1999, between Acquiror and the Company.
"OFFICER'S CERTIFICATE" shall have the meaning specified in Section
8.05(a).
"OTHER TRANSACTION" shall have the meaning specified in Section 6.04.
"PERMIT" shall have the meaning specified in Section 4.06.
"PERMITS" shall have the meaning specified in Section 4.06.
"PERMITTED ENCUMBRANCES" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable or that are being contested in good faith by
appropriate proceedings and as to which adequate reserves have been established
on the Reference Balance Sheet in accordance with U.S. GAAP; (b) Encumbrances
imposed by law, such as materialmen's, mechanics', carriers', workmen's and
repairmen's liens and other similar liens arising in the ordinary course of
business securing obligations that (i) are not overdue for a period of more than
30 days and (ii) are not in excess of $1,000 in the case of a single property or
$10,000 in the aggregate at any time; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations; and (d) minor survey exceptions, reciprocal
easement agreements and other customary encumbrances on title to real property
that (i) were not incurred in connection with any Indebtedness, (ii) do not
render title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current and anticipated purposes.
"PERSON" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "PERSON" as defined in Section 13(d)(3) of the Exchange Act),
trust, association, entity or government or political subdivision, agency or
instrumentality of a government.
"REFERENCE BALANCE SHEET" shall mean the unaudited balance sheet of the
Company as of December 31, 1999.
"REFERENCE BALANCE SHEET DATE" shall mean December 31, 1999.
"REORGANIZATION" shall have the meaning specified in the recitals to
this Agreement.
"REGULATIONS" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"REPRESENTATIVES" shall have the meaning specified in Section 6.03(a).
"RETENTION AGREEMENT" shall have the meaning specified in Section
7.02(d).
"SEC" shall mean the Securities and Exchange Commission.
7
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"SHAREHOLDER AGREEMENT" shall have the meaning specified in Section
4.25(b).
"SHAREHOLDERS' AGENT" shall have the meaning specified in Section
8.09(a).
"SOFTWARE PROGRAMS" shall have the meaning specified in Section
4.19(g).
"SUBSIDIARY" shall mean, with respect to any person, any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other subsidiary
of such person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"TAX" or "TAXES" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity, including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customs' duties, tariffs and similar
charges.
"TAX RETURNS" shall mean all returns, declarations, reports, forms,
estimates, information returns and statements required to be filed in respect of
any Taxes or to be supplied to a taxing authority in connection with any Taxes.
"TECHNICAL DOCUMENTATION" shall have the meaning specified in Section
4.19(a).
"TERMINATING ACQUIROR BREACH" shall have the meaning specified in
Section 9.01(f).
"TERMINATING COMPANY BREACH" shall have the meaning specified in
Section 9.01(e).
"U.S. GAAP" shall mean United States generally accepted accounting
principles, applied on a consistent basis.
"WARN" shall have the meaning specified in Section 4.13(f).
"YEAR 2000 COMPLIANT" shall have the meaning specified in Section
4.19(k).
8
ARTICLE II
THE REORGANIZATION
SECTION 2.01 ASSETS TO BE TRANSFERRED. At the Closing, the Company will
convey, transfer, assign and deliver to Acquiror and Acquiror will accept and
acquire all the business, property and assets of every kind and wherever
situated which are owned by the Company, or in which it has any right or
interest (including without limitation the right to use the name "Rockport
Trade Systems, Inc." and any derivation or modification thereof), as of the
Closing, except those provided in Section 2.02.
SECTION 2.02 ASSETS TO BE RETAINED. The Company shall retain:
(a) The consideration which Acquiror agrees to pay the Company
hereunder and the Company's other rights hereunder;
(b) The Company's franchise to be a corporation, its certificate of
incorporation, corporate seal, stock books, minute books and other corporate
records having exclusively to do with the corporate organization and
capitalization of Company; provided that Acquiror or its designated agents may
have reasonable access to such books and records and may make excerpts
therefrom;
(c) Any of the Company's rights or obligations under its agreement with
Buyers and Shippers Enterprises, Inc. dated March 18, 1997 (the "Buyers and
Shippers Agreement"); and
(d) Rights that cannot lawfully be transferred by the Company
(provided, however, that such rights shall be held by the Company for the
benefit of the Acquiror and Acquiror, at its option, may act as the Company's
agent in order to enforce and obtain for Acquiror the benefit of such rights).
SECTION 2.03 LIABILITIES NOT ASSUMED. Anything to the contrary herein
notwithstanding Acquiror shall not assume or pay:
(a) any Taxes applicable to, imposed upon or arising out of the
transfer of assets to Acquiror contemplated by this Agreement or the
Reorganization;
(b) any liability, cost, obligation or expense incurred in connection
with this Agreement and the transactions contemplated herein except to the
extent otherwise provided for under Section 9.05 hereof;
(c) any obligations or liabilities of the Company and/or the Former
Company Equityholders with respect to which the Former Company Equityholders are
indemnifying
9
Acquiror pursuant to Section 8.02 hereof, subject to the terms and
limitations of Article VIII hereof and the Escrow Agreement.
(d) any obligations or liabilities of the Company to its shareholders
including but not limited to Dissenting Shareholders, if any except as otherwise
provided for under Section 3.02 hereof ; and
(e) obligations or liabilities of Company under the Buyers and Shippers
Agreement.
SECTION 2.04 CLOSING. Unless this Agreement shall have been terminated and
the Reorganization shall have been abandoned pursuant to Section 9.01, and
subject to the satisfaction or written waiver of the conditions set forth in
Article VII, the consummation of the Reorganization shall take place as promptly
as practicable after the satisfaction or waiver of the conditions set forth in
Article VII at a closing (the "CLOSING") to be held at the offices of Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, Xxxxx Street Tower, One Market, San Francisco,
California, and in any event on or before March 31, 2000, unless another date,
time or place is agreed to by the Company and Acquiror in writing.
SECTION 2.05 DOCUMENTS TO BE DELIVERED BY COMPANY. At the Closing, the
Company will deliver to Acquiror (a) such instruments of transfer (including
consents and approvals of third parties) as will be sufficient or requisite in
the opinion of Acquiror's counsel to vest in Acquiror, its successors and
assigns, the full legal and equitable title of the Company to the properties to
be transferred by the Company pursuant to Section 2.01 hereof; (b) an instrument
satisfactory to counsel for Acquiror appointing Acquiror as the true and lawful
attorney in fact for the Company to institute and prosecute (in its own name or
in the name of the Company but for the benefit of Acquiror) any proceedings
deemed by Acquiror to be necessary or appropriate to collect, assert or enforce
its right, title and interest to the properties and assets to be transferred to
Acquiror hereunder, including rights described in Section 2.01 hereof; (c) the
documents referred to in Section 7.03 hereof; (d) written resignations,
effective on acceptance of such directors of the Company's Subsidiaries as
Acquiror may request prior o the Closing; and (e) such evidences as counsel for
Acquiror may reasonably require as to the Company's compliance with provisions
of applicable law relating to the change of the Company's corporate name, the
sale of all or substantially all of its assets, and its liquidation and
dissolution pursuant to the provisions of this Agreement.
SECTION 2.06 TAX CONSEQUENCES. It is intended by the parties hereto that
the Reorganization shall constitute a reorganization within the meaning of
Section 368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations. Accordingly, both prior to and after the
Closing Date, each party's books and records shall be maintained and federal,
state and local income tax and returns and schedules thereto shall be filed in a
manner consistent with the Reorganization qualifying as a reorganization under
Section 368(a) of the Code (unless a court of competent jurisdiction renders a
determination (as defined in Section 1313(a)(1) of the Code) that the
Reorganization does not qualify as such). Each party shall
10
provide to each other such information, reports, returns or schedules as may be
reasonably required to assist such party in accounting for reporting the
Reorganization being so qualified.
ARTICLE III
PAYMENT BY ACQUIROR
SECTION 3.01 TRANSFER OF ACQUIROR COMMON STOCK AND CASH. At the Closing,
Acquiror shall deliver to the Company (a) a certificate or certificates
representing the number of shares (rounded off to the nearest full share) of
Acquiror Common Stock determined in accordance with Exhibit B hereto (less the
number of shares of Acquiror Common Stock to be deposited into an escrow fund
(the "ESCROW FUND") pursuant to the requirements of Section 3.07 hereof and the
number of shares of Acquiror Common Stock attributable to Dissenting Shares
pursuant to Section 3.02 hereof, if any), and (b) any cash in lieu of fractional
shares due pursuant to Section 3.05 hereof.
SECTION 3.02 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, no shares of Acquiror Common Stock attributable pursuant to
Exhibit B hereto to any issued and outstanding shares of Company Capital Stock
held by a person (a "DISSENTING SHAREHOLDER") who shall have voted against
adopting this Agreement or not consented thereto in writing and who shall have
properly filed a notice of election to dissent with the Company in accordance
with Chapter 110D, 7 of the BCL ("DISSENTING SHARES") shall be delivered to
Company pursuant to Section 3.01 hereof, unless such holder fails to perfect or
withdraws or otherwise loses his right to receive payment for shares. If, after
the Closing, such Dissenting Shareholder fails to perfect or withdraws or loses
his right to receive payment, such Dissenting Shareholder's shares of Company
Capital Stock shall no longer be considered Dissenting Shares for the purposes
of this Agreement, and Acquiror shall deliver to the Company an additional
certificate or certificates representing the number of shares of Acquiror Common
Stock (rounded to the nearest full share) determined in accordance with Exhibit
B hereto with respect to such Dissenting Shareholder's shares of Company Capital
Stock. The Company shall give Acquiror (i) prompt notice of any notice of
election to dissent received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such election. The Company shall not, without the prior written consent of
Acquiror, make any payment with respect to, settle, offer to settle or otherwise
negotiate, any such election.
SECTION 3.03 ASSUMPTION OF THE COMPANY'S LIABILITIES. At the Closing,
Acquiror shall assume and pay, discharge and perform when lawfully due all
liabilities, contracts and other obligations of the Company as the same shall
exist at the Closing, excluding liabilities of the Company described in Section
2.03.
SECTION 3.04 COMPANY STOCK OPTION PLAN. At the Closing Date, the Company
Stock Option Plan and all Employee and Director Options shall be assumed by
Acquiror in accordance with Section 6.11 below.
11
SECTION 3.05 FRACTIONAL SHARES. No fraction of a share of Acquiror Common
Stock will be issued, but in lieu thereof the Company shall receive from
Acquiror an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the Acquiror Stock Price.
SECTION 3.06 NO TRANSFERS. After the Closing, there shall be no transfers
of the Company Capital Stock on the stock transfer books of the Company and the
stock ledger of the Company shall be closed.
SECTION 3.07 ESCROW FUND. As soon as possible after Closing and subject to
and in accordance with the provisions of Article VIII hereof, Acquiror shall
cause to be delivered to the Escrow Agent (as defined in Article VIII hereof) a
certificate or certificates representing twenty-five percent (25%) of the shares
of Acquiror Common Stock issued in the Reorganization (the "ESCROW SHARES")
which shall be registered in the name of the Escrow Agent as nominee for the
Former Company Equityholders as set forth in Schedule 3 hereto. The Escrow
Shares shall be held in escrow and shall be available to compensate Acquiror for
certain damages as provided in Article VIII. To the extent not used for such
purposes, such shares shall be released, as all provided in Article VIII hereof.
As soon as practicable after the Closing Date, the Escrow Shares shall be
registered in the name of, and be deposited with, NorWest Bank Minnesota, N.A.
(or other bank or financial institution selected by Acquiror with the reasonable
consent of the Company) as escrow agent (the "ESCROW AGENT"), such deposit
(together with interest and other income thereon) to constitute the Escrow Fund
and to be governed by the terms set forth herein and in the Escrow Agreement.
The Escrow Fund shall be available to compensate Acquiror pursuant to the
indemnification obligations of the Former Company Equityholders.
SECTION 3.08 WITHHOLDING RIGHTS. Acquiror shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
Law or Order.
SECTION 3.09 FURTHER ASSURANCES. The Company and Acquiror agree that, in
the event any consent, approval or authorization necessary or desirable to
preserve for the Company's business any right or benefit under any lease,
license, contract, commitment or other agreement or arrangement to which the
Company is a party is not obtained prior to the Closing, the Company will,
subsequent to the Closing, cooperate with Acquiror in attempting to obtain such
consent, approval or authorization as promptly thereafter as practicable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically disclosed with respect to a section of this Article
IV in the Company Disclosure Schedule or disclosed in another section of the
Company Disclosure Schedule if it is reasonably apparent on the face of the
disclosure that it is applicable to another section in this Article IV, the
Company hereby represents and warrants to Acquiror that:
12
SECTION 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and its Subsidiaries has been duly organized and is
validly existing and in good standing under the laws of the jurisdiction of its
organization, and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
and governmental approvals is not reasonably expected to have, individually or
in the aggregate, a Company Material Adverse Effect. Each of the Company and its
Subsidiaries is duly qualified or licensed to do business, and is in good
standing (to the extent applicable) in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary. Section 4.01 of the Company
Disclosure Schedule sets forth each of the Company's Subsidiaries, the
jurisdiction in which each was formed and each jurisdiction where each of the
Company and its Subsidiaries is so qualified or licensed to do business and
separately lists each other jurisdiction in which the company or its
Subsidiaries owns, uses, licenses or leases its assets and properties, or
conducts business or has employees or engages independent contractors.
SECTION 4.02 CHARTER; CORPORATE BOOKS AND RECORDS. The Company has provided
to Acquiror, true, correct and complete copies of the Charter and bylaws of
Company and each of its Subsidiaries. Such Charter and bylaws are in full force
and effect. None of the Company or any of its Subsidiaries is in violation of
any of the provisions of its Charter or bylaws. The minute books of the Company
and each of its Subsidiaries contain accurate records of all meetings and
accurately reflect all other actions taken by the shareholders and the Boards of
Directors and all committees of the Board of Directors of the Company and each
of its Subsidiaries. Complete and accurate copies of all such minute books and
of the stock register of the Company and each of its Subsidiaries have been
provided by the Company to Acquiror.
SECTION 4.03 CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 13,210,000 shares of Company Common Stock and 536,790 shares
of Company Preferred Stock. As of the date hereof (i) 8,400,000 shares of
Company Common Stock and 400,000 shares of Company Preferred Stock are issued
and outstanding, (ii) 136,790 shares of Company Preferred Stock are subject to
outstanding stock purchase warrants, (iii) 3,217,283 shares of Company Common
Stock are reserved for issuance upon the conversion of the outstanding shares of
Company Preferred Stock and the shares of Company Preferred Stock issuable upon
the exercise of the outstanding stock purchase warrants, (iv) 1,375,000 shares
of Company Common Stock are reserved for issuance upon the exercise of the
Employee and Director Options, and (v) 600,000 shares of Company Common Stock
are held in the treasury of the Company. All outstanding shares of Company
Common Stock and Company Preferred Stock are duly authorized, validly issued,
fully-paid and nonassessable and are free and clear of any liens or encumbrances
other than liens or encumbrances imposed upon the holder thereof. All
outstanding shares of Company Common Stock and Company Preferred Stock and all
Employee and Director Options and warrants to purchase shares of Company
Preferred Stock were issued in compliance with all applicable Federal and state
securities laws. Section 4.03 of the Company Disclosure Schedule sets forth all
outstanding options to purchase Company Common Stock and Company Preferred
Stock, the names of the grantees, the number of shares of Company
13
Common Stock and Company Preferred Stock included in each grant, and the number
of shares that are unvested, outstanding and unexercised and vested, outstanding
and unexercised, respectively, with respect to each such grant. Except for
shares of Company Common Stock issuable pursuant to agreements or arrangements
described in Section 4.03 of the Company Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which the Company is a party or by which the Company is bound
relating to the issued or unissued capital stock of the Company or obligating
the Company to issue or sell any shares of capital stock of, or other equity
interests in, the Company. The terms of the Company Stock Option Plan and the
applicable stock option agreements permit the assumption or substitution of
options to purchase Acquiror Common Stock (which is voting common stock as
defined herein) as provided in this Agreement, without the consent or approval
of the holders of such securities, the Company shareholders, or otherwise. None
of the Employee and Director Options permit any accelerated vesting or
exercisability of those options by reason of the Reorganization or any other
transactions contemplated by this Agreement. Except as disclosed in Section 4.03
of the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock of the Company. Except as set forth in Section 4.03 of the Company
Disclosure Schedule, there are no voting trusts, shareholder agreements, proxies
or other agreement or understandings in effect with respect to the voting or
transfer of Company Common Stock or Company Preferred Stock. Except as set forth
in Section 4.03 of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company to provide funds to or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
Person. True and complete copies of all agreements and instruments relating to
or issued under the Company Stock Option Plan have been provided to Acquiror and
such agreements and instruments have not been amended, modified or supplement
such agreement or instrument in any case from the form provided to Acquiror.
(b) Section 4.03 of the Company Disclosure Schedule sets forth the
authorized capital stock by class of each Subsidiary and the number of shares of
each class of capital of each Subsidiary that are issued and outstanding. The
Company is the owner of all outstanding shares of each of its Subsidiaries and
all such shares are duly authorized, validly issued, fully paid and
nonassessable. All of the outstanding shares of each Subsidiary are owned by the
Company free and clear of all liens, charges, claims or encumbrances, or rights
of others. There are no outstanding subscriptions, options, warrants, puts,
calls, rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued shares or other
securities of any such Subsidiary, or otherwise obligating the Company or any
such Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire
any such securities. The Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other Person other than its interests in the
Company's Subsidiaries set forth in Section 4.03 of the Company Disclosure
Schedule. All outstanding shares of capital stock of any Subsidiary were issued
in compliance with all applicable federal and state securities laws.
SECTION 4.04 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations
14
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws, both state and federal,
affecting the enforcement of creditors' rights or remedies in general as from
time to time in effect and the exercise by courts of equity powers).
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance by the Company of its obligations hereunder and the consummation
of the Reorganization will not, (i) conflict with or violate any provision of
the Charter or bylaws of the Company or any of its Subsidiaries, (ii) assuming
that all consents, approvals, authorizations and permits described in Section
4.05(b) have been obtained and all filings and notifications described in
Section 4.05(b) have been made, conflict with or violate any Law applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected or (iii) except as set
forth in Section 4.05(a) of the Company Disclosure Schedule, result in any
breach of or constitute a default (or an event which, with the giving of notice
or lapse of time or both, could reasonably be expected to become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any property or
asset of the Company or any of its Subsidiaries pursuant to, any Material
Contract or Permit (as defined in Section 4.06) or other instrument or
obligation.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance by the Company of its obligations hereunder and the
consummation of the Reorganization will not as of the Closing Date, require
any material consent, approval, authorization or permit of, or filing by the
Company with or notification by the Company to, any Governmental Entity,
except (i) such consents, approvals, orders, authorizations, registrations,
declarations, and filings as may be required under applicable state
securities laws and the securities law of any foreign country, and (ii) as
set forth in Section 4.05(b) of the Company Disclosure Schedule.
SECTION 4.06 PERMITS; COMPLIANCE WITH LAWS. The Company and each of its
Subsidiaries is in possession of all material franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity (collectively, "PERMITS") necessary for the Company or
the Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted and, as of the date of this Agreement,
no suspension or cancellation of any of the Permits is pending or, to the
15
knowledge of the Company, threatened. The Company and each of its Subsidiaries
is not in any material respect in conflict with, or in default or violation of,
(i) any Law applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
or (ii) any Permits. Neither the Company nor any of its Subsidiaries has
received written or, to the Company's knowledge, non-written notice from any
Governmental Entity pending or threatened investigations and no such
investigations are pending or, to the knowledge of the Company, threatened.
Section 4.06 of the Company Disclosure Schedule sets forth, as of the date of
this Agreement, all actions, proceedings, investigations or surveys pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries that could reasonably be expected to result in (i) the loss or
revocation of a Permit or (ii) the suspension or cancellation of any other
Permit. Except as set forth in Section 4.06 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has received from any
Governmental Entity any written notification with respect to possible conflicts,
defaults or violations of Laws, except for written notices relating to possible
conflicts, defaults or violations that are not reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.07 FINANCIAL STATEMENTS.
(a) The Company has provided to Acquiror (i) audited financial statements
for the fiscal years ended December 31, 1998 (the "AUDITED REPORT"), and (ii)
interim unaudited financial statements for the fiscal year ended December 31,
1999 (the "INTERIM REPORTS", together with the Audited Reports, the "COMPANY
REPORTS").
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Audited Report was prepared in accordance with U.S.
GAAP applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto) and each of the financial statements
(including, in each case, any notes thereto) contained in the Company Reports
presented fairly the financial position and operating results of the Company and
its Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments which
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect).
(c) Except as and to the extent set forth or reserved against on the
balance sheet of the Company as reported in the Company Reports, including the
notes thereto, neither the Company nor any of its Subsidiaries has any
liabilities or obligations (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on a balance sheet or in notes thereto
prepared in accordance with U.S. GAAP, except for liabilities or obligations
incurred in the ordinary course of business consistent with past practice since
December 31, 1999 that have not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999,
except as disclosed in Section 4.08 of the Company Disclosure Schedule or on the
Reference
16
Balance Sheet, the business of the Company and each of its Subsidiaries has been
conducted in the ordinary course and consistent with past practice. As
amplification and not limitation of the foregoing, except as disclosed in
Section 4.08 of the Company Disclosure Schedule or on the Reference Balance
Sheet, since December 31, 1999, neither the Company nor any of its Subsidiaries
has:
(i) transferred to any person or entity any rights to its Intellectual
Property other than transfers necessary to conduct development or manufacturing
activities, or sell products or services in the ordinary course of business
consistent with past practice;
(ii) permitted or allowed any of the assets or properties (whether
tangible or intangible) of the Company or any of its Subsidiaries to be
subjected to any Encumbrance, except in the ordinary course of business and
consistent with past practice and other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the Closing;
(iii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance or
paid or otherwise discharged any liability relating thereto, other than current
liabilities reflected on the Reference Balance Sheet and current liabilities
incurred in the ordinary course of business consistent with past practice since
the Reference Balance Sheet Date;
(iv) made any loan to, guaranteed any Indebtedness of or otherwise
incurred any Indebtedness on behalf of, in each case in an amount greater than
$10,000, any Person;
(v) failed to pay any creditor any amount owed to such creditor when
due, except where such amount and all interest and penalties related thereto has
been paid in full prior to the date hereof;
(vi) redeemed any of the capital stock or declared, made or paid any
dividends or distributions (whether in cash, securities or other property) to
the holders of capital stock of the Company or otherwise;
(vii) made any changes in the customary methods of operations of the
Company or any of its Subsidiaries, including, without limitation, practices and
policies relating to marketing, selling and pricing;
(viii) merged with, entered into a consolidation with or acquired an
interest of 5% or more in any Person or acquired a substantial portion of the
assets or business of any Person or any division or line of business thereof;
(ix) made any capital expenditure or commitment of any capital
expenditure in excess of $25,000 individually or $100,000 in the aggregate;
(x) issued any sales orders or otherwise agreed to make any purchases
involving exchanges in value in excess of $25,000 individually or $100,000 in
the aggregate;
17
(xi) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, leasehold interests and intangible assets) with value in
excess of $25,000 individually or $100,000 in the aggregate, other than in the
ordinary course of business consistent with past practice;
(xii) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company or any of its Subsidiaries;
(xiii) entered into any agreement, or written arrangement with any of
its directors, officers, employees or shareholders except in the ordinary course
of business consistent with past practice (or with any relative, beneficiary,
spouse or Affiliate of such Person);
(xiv) written down or written up (or failed to write down or write up
in accordance with U.S. GAAP consistent with past practice) the value of any
Inventories or receivables or revalued any assets of the Company or any of its
Subsidiaries other than in the ordinary course of business consistent with past
practice, and in accordance with U.S. GAAP;
(xv) amended, terminated, cancelled or compromised any material claims
of the Company or any of its Subsidiaries or waived any other rights of
substantial value to the Company or any of its Subsidiaries;
(xvi) made any change in any method of accounting or accounting
practice or policy used by the Company or any of its Subsidiaries, other than
such changes required by U.S. GAAP or disclosed in Section 4.08 of the Company
Disclosure Schedule;
(xvii) allowed any Permit or Environmental Permit that was issued or
relates to the Company or any of its Subsidiaries to lapse or terminate or
failed to renew any such Permit or Environmental Permit or any insurance policy
that is scheduled to terminate or expire within 45 calendar days of the Closing
Date;
(xviii) amended or restated the Charter or the bylaws of the Company or
any of its Subsidiaries;
(xix) amended, modified or consented to the termination of any Material
Contract or the Company's or any of its Subsidiaries' rights thereunder;
(xx) terminated, discontinued, closed or disposed of any plant,
facility or other business operation, or laid off any employees (other than
layoffs of less than 10 employees in any six-month period) or implemented any
early retirement, separation or program providing early retirement window
benefits within the meaning of Section 1.401(a)-4 of the Regulations or
announced or planned any such action or program for the future;
(xxi) disclosed any secret or confidential Company Intellectual
Property (except by way of issuance of a patent or license), or permitted to
lapse or go abandoned any Company Intellectual Property (or any registration or
grant thereof or any application relating
18
thereto) to which, or under which, the Company or any of its Subsidiaries has
any right, title, interest or license, except as would not have a Company
Material Adverse Effect;
(xxii) made any express or deemed election or settled or compromised
any liability with respect to Taxes of the Company or any of its Subsidiaries;
(xxiii) suffered any casualty loss or damage with respect to any of the
assets which in the aggregate have a replacement cost of more than $20,000, and
which is not covered by insurance;
(xxiv) suffered any Company Material Adverse Effect; or
(xxv) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 4.08, or granted any options to purchase,
rights of first refusal, rights of first offer or other similar rights or
commitments with respect to any of the actions specified in this Section 4.08,
except as expressly contemplated by this Agreement.
SECTION 4.09 ACCOUNTS RECEIVABLE; INVENTORIES.
(a) Except as set forth in Section 4.09(a) of the Company Disclosure
Schedule, (i) each account receivable of the Company and each of its
Subsidiaries as of December 31, 1999 (collectively, the "ACCOUNTS RECEIVABLE")
represents a sale actually made in the ordinary course of business and which
arose pursuant to an enforceable contract for a bona fide sale of goods or for
services performed, and the Company and each of its Subsidiaries has performed
all of its obligations to produce the goods or perform the services to which
such Accounts Receivable relates, (ii) as of the date hereof, no Account
Receivable is subject to any claim for reduction, counterclaim, set-off,
recoupment or other claim for credit, allowances or adjustments by the obligor
thereof other than claims of $25,000 or less and (iii) the amount shown in the
Interim Report as an allowance for doubtful accounts was as of the date of the
Interim Report and remains as of the date hereof a reasonable estimate of bad
debts which may be sustained on the accounts receivable identified therein.
Section 4.09(a) of the Company Disclosure Schedule sets forth an aged list of
Accounts Receivable as of December 31, 1999 showing separately those Accounts
Receivable that as of such date had been outstanding (i) 29 days or less, (ii)
30 to 59 days, (iii) 60 to 89 days, (iv) 90 to 119 days and (v) more than 119
days.
(b) Neither the Company nor any of its Subsidiaries has any Inventory,
except for packaging and supplies.
SECTION 4.10 CUSTOMERS; SUPPLIERS.
(a) Listed in Section 4.10(a) of the Company Disclosure Schedule are
the names and addresses of all the customers of the Company and each of its
Subsidiaries that ordered goods or merchandise, or purchased services, or
licensed rights from the Company or any of its Subsidiaries with an aggregate
value of $20,000 or more during the twelve-month
19
period ended December 31, 1999, and the amount for which each such customer was
invoiced during such period. Except as disclosed in Section 4.10 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received any written or, to the Company's knowledge, non-written notice to the
effect that, nor, to the Company's knowledge, has any customer of the Company or
any of its Subsidiaries that provided the Company or any of its Subsidiaries
with revenue during the year ended December 31, 1999, ceased or is likely to
cease, use of the products, equipment, goods or services of the Company.
(b) Listed in Section 4.10(b) of the Company Disclosure Schedule are
the names and addresses of all the suppliers from which the Company and each of
its Subsidiaries ordered raw materials, supplies, merchandise and other goods
for the Company and each of its Subsidiaries with an aggregate purchase price of
$20,000 or more during the twelve-month period ended December 31, 1999 and the
amount for which each such supplier invoiced the Company or any of its
Subsidiaries during such period. Except as disclosed in Section 4.10 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received any written or, to the Company's knowledge, non-written notice to the
effect that, nor, to the Company's knowledge, is it likely that, any such
supplier will not sell raw materials, supplies, merchandise and other goods or
services to the Company or any of its Subsidiaries at any time after the Closing
Date on terms and conditions substantially similar to those used in its current
sales to the Company and each of its Subsidiaries.
SECTION 4.11 SALES AND PURCHASE ORDER BACKLOG.
(a) As of December 31, 1999, open sales orders accepted by the Company
and each of its Subsidiaries totaled approximately $25,000, and as of the date
immediately preceding the date hereof, open sales orders accepted by the Company
and each of its Subsidiaries totaled $33,750. Section 4.11(a) of the Company
Disclosure Schedule lists all sales orders exceeding $1,000 per order, which
have been accepted by the Company and each of its Subsidiaries, and which were
open as of December 31, 1999.
(b) As of December 31, 1999, purchase orders issued by the Company and
each of its Subsidiaries totaled approximately $46,496, and as of the date
immediately preceding the date hereof, open purchase orders issued by the
Company and each of its Subsidiaries totaled approximately $3,837. Section
4.11(b) of the Company Disclosure Schedule lists all purchaser orders exceeding
$1,000 per order, which have been issued by the Company or any of its
Subsidiaries and which were open as of December 31, 1999.
SECTION 4.12 PRODUCT AND SERVICE WARRANTIES. Set forth on Section 4.12 of
the Company Disclosure Schedule are the standard written forms of product and
service warranties and guarantees utilized by the Company or any of its
Subsidiaries as of the date of this Agreement. Except as set forth on Section
4.12 of the Company Disclosure Schedule, during a period of three (3) years
prior to the Closing Date, neither the Company nor any of its Subsidiaries nor
any of their employees or officers has made any other written material
warranties with regard to products and/or services supplied by the Company or
any of its Subsidiaries.
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SECTION 4.13 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 4.13(a) of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus,
stock option, stock purchase, stock appreciation rights, restricted stock,
phantom stock, incentive, deferred compensation, supplemental retirement,
severance or other benefit plans, programs or arrangements, employee relocation
programs, cafeteria benefit (Code Section 125) and dependent care (Code Section
129) plan, and all employment, termination, severance or other contracts or
agreements, whether legally enforceable or not, to which the Company or any of
its Subsidiaries or other trade or business (whether or not incorporated)
treated as a single employer with the Company (an "ERISA AFFILIATE") pursuant to
Code Section 414(b), (c), (m) or (o) is a party, or with respect to which the
Company or any ERISA Affiliate has any obligation, or which are maintained,
contributed to or sponsored by the Company or any ERISA Affiliate for the
benefit of any current or former employee, officer or director of the Company or
any ERISA Affiliate (collectively, the "COMPANY BENEFIT PLANS"). With respect to
each Company Benefit Plan, the Company has delivered or made available to
Acquiror a true, complete and correct copy of (i) such Company Benefit Plan and
the most recent summary plan description related to such Company Benefit Plan,
if a summary plan description is required therefor, (ii) each trust agreement or
other funding arrangement relating to such Company Benefit Plan, (iii) the
annual reports (Form 5500), if any, for such Company Benefit Plan filed with the
IRS for the last three (3) plan years, (iv) the most recent actuarial report or
financial statement, if any, relating to such Company Benefit Plan and (v) the
most recent determination letter issued by the IRS with respect to such Company
Benefit Plan, if it is qualified under Section 401(a) of the Code. Except as
disclosed on Section 4.13(a) of the Company Disclosure Schedule, there are no
other employee benefit plans, programs, arrangements or agreements, whether
formal or informal, whether in writing or not, to which the Company or any ERISA
Affiliate is a party, with respect to which the Company or any ERISA Affiliate
has any obligation or which are maintained, contributed to or sponsored by the
Company or any ERISA Affiliate for the benefit of any current or former
employee, officer or director of the Company or any ERISA Affiliate. Neither the
Company nor any ERISA Affiliate has any express or implied legally enforceable
commitment, (i) to create and incur liability with respect to or cause to exist
any other employee benefit plan, program or arrangement other than a Company
Benefit Plan, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual other than pursuant to a Company
Benefit Plan, or (iii) to modify, change or terminate any Company Benefit Plan,
other than with respect to a modification, change or termination required by
ERISA or the Code. Unless Acquiror consents otherwise in writing, Company shall
take all action necessary to terminate, or cause to terminate, before the
Closing Date, any Company Benefit Plan that is a 401(k) plan.
(b) The Company does not now sponsor, participate in or contribute to,
(i) any pension plan which is subject to Title IV of ERISA or Section 412 of the
Code, or (ii) any voluntary employees' beneficiary association intended to be
exempt from federal income taxation under Section 501(c)(9) of the Code; and at
no time has the Company contributed to or been requested to contribute to any
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA).
None of the Company Benefit Plans provides for or promises retiree medical,
retiree disability or retiree life insurance benefits to any current or former
employee,
21
officer or director of the Company or any ERISA Affiliate, except as may be
required by COBRA or other applicable law. The Company's Money Purchase Pension
Plan has been terminated and all assets have been distributed to participants
within a reasonable time period following receipt of a favorable determination
from the IRS regarding such Pension Plan termination.
(c) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms, and all contributions required to be made
under the terms of any of the Company Benefit Plans as of the date of this
Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Reports prior to the date of this Agreement. Except as set forth in Section
4.13(e) of the Company Disclosure Schedule with respect to the Company Benefit
Plans, no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances, in connection with which the Company or
any ERISA Affiliate could be subject to any material liability under the terms
of such Company Benefit Plans, ERISA, the Code or any other applicable Law.
(d) The Company on behalf of itself and all of the ERISA Affiliates
hereby represents that, other than as disclosed in Section 4.13(d) of the
Company Disclosure Schedule: (i) each Company Benefit Plan which is intended to
be qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS as to its qualified
status under the Code, and each trust established in connection with any Company
Benefit Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
it is so exempt, and to the Company's knowledge no fact or event has occurred
since the date of such determination letter from the IRS to adversely affect the
qualified status of any such Company Benefit Plan or the exempt status of any
such trust; (ii) to the Company's knowledge there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code), and not otherwise exempt under Section 408 of ERISA or Section 4975 of
the Code, with respect to any Company Benefit Plan; (iv) neither the Company nor
any ERISA Affiliate has incurred any liability for any penalty or tax arising
under Section 4971, 4972, 4980, 4980B or 6652 of the Code or any liability under
Section 502 of ERISA, and to the Company's knowledge no fact or event exists
which could give rise to any such liability; (iv) no complete or partial
termination has occurred within the five years preceding the date hereof with
respect to any Company Benefit Plan; (v) all contributions, premiums or payments
required to be made with respect to any Company Benefit Plan have been or will
be made on or before their due dates; (vi) all such contributions have been or
will be fully deducted for income tax purposes, and no such deduction has been
challenged in writing or disallowed by any government entity and to the
Company's knowledge no fact or event exists which could give rise to any such
challenge or disallowance; (vii) as of the Closing Date, no Company Benefit Plan
which is subject to Title IV of ERISA will have an "unfunded benefit liability"
(within the meaning of Section 4001(a)(18) of ERISA); and (xii) each Company
Benefit Plan can be amended, terminated or otherwise discontinued after the
Closing Date in accordance with its terms, without liability to Acquiror (other
than ordinary administrative expenses typically incurred in a termination
event). With respect to each Company Benefit Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section
22
3(1) of ERISA, the Company on behalf of itself and all of the ERISA Affiliates
hereby represents that all requisite governmental reports (which were true and
correct in all material respects as of the date filed) have been prepared in
good faith and timely filed and all notices and reports to employees required to
be filed, distributed or posted with respect to each such Company Benefit Plan
have been properly and timely filed and distributed or posted, except as would
not have in the aggregate a Company Material Adverse Effect. No suit,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of the Company is threatened, against or with respect to any such
Company Benefit Plan, including any audit or inquiry by the IRS or United States
Department of Labor (other than routine benefits claims).
(e) Except as set forth in Section 4.13(e) of the Company Disclosure
Schedule, to the Company's knowledge, the Company and each of its Subsidiaries
is in compliance with the requirements of (i) the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the regulations (including proposed regulations)
thereunder, (ii) the applicable requirements of the Health Insurance Portability
and Accountability Act of 1996 and the regulations (including the proposed
regulations) thereunder, and (iii) the applicable requirements of the Family
Medical and Leave Act of 1993 and the regulations thereunder, except to the
extent that such non-compliance would not reasonably be expected to have, either
individually or in the aggregate, a Company Material Adverse Effect.
(f) The Company is in compliance with the requirements of the Worker
Adjustment and Retraining Notification Act ("WARN") and has no liabilities
pursuant to WARN.
(g) Neither the Company nor any of its Subsidiaries is a party to and
has never been a party to any collective bargaining or other labor union
contract applicable to persons employed by the Company or any of its
Subsidiaries and no collective bargaining agreement is being negotiated by the
Company or any of its Subsidiaries. As of the date of this Agreement, there is
no labor dispute, strike or work stoppage against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened which may
interfere with the respective business activities of the Company or any of its
Subsidiaries, except where such dispute, strike or work stoppage could not
reasonably be expected to have a Company Material Adverse Effect. As of the date
of this Agreement, to the knowledge of the Company, none of the Company or any
of its Subsidiaries or any of any of their representatives or employees has
committed any unfair labor practice in connection with the operation of the
business of the Company or any of its Subsidiaries, and there is no charge or
complaint against the Company or any of its Subsidiaries by the National Labor
Relations Board or any comparable Governmental Entity pending or threatened in
writing, except where such unfair labor practice, charge or complaint could not
reasonably be expected to have a Company Material Adverse Effect.
(h) The Company has delivered to Acquiror true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of the Company and each of its Subsidiaries providing for annual
compensation in excess of $100,000, (ii) all written severance programs and
policies of the Company and each of its Subsidiaries with or
23
relating to their respective employees or consultants, (iii) all plans,
programs, agreements and other arrangements of the Company and each of its
Subsidiaries with or relating to their respective employees or consultants
which contain "change of control" provisions, (iv) all commission, bonus or
incentive compensation plans, programs, agreements and other arrangements,
and (v) all vacation and sick leave programs and policies of the Company and
each of its Subsidiaries. No payment or benefit which will be made by the
Company and each of its Subsidiaries under any Company Benefit Plan or other
arrangement will constitute an excess parachute payment under Code Section
280(G)(1). Except as set forth in the Section 4.13(h) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of the Company or any of its Subsidiaries to severance
benefits or any other payment, except as expressly provided by this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or service provider.
(i) There has been no amendment to, written interpretation or
announcement (whether or not written) by Company or any ERISA Affiliate relating
to, or change in participation or coverage under, any Company Benefit Plan which
would materially increase the expense of maintaining such Company Benefit Plan
above the level of expense incurred with respect to that Company Benefit Plan
for the most recent fiscal year included in the Company Reports.
SECTION 4.14 EMPLOYEE MATTERS.
(a) The Company and its Subsidiaries has approximately 73 full-time
equivalent employees and the Company and each of its Subsidiaries generally
enjoys good employer-employee relations. Neither the Company nor any of its
Subsidiaries is delinquent in payments to any of its employees or consultants
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by them to the date hereof or amounts required to be
reimbursed to such employees. Neither the Company, Acquiror or the Surviving
Corporation will by reason of the Reorganization or anything done prior to the
Closing Date be liable to any of employees of the Company or any of its
Subsidiaries for severance pay or any other payments (other than accrued salary,
vacation or sick pay in accordance with the Company's normal policies and as is
provided in Section 4.13(h) of the Company Disclosure Schedule). True and
complete information as to all current directors, officers, employees or
consultants of the Company and each of its Subsidiaries, including, in each
case, name, current job title, base salary, bonus potential, commissions and
termination obligations has been previously furnished to Acquiror.
(b) Section 4.14 of the Company Disclosure Schedule lists the name,
place of employment, the current annual salary rates, bonuses, deferred or
contingent compensation, pension, accrued vacation, "golden parachute" and other
like benefits paid or payable (in cash or otherwise) in 1998 and 1999, the date
of employment and a description of position and job function of each current
salaried employee, officer, director or consultant of the Company whose annual
compensation as reported on IRS Form W-2 exceeded $50,000 in 1999. Neither the
Company nor any of its Subsidiaries has granted any increase, or announced any
increase, in the
24
wages, compensation, pension or other benefits payable by the Company or any of
its Subsidiaries to any of its employees (including, without limitation, any
increase or change pursuant to the Company Benefit Plan) not reflected in
Section 4.14 of the Company Disclosure Schedule. The revenue sharing plan of the
Company and each of its Subsidiaries has been terminated and neither the Company
nor any of its Subsidiaries has nor will any of them have any obligations
thereunder at any time after the Closing Date.
(c) Except as disclosed in Section 4.14 of the Company Disclosure
Schedule, all officers, employees and consultants of the Company and each of its
Subsidiaries have executed and delivered proprietary rights and confidentiality
agreements in substantially the form attached hereto on Section 4.14(c) of the
Company Disclosure Schedule and, in each case when such officer, employee or
consultant signed a proprietary rights and confidentiality agreement after
commencing providing services to the Company or any of its Subsidiaries, such
Persons have executed and delivered an appropriate instrument of assignment in
favor of the Company as assignee that conveyed to the Company effective and
exclusive ownership of all tangible or intangible property thereby existing.
(d) The Company and each of its Subsidiaries is in compliance in all
material respects with all currently applicable laws and regulations respecting
employment including without limitation, discrimination in employment, terms and
conditions of employment, wages, hours, withholding and payment of payroll
related taxes and governmental program contributions, and occupational safety
and health and employment practices. The Company and each of its Subsidiaries is
not liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending asserted
claims against the Company or any of its Subsidiaries under any workers
compensation plan or policy or for long term disability. There are no
controversies pending or, to the knowledge the Company, threatened, between the
Company or any of its Subsidiaries, on the one hand, and any of their respective
employees, former employees or job applicants, on the other hand, which
controversies have or could reasonably be expected to result in an action, suit,
proceeding, claim, arbitration or investigation before any agency, court or
tribunal, foreign or domestic. To the Company's knowledge, no employees of the
Company or any of its Subsidiaries are in violation of any term of any
employment contract, patent disclosure agreement, noncompetition agreement, or
any restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company or any of its Subsidiaries because of the
nature of the business conduced or presently proposed to be conducted by the
Company or any of its Subsidiaries or to the use of trade secrets or proprietary
information of others. No key employees or officers of the Company or any of its
Subsidiaries have given notice to the Company or any of its Subsidiaries, nor is
the Company or any of its Subsidiaries otherwise aware, that any such key
employee or officer intends to terminate his or her employment with the Company
or any of its Subsidiaries.
25
SECTION 4.15 MATERIAL CONTRACTS.
(a) Set forth in Section 4.15(a) of the Company Disclosure Schedule is
a list of all of the Material Contracts.
(b) Except as disclosed in Section 4.15 of the Company Disclosure
Schedule, each Material Contract: (i) is legal, valid and binding on the
respective parties thereto and is in full force and effect, (ii) is freely and
fully assignable to Acquiror without penalty or other adverse consequences, and
(iii) upon consummation of the transactions contemplated by this Agreement,
except to the extent that any consents set forth in Section 4.15(b) of the
Company Disclosure Schedule are not obtained, shall continue in full force and
effect without penalty or other adverse consequence. Neither the Company nor any
of its Subsidiaries is in breach of, or default under, any Material Contract.
(c) Except as disclosed in Section 4.15(c) of the Company Disclosure
Schedule, to the Company's knowledge, no other party to any Material Contract is
in breach thereof or default thereunder.
SECTION 4.16 GUARANTIES. Except as set forth in Section 4.16 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any guaranty, and no Person is a party to any guaranty for the benefit of the
Company or any of its Subsidiaries.
SECTION 4.17 LITIGATION. Except as disclosed in Section 4.17 of the Company
Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any of their properties of any of
their officers and directors (in their capacity as such). Except as disclosed in
Section 4.17 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries nor any of their officers and directors (in their capacity as
such) is subject to any outstanding order, writ, injunction or decree.
SECTION 4.18 ENVIRONMENTAL MATTERS. Except as disclosed in Section 4.18 of
the Company Disclosure Schedule (i) the Company and each of its Subsidiaries is
in compliance with all Environmental Laws applicable to the Company's and the
Subsidiaries' business; (ii) all past noncompliance of the Company and each of
its Subsidiaries with respect to Environmental Laws or Environmental Permits has
been resolved without any pending, ongoing or future obligation, cost or
liability; and (iii) neither the Company nor any of its Subsidiaries has
released a Hazardous Material at, or transported a Hazardous Material to or
from, any real property currently or formerly owned, leased or occupied by the
Company or any of its Subsidiaries, in violation of any Environmental Law
applicable to the Company's or any of its Subsidiaries' business.
26
SECTION 4.19 INTELLECTUAL PROPERTY.
(a) COMPANY INTELLECTUAL PROPERTY. All patents, trademarks, trade
names, service marks, trade dress, Internet domain names, copyrights and any
renewal rights therefor, technology, supplier lists, trade secrets, proprietary
know-how, computer software programs or applications in both source and object
code form, technical documentation of such software programs ("TECHNICAL
DOCUMENTATION"), registrations and applications for any of the foregoing and all
other tangible or intangible proprietary information or materials that are or
have been used in (including, without limitation, in the development of) the
Company's or any of its Subsidiaries' business and/or in any product, technology
or process (i) currently being or formerly manufactured, published or marketed
by the Company or any of its Subsidiaries, or (ii) previously or currently under
development for possible future manufacturing, publication, marketing or other
use by the Company or any of its Subsidiaries are hereinafter referred to as the
"COMPANY INTELLECTUAL PROPERTY."
(b) APPLICATIONS AND REGISTRATIONS. Section 4.19(b) of the Company
Disclosure Schedule contains a true and complete list of all of the Company's
and each of its Subsidiaries' patents, patent applications, trademark
registrations, trademark applications, trade names, service xxxx registrations,
service xxxx applications, Internet domain names, Internet domain name
applications, copyrights and copyright registrations and applications and other
filings and formal actions made or taken pursuant to Federal, state, local and
foreign laws by the Company or any of its Subsidiaries to protect its interests
in the Company Intellectual Property.
(c) RIGHTS TO COMPANY INTELLECTUAL PROPERTY. The Company Intellectual
Property consists solely of items and rights which are: (i) owned by the Company
or any of its Subsidiaries; (ii) in the public domain; or (iii) rightfully used
by the Company and any of their successors pursuant to a valid license. The
Company and each of its Subsidiaries has all rights in the Company Intellectual
Property necessary to carry out the Company's and each of its Subsidiaries'
current and currently contemplated activities.
(d) THIRD PARTY CLAIMS. Reproduction, manufacturing, distribution,
licensing, sublicensing, sale or any other exercise of rights in any Company
Intellectual Property, product, work, technology or process as now used or
offered by the Company does not infringe on any copyright, trade secret,
trademark, service xxxx, trade name, trade dress, firm name, Internet domain
name, logo, trade dress or mask work of any Person or the patent of any Person.
No claims (i) challenging the validity, effectiveness or ownership by the
Company or any of its Subsidiaries of any of the Company Intellectual Property,
or (ii) to the effect that the use, distribution, licensing, sublicensing, sale
or any other exercise of rights in any product, work, technology or process as
now used or offered or proposed for use, licensing, sublicensing or sale by the
Company or any of its Subsidiaries infringes or will infringe on any
intellectual property or other proprietary right of any Person have been
asserted or, to the knowledge of Company, are threatened by any Person, nor are
there, to the Company's knowledge, any valid grounds for any bona fide claim of
any such kind. All registered, granted or issued patents, trademarks, Internet
domain names and copyrights held by the Company or any of its Subsidiaries are
enforceable and subsisting. There is no unauthorized use, infringement or
misappropriation of any of the
27
Company Intellectual Property by any third party, employee or former employee.
Neither the Company nor any of its Subsidiaries has entered into any agreement
to indemnify any other Person against a charge of infringement of any Company
Intellectual Property, other than indemnification provisions contained in
purchase orders or in license agreements arising in the ordinary course of
business.
(e) ROYALTIES. Except as set forth in Section 4.19(e) of the Company
Disclosure Schedule, there are no royalties, fees, honoraria or other payments
payable by the Company or any of its Subsidiaries to any person or entity by
reason of the ownership, development, use, license, sale or disposition of the
Company Intellectual Property, other than salaries and sales commissions paid to
employees and sales agents in the ordinary course of business.
(f) THIRD PARTY AGREEMENTS. Neither the Company nor any of its
Subsidiaries is, nor as a result of the execution or delivery of this Agreement,
or performance of the Company's obligations hereunder, will the Company or any
of its Subsidiaries be, in violation of any license, sublicense, agreement or
instrument to which the Company or any of its Subsidiaries is a party or
otherwise bound, nor will execution or delivery of this Agreement, or
performance of Company's obligations hereunder, cause the impairment,
termination or forfeiture of any Company Intellectual Property except as would
not result in a Company Material Adverse Effect. Section 4.19(f) of the Company
Disclosure Schedule sets forth a list of all license agreements to which the
Company or any of its Subsidiaries is a party and (i) pursuant to which any
Person is authorized to use any Company Intellectual Property, or (ii) pursuant
to which the Company or any of its Subsidiaries is authorized to use any
intellectual property of any third party.
(g) COMPANY SOFTWARE PROGRAMS. Section 4.19(g) of the Company
Disclosure Schedule contains a true and complete list of all of the Company's
and each of its Subsidiaries' proprietary software programs (the "SOFTWARE
PROGRAMS"). The Company and each of its Subsidiaries owns full and unencumbered
right and good, valid and marketable title to such Software Programs free and
clear of all Encumbrances.
(h) PROTECTION. The source code and system documentation relating to
the Software Programs (i) have at all times been maintained in strict
confidence, (ii) except as set forth in Section 4.19(h) of the Company
Disclosure Schedule, have been disclosed by the Company or any of its
Subsidiaries only to employees who have a "need to know" the contents thereof in
connection with the performance of their duties to the Company and who have
executed the proprietary rights and confidentiality agreements referred to in
Section 4.14(b), and (iii) have not been disclosed to any third party except
pursuant to any license referred to in Section 4.19(f).
(i) THIRD-PARTY SOFTWARE. Section 4.19(i) of the Company Disclosure
Schedule contains a complete list of (i) material software libraries, compilers
and other third-party software used in the development of the Software Programs
and (ii) material software systems and applications used by the Company or any
of its Subsidiaries in the operation of its
28
business. Section 4.19(i) of the Company Disclosure Schedule lists all license
agreements for the use of all such software and, if any such software is not
licensed, the basis of the use of such software by the Company or any of its
Subsidiaries. All use of each of such software product by the Company or any of
its Subsidiaries is in material compliance with the respective license agreement
or other right of use listed on Section 4.19(i) of the Company Disclosure
Schedule.
(j) CONTRACT PERFORMANCE. The Company and each of its Subsidiaries has
observed all material provisions of, and performed all of its material
obligations under, the license agreements to which it is a party. Neither the
Company nor any of its Subsidiaries has taken any action that could cause, or
failed to take any action, the failure of which could cause, (i) any source
code, trade secret or other Company Intellectual Property to be released from an
escrow or otherwise made available to any person or entity other than those
persons described in Section 4.14(b), dedicated to the public or otherwise
placed in the public domain or (ii) any other material adverse affect to the
protection of the Software Programs under trade secret, copyright, patent or
other intellectual property laws.
(k) YEAR 2000 COMPLIANT. The hardware and software included in the
Company Intellectual Property does not perform internal processing of dates, but
rather, relies upon the date processing from its platform, FileMaker, and, to
the Company's knowledge, where the date data comprises an unambiguous reference
to the century, the present version of FileMaker (i) has been designed to ensure
Year 2000 compatibility, which includes, but is not limited to, date data
century recognition, and calculations that accommodate same century and
multi-century formulas and date values; (ii) has not and shall not fail to
operate in accordance with its specification as a result of the year becoming
2000 AD; and (iii) shall not end abnormally or provide invalid or incorrect
results as a result of date data, which represents or references different
centuries or more than one century ("YEAR 2000 COMPLIANT"). Prior versions of
FileMaker, some of which are still in service in connection with Company
Intellectual Property, are not Year 2000 Compliant. To the knowledge of the
Company, there have been no adverse consequences to the customers of the Company
or any of its Subsidiaries as a result of prior versions of FileMaker not being
Year 2000 Compliant. The hardware and software included in the Company
Intellectual Property does not validate date data imported from other computers,
and will accept date data that does not contain unambiguous reference with
respect to the 20th and 21st centuries. All of the hardware and software
components utilized by the Company and each of its Subsidiaries are Year 2000
Compliant.
SECTION 4.20 TAXES. The Company hereby represents that, other than as
disclosed in Section 4.20 of the Company Disclosure Schedule: (a) the Company
and each of its Subsidiaries has filed all United States Federal income tax and
all other material Tax Returns required to be filed by it, and the Company and
each of its Subsidiaries has paid and discharged all Taxes with respect to
periods and portions of periods through the Reference Balance Sheet Date, except
for unpaid Taxes reflected on the Reference Balance Sheet and any unpaid Taxes
not yet due and payable; (b) neither the IRS nor any other taxing authority or
agency is now asserting or, to the knowledge of the Company, threatening to
assert against the Company or any of its Subsidiaries any deficiency or claim
for additional Taxes and, to the Company's knowledge, there are no requests from
any taxing authorities for information currently outstanding that could affect
the Taxes of the Company or any of its Subsidiaries; (c) neither the Company nor
any of its
29
Subsidiaries is currently being audited by any taxing authority; (d) there are
no tax liens on any assets of the Company or any of its Subsidiaries other than
for Taxes not yet due and payable; (e) neither the Company nor any of its
Subsidiaries has granted any currently effective waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax, and no such request for any such waiver or extension is pending; (f)
neither the Company nor any of its Subsidiaries is a party to any agreement,
contract or arrangement that may result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the Code; and (g) other than in the ordinary course of business, no material Tax
liability will accrue to the Company or any of its Subsidiaries after the
Reference Balance Sheet Date through the Closing Date. The Company has made
available to Acquiror or its legal counsel and accountants for inspection copies
of all material Tax Returns of the Company and each of its Subsidiaries for all
periods since the dates of the Company's and each of the Subsidiaries'
incorporation. The Company and each of the Subsidiaries will provide to Acquiror
copies of any Tax Returns filed after the date hereof by the Company and any of
its Subsidiaries at least five days prior to filing and any reports or written
assertions received after the date hereof from any taxing authority relating to
Taxes of the Company or any of its Subsidiaries within five days of their first
being received by the Company or any of its Subsidiaries. The Company and each
of its Subsidiaries has complied in all material respects with all applicable
laws, rules and regulations relating to the withholding of Taxes and has timely
collected or withheld and paid over (and up to the Closing Date will have timely
collected or withheld and paid over) to the proper Governmental Entities or
other taxing authorities all amounts required to be so collected or withheld and
paid over for all periods up to the Closing Date under all applicable Tax laws.
There are no Tax rulings, requests for rulings or closing agreements relating to
the Company or any of its Subsidiaries that could affect any of its liabilities
for Taxes for any period after the Closing Date. Neither the Company nor any of
its Subsidiaries has any contractual obligation, or obligation as a successor in
interest or transferee, to indemnify any other Person with respect to Taxes, or
any obligation to make distributions in respect of Taxes. No written claim has
ever been received from a taxing authority in a jurisdiction where the Company
or any of its Subsidiaries does not file Tax Returns that the Company or any of
its Subsidiaries is or may be subject to taxation by such jurisdiction. No power
of attorney has been granted by the Company or any of its Subsidiaries with
respect to any matter relating to Taxes, which power of attorney is currently in
force. Neither the Company nor any of its Subsidiaries has filed a consent under
Section 341(f) of the Code or any comparable provision of state law.
SECTION 4.21 PROPERTIES AND ASSETS.
(a) The Company and each of its Subsidiaries has good and marketable
title to the properties and assets reflected on the Reference Balance Sheet of
the Company other than nonmaterial properties and assets disposed of in the
ordinary course of business consistent with past practice since the date of the
Reference Balance Sheet, and all such properties and assets are free and clear
of any Encumbrances, except (i) as set forth in Section 4.21(a) of the Company
Disclosure Schedule and (ii) Permitted Encumbrances. Such properties and assets
are sufficient for the conduct of the Company's and each of its Subsidiaries'
business substantially in the same manner as it has been conducted prior to the
date hereof.
30
(b) Neither the Company nor any of its Subsidiaries owns any real
properties. Section 4.21(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of the real properties leased by the Company and each
of its Subsidiaries (the "LEASED PROPERTIES"). The Company and each of its
Subsidiaries has good and marketable leasehold title to the Leased Properties
set forth in Section 4.21(b) of the Company Disclosure Schedule, and the Leased
Premises are free and clear of all claims, tenants and occupants except for
Permitted Encumbrances. Complete and accurate copies of all leases or other
agreements relating to the Leased Properties have been delivered to Acquiror and
there have been no material changes or amendments to such leases or agreements
since such delivery. Except as provided in the leases for the Leased Properties,
the Company and each of its Subsidiaries is the lawful owner of all improvements
and fixtures located at the Leased Properties, free and clear except for
Permitted Encumbrances. Each lease or other agreement relating to the Leased
Properties is a valid and subsisting agreement, without any material default of
the Company or any of its Subsidiaries thereunder and to the Company's
knowledge, without any material default thereunder of the other party thereto,
and such leases and agreements give the Company and each of the Subsidiaries the
right to use or occupy, as the case may be, all real properties as are
sufficient and adequate to operate its business as it is currently being
conducted. Except as set forth in Section 4.21(b) of the Company Disclosure
Schedule, the possession of such property by the Company and each of the
Subsidiaries has not been disturbed nor has any claim relating to the Company's
or any of Subsidiaries' title to or possession of such property been asserted
against the Company or any of its Subsidiaries that would have a Company
Material Adverse Effect.
SECTION 4.22 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Reorganization based upon arrangements made by or on behalf of the
Company or any of its Subsidiaries.
SECTION 4.23 CERTAIN BUSINESS PRACTICES. Neither of the Company, any of
its Subsidiaries, nor, to the Company's knowledge, any directors, officers,
agents or employees of the Company or any of its Subsidiaries (in their
capacities as such) has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment.
SECTION 4.24 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 4.24(a) of the Company Disclosure Schedule, since December 31, 1999 no
executive officer, director or shareholder of the Company or any of its
Subsidiaries has engaged in any business dealings with the Company or any of its
Subsidiaries (other than any such business dealings that would not be required
to be disclosed in a proxy statement satisfying the requirements of Regulation
14A promulgated under the Exchange Act filed on the date hereof). Except for
normal compensation received as employees or directors, to the Company's
knowledge, no officer, director or shareholder of the Company or any of its
Subsidiaries, and no entity known by the Company or
31
any of its Subsidiaries to be controlled by any officer, director or shareholder
of the Company or any of its Subsidiaries:
(a) is directly or indirectly engaged in business as a competitor,
lessor, lessee, customer or supplier of the Company or any of its Subsidiaries;
owns directly or indirectly any interest (excepting no more than five percent
stockholdings for investment purposes in securities of publicly held companies)
in any Person that is directly or indirectly materially engaged in business as a
competitor, lessor, lessee, franchisee, customer or supplier of the Company or
any of its Subsidiaries; or is an officer, director, employee or consultant of
any such person;
(b) owns directly or indirectly, in whole or in part, any material
tangible or intangible property that the Company or any of its Subsidiaries
uses;
(c) has any cause of action or other claim whatsoever against, or owes
any amount to, the Company or any of its Subsidiaries, except for claims in the
ordinary course of business, such as for accrued vacation pay, and similar
matters in agreements existing on the date hereof; or
(d) has made any payment or commitment to pay any commission, fee or
other amount to, or purchase or obtain or otherwise contract to purchase or
obtain any goods or services from, any Person of which any officer or director
of the Company or any of its Subsidiaries is a partner or shareholder (excepting
no more than five percent stockholdings for investment purposes in securities of
publicly held companies).
SECTION 4.25 VOTE REQUIRED; CONSENTS.
(a) The affirmative votes or consents of the holders of a majority of
the Company Common Stock and of a majority of Company Preferred Stock are the
only votes of the holders of any of the Company Capital Stock necessary to
approve this Agreement and the Reorganization and the transactions contemplated
hereby.
(b) Holders of all of the outstanding Company Common Stock and of all
of the outstanding Company Preferred Stock have executed and delivered to
Acquiror a Shareholder Agreement substantially in the form of Exhibit C (the
"SHAREHOLDER AGREEMENT") and an Irrevocable Proxy substantially in the form of
Exhibit A attached thereto (the "IRREVOCABLE PROXY").
(c) Any contract, agreement or other arrangement, including those
entered into in connection with this Agreement, the Reorganization and the
transactions contemplated hereby, which may result in the payment of any amount
or the provision of any benefit that would not otherwise be deductible by reason
of Section 280G of the Code, shall have been approved by the holders of such
percentage of the Company's outstanding voting securities as is required by the
terms of Section 280G(b)(5)(B) of the Code to avoid the treatment of such
payment or benefit as a parachute payment under the federal tax laws, and such
stockholder
32
approval shall be obtained in a manner which satisfies all applicable
requirements of Section 280G(b)(5)(B) and the proposed Treasury Regulations
hereunder, including, without limitation, Q-7 of Section 1.280G-1 of such
proposed regulations.
SECTION 4.26 BOARD APPROVAL. The Board of Directors of the Company has (i)
unanimously approved this Agreement and the Reorganization and all transactions
contemplated hereby, (ii) determined that the Reorganization is in the best
interests of the shareholders of the Company and is on the terms that are fair
to such shareholders and (iii) recommended that the shareholders of the Company
approve this Agreement and consummate the Reorganization.
SECTION 4.27 BUSINESS ACTIVITY RESTRICTIONS. Except as set forth in Section
4.27 of the Company Disclosure Schedule, there is no agreement (noncompetition
or otherwise), commitment, judgment, injunction, order or decree to which the
Company or any of its Subsidiaries or, to the Company's knowledge, any officer,
employee or consultant of the Company or any of its Subsidiaries is a party or
that otherwise is binding upon the Company or any of its Subsidiaries or such
officer, employee or consultant that has or reasonably would be expected to have
the effect of prohibiting or impairing in any material manner any present
business practice of the Company or any of its Subsidiaries, any acquisition of
property (tangible or intangible) by the Company or any of its Subsidiaries, or
the conduct of business by the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has entered into any agreement under which
the Company or any of its Subsidiaries is restricted from selling, licensing or
otherwise distributing any of its technology or products to, or providing
services to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the market or
line of business.
SECTION 4.28 TAX TREATMENT. To the knowledge of the Company, the
Reorganization will qualify as a reorganization within the meaning of Section
368(a)(1)(C) of the Code
SECTION 4.29 ACQUISITION CONSIDERATION. (a) Section (b) of Exhibit B hereto
accurately sets forth the aggregate Acquisition Consideration that could be
issued in connection with Acquiror's acquisition of substantially all of the
assets of the Company as calculated in accordance with the formula set forth in
Section (a) of Exhibit B hereof, and (b) Schedule 3 hereof sets forth the (i)
Acquisition Consideration to be received by each Shareholder of Company in the
distribution of Acquiror Common Stock by the Company in complete liquidation of
the Company that constitutes a part of the Reorganization, (ii) the number of
shares of Acquiror Common Stock being assigned to the Escrow Agent to be
maintained in the Escrow Fund pursuant to Articles VII and VIII hereof and the
Escrow Agreement on behalf of each Company shareholder, and (iii) the number of
shares of Acquiror Common Stock to which holders of Employee and Director
Options shall be entitled, assuming their options are fully vested and
exercised.
SECTION 4.30 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company herein or in any Schedule hereto, including the
Company Disclosure Schedule, or certificate furnished by the Company pursuant to
this Agreement, when all such
33
documents are read together in their entirety, contains or will contain at the
Closing Date any untrue statement of a material fact, or omits or will omit at
the Closing Date to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Except as specifically disclosed with respect to the sections of this
Article V in the Acquiror Disclosure Schedule, Acquiror hereby represents and
warrants to the Company that:
SECTION 5.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Acquiror has
been duly organized and is validly existing and in good standing (to the extent
applicable) under the laws of the jurisdiction of its incorporation, and has the
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals are
not reasonably expected to have, individually or in the aggregate, an Acquiror
Material Adverse Effect. Acquiror is duly qualified or licensed to do business,
and is in good standing (to the extent applicable), in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that is not
reasonably expected to have, individually or in the aggregate, an Acquiror
Material Adverse Effect.
SECTION 5.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Acquiror has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Acquiror
and the consummation by Acquiror of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Acquiror are necessary to authorize this
Agreement or to consummate such transactions. This Agreement has been duly
executed and delivered by Acquiror and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligation of Acquiror, enforceable against Acquiror in accordance with its
terms (except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors' rights or remedies in general as from time to time
in effect and the exercise by courts of equity powers).
SECTION 5.03 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Acquiror and do
not, and the performance by Acquiror of its obligations hereunder and the
consummation of the Reorganization will not, (i) conflict with or violate any
provision of the certificate of incorporation or bylaws of Acquiror, or (ii)
assuming that all consents, approvals, authorizations
34
and permits described in Section 5.03(b) have been obtained and all filings and
notifications described in Section 5.03(b) have been made, conflict with or
violate any Law applicable to Acquiror or by which any property or asset of
Acquiror is bound or affected.
(b) The execution and delivery of this Agreement by Acquiror do not,
and the performance by Acquiror of its respective obligations hereunder and the
consummation of the Reorganization will not, require any consent, approval,
authorization or permit of, or filing by Acquiror with or notification by
Acquiror to, any Governmental Entity, except where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, could not reasonably be expected, individually or in the
aggregate, to prevent or materially delay the performance by Acquiror of its
obligations pursuant to this Agreement or the consummation of the
Reorganization.
SECTION 5.04 CAPITALIZATION. The authorized capital stock of Acquiror
consists of 20,000,000 shares of Acquiror Common Stock and 10,000,000 shares of
preferred stock, $0.001 par value ("ACQUIROR PREFERRED STOCK"). As of December
31, 1999 (i) 13,674,533 shares of Acquiror Common Stock are issued and
13,647,208 shares of Acquiror Common Stock are outstanding, all of which are
validly issued, fully paid and nonassessable, (ii) 27,325 shares of Acquiror
Common Stock are held in the treasury of Acquiror, (iii) no shares of Acquiror
Common Stock are held by the Subsidiaries of Acquiror, (iv) 2,384,377 shares of
Acquiror Common Stock are reserved for future issuance pursuant to outstanding
options and warrants to purchase Acquiror Common Stock ("ACQUIROR STOCK
Option"), of which 971,860 and 1,412,517 shares of Acquiror Common Stock are
reserved for future issuance pursuant to unvested, outstanding, unexercised and
vested, outstanding, unexercised Acquiror Stock Options, respectively, (v) no
shares of Acquiror Preferred Stock are issued and outstanding and (vi) 225,000
shares of Acquiror Common Stock are reserved for issuance pursuant to the
Acquiror Employee Stock Purchase Plan, of which 144,569 shares have been issued.
The shares of Acquiror Common Stock to be issued pursuant to the Reorganization
will be duly authorized, validly issued, fully paid, and non-assessable.
SECTION 5.05 SEC FILINGS; FINANCIAL STATEMENTS. Acquiror has made available
to the Company each statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement, and other filing filed with the SEC by Acquiror
since March 24, 1999 (collectively, the "ACQUIROR SEC DOCUMENTS"). In addition,
Acquiror has made available to the Company all exhibits to the Acquiror SEC
Documents filed prior to the date hereof, and will promptly make available to
the Company all exhibits to any additional Acquiror SEC Documents filed prior to
the Closing Date. As of their respective filing dates, the Acquiror SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Acquiror SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed Acquiror SEC Document.
The financial statements of Acquiror, including the notes thereto, included in
the Acquiror SEC Documents (the "ACQUIROR FINANCIAL STATEMENTS") were complete
and correct in all material respects as of their respective dates, complied as
to form in all material respects with applicable accounting requirements and
with the published
35
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with U.S. GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the SEC). The Acquiror Financial Statements fairly present the
consolidated financial condition and operating results of Acquiror at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments).
SECTION 5.06 ABSENCE OF UNDISCLOSED LIABILITIES. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet included in Acquiror's Quarterly Report on Form 10-Q for the
period ended September 30, 1999 (the "ACQUIROR BALANCE SHEET"), (ii) those
incurred in the ordinary course of business and not required to be set forth in
the Acquiror Balance Sheet under generally accepted accounting principles, and
(iii) those incurred in the ordinary course of business consistent with past
practice since the Acquiror Balance Sheet Date that have not had and could not
reasonably be expected to have, individually or in the aggregate, an Acquiror
Material Adverse Effect.
SECTION 5.07 BROKERS. Except for Xxxxxxxxx, Xxxxxx & Xxxxxxxx, all fees and
expenses of which shall be borne by Acquiror; no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Reorganization based upon arrangements made by or on behalf
of Acquiror.
SECTION 5.08 TAX TREATMENT. To the knowledge of Acquiror the Reorganization
will qualify as a reorganization within the meaning of Section 368(a)(1)(C) of
the Code.
SECTION 5.09 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Acquiror herein or in any Schedule hereto, including the
Acquiror Disclosure Schedule, or certificate furnished by Acquiror pursuant to
this Agreement, or the Acquiror SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Closing Date any
untrue statement of a material fact, or omits or will omit at the Closing Date
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE VI
CONDUCT PRIOR TO CLOSING AND COVENANTS
SECTION 6.01 CONDUCT OF BUSINESS BY THE COMPANY.
(a) The Company agrees that, between the date of this Agreement and the
Closing Date, except as expressly contemplated by any provision of this
Agreement, unless Acquiror shall otherwise agree in writing, (x) the respective
businesses of the Company and each of its Subsidiaries be conducted only in, and
the Company and each of its Subsidiaries shall
36
not take any action except in, the ordinary course of business consistent with
past practice and (y) the Company and each of its Subsidiaries shall use all
reasonable efforts to keep available the services of such of the current
officers, significant employees and consultants of the Company and each of its
Subsidiaries and to preserve the current relationships of the Company and each
of its Subsidiaries with such of the corporate partners, customers, suppliers
and other persons with which the Company and each of its Subsidiaries has
significant business relations in order to preserve substantially intact its
business organization.
(b) Except as described in Section 6.01(b) of the Company Disclosure
Schedule, the Company covenants and agrees that, prior to the Closing, without
the prior written consent of Acquiror, neither the Company nor any of its
Subsidiaries will do any of the things enumerated in Section 4.08(i)-(xxiii).
SECTION 6.02 NOTICES OF CERTAIN EVENTS. Upon becoming aware of the same,
the Company agrees to give prompt notice to Acquiror of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Reorganization; (ii) any notice or other
communication from any Governmental Entity in connection with the
Reorganization; (iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company that relate to the consummation of the
Reorganization; (iv) the occurrence of a default or event that, with the giving
of notice or lapse of time or both, will become a default under any Material
Contract; and (v) any change that could reasonably be expected to have a Company
Material Adverse Effect or to delay or impede the ability of the Company to
perform its obligations pursuant to this Agreement and to effect the
consummation of the Reorganization.
SECTION 6.03 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) From the date of this Agreement to the Closing Date, the Company
shall (i) provide to Acquiror (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives
(collectively, "REPRESENTATIVES")) access at reasonable times upon prior notice
to its officers, employees, agents, properties, offices and other facilities and
to the books and records thereof, and (ii) furnish promptly such information
concerning its business, properties, contracts, assets, liabilities and
personnel as the other party or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 6.03 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement with respect to the information disclosed
pursuant to this Section 6.03.
SECTION 6.04 NO SOLICITATION OF TRANSACTIONS. The Company shall not
directly or indirectly, and shall instruct its officers, directors, employees,
agents or advisors or other representatives (including, without limitation, any
investment banker, attorney or accountant retained by it), not to, directly or
indirectly, solicit, initiate or knowingly encourage (including by
37
way of furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) that constitutes,
or may reasonably be expected to lead to, a transaction involving a change of
control of the Company, the sale of the Company's assets, a merger consolidation
or reorganization of or with the Company or any other party, the sale of the
Company's stock or other similar transaction (collectively, "OTHER
TRANSACTION"), or enter into or maintain or continue discussions or negotiate
with any person in furtherance of such inquiries or to obtain an Other
Transaction, or agree to or endorse any Other Transaction, or authorize or
permit any of the officers, directors or employees of the Company or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company to take any such action. The Company
shall notify Acquiror promptly, and in no event later than one day after
receipt, if any proposal or offer, or any inquiry or contact with any person
with respect thereto, regarding an Other Transaction is made. The Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to an Other
Transaction. The Company shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which it is a
party. The Company shall ensure that its officers, directors, employees, agents
and advisors or other representatives (including, without limitation, any
investment banker, attorney or accountant retained by it) are aware of the
restrictions described in this Section 6.04.
SECTION 6.05 FURTHER ACTION; CONSENTS; FILINGS.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Reorganization, (ii) obtain from Governmental Entities
any consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Acquiror, the Company in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Reorganization and (iii) make all necessary filings, and thereafter make any
other required or appropriate submissions, with respect to this Agreement and
the Reorganization required under any applicable Law. The parties hereto shall
cooperate and consult with each other in connection with the making of all such
filings, including by providing copies of all such documents to the nonfiling
parties and their advisors prior to filing, and none of the parties shall file
any such document if any of the other parties shall have reasonably objected to
the filing of such document. No party shall consent to any voluntary extension
of any statutory deadline or waiting period or to any voluntary delay of the
consummation of the Reorganization at the behest of any Governmental Entity
without the consent and agreement of the other parties hereto, which consent
shall not be unreasonably withheld or delayed.
(b) Each of the parties hereto shall promptly give any notices
regarding the Reorganization, this Agreement or the transactions contemplated
hereby or thereby to third parties required under applicable law or by any
Material Contract, and use all reasonable efforts to obtain any third party
consents required under any such Material Contract in connection with the
consummation of the Reorganization or the other transactions contemplated by
this Agreement.
38
(c) The Company and Acquiror agree that, in the event any consent,
approval or authorization necessary or desirable to preserve for the Company
business and the Company any right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which the Company is a
party is not obtained prior to the Closing, the current officers and directors
of the Company will, subsequent to the Closing, cooperate with Acquiror and the
Company in attempting to obtain such consent, approval or authorization as
promptly thereafter as practicable.
SECTION 6.06 PUBLIC ANNOUNCEMENTS. Except to the extent required by
applicable law or, as to Acquiror, the rules and regulations of the Nasdaq
National Market, in which case the issuing party shall use all reasonable
efforts to consult with the other parties before issuing any such disclosure,
Acquiror and the Company shall consult with each other before making any
disclosure with respect to this Agreement or the transactions contemplated
hereby, and no public announcement or press release regarding this Agreement or
any transaction contemplated hereby shall be made by the Acquirer, the Company
or the Shareholders' Agent unless approved by each of the parties to this
Agreement in their sole and absolute discretion prior to release.
SECTION 6.07 SHAREHOLDER APPROVAL. Company shall promptly after the date
hereof take all action necessary in accordance with Massachusetts Law and its
Charter and bylaws to secure the unanimous written consent of its shareholders
within five (5) business days of the date of this Agreement. Company shall use
its best efforts to take all action necessary or advisable to secure the consent
of shareholders required to effect the Reorganization.
SECTION 6.08 NNM LISTING OF ADDITIONAL SHARES APPLICATION. Acquiror shall
use its commercially reasonable efforts to cause to be authorized for listing on
the Nasdaq National Market the shares of Acquiror Common Stock to be issued in
connection with the Reorganization.
SECTION 6.09 FIRPTA CERTIFICATE. The Company shall, as soon as practicable
after the date hereof and in no event later than the business day immediately
preceding the Closing Date, provide Acquiror with a properly executed FIRPTA
Notification Letter, substantially in the form of Exhibit D attached hereto,
which states that shares of capital stock of the Company do not constitute
"United States real property interests" under Section 897(c) of the Code, for
purposes of satisfying Acquiror's obligations under Treasury Regulation Section
1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification
Letter, the Company shall have provided to Acquiror, as agent for the Company, a
form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) and substantially in
the form of Exhibit E attached hereto along with written authorization for
Acquiror to deliver such notice form to the Internal Revenue Service on behalf
of the Company upon the Closing of the Reorganization.
SECTION 6.10 COMPANY AND STOCK OPTION PLAN; ASSUMPTION OF EMPLOYEE AND
DIRECTOR OPTIONS. At the Closing, the Company Stock Option Plan, and each
Employee and Director Option, whether vested or unvested, will be assumed by
Acquiror. SCHEDULE 4 hereto sets forth a true and complete list as of the date
hereof of all holders of Employee and Director
39
Options under the Company Stock Option Plan including the number of shares of
Company Common Stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. Each
such option so assumed by Acquiror under this Agreement shall continue to have,
and be subject to, the same terms and conditions set forth in the Company Stock
Option Plan and the applicable stock option agreement immediately prior to the
Closing, except that (i) such option will be exercisable for that number of
whole shares of Acquiror Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such option
immediately prior to the Closing multiplied by the Exchange Ratio set forth in
Section (c) of Exhibit B hereof and rounded down to the nearest whole number of
shares of Acquiror Common Stock, and (ii) the per share exercise price for the
shares of Acquiror Common Stock issuable upon exercise of such assumed option
will be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such option was exercisable immediately
prior to the Closing by the Exchange Ratio set forth in Section (c) of Exhibit B
hereof rounded up to the nearest whole cent. Consistent with the terms of the
Company Stock Option Plan and the documents governing the outstanding options
under such plan, the transactions contemplated hereby will not terminate any of
the outstanding options under the Company Stock Option Plan with respect to
employees of the Company who become employed by Acquiror or, except to the
extent set forth in the Option Agreement covering any Employee and Director
Option, accelerate the exercisability or vesting of such options or the shares
of Acquiror Common Stock which will be subject to those options upon the
Acquiror's assumption of the options hereunder. Within 30 business days after
the Closing, Acquiror will (i) file with the SEC a registration statement on
Form S-8 covering the shares of Acquiror Common Stock issuable upon the exercise
of the assumed Employee and Director Options with respect to those optionholders
whose shares are qualified to be covered under a Form S-8 and (ii) issue to each
person who, immediately prior to the Closing was a holder of an Employee and
Director Option, a document in form and substance satisfactory to the Company
evidencing the foregoing assumption of such option by Acquiror.
SECTION 6.11 TAX COVENANT.
(a) The parties hereto shall take all action necessary to cause the
Reorganization to qualify as reorganization within the meaning of Section
368(a)(1)(C) of the Code.
(b) The parties hereto shall not take any action that would cause and
shall not fail to take any action which if not taken would cause the
Reorganization to fail to qualify as a reorganization within the meaning of
Section 368(a)(1)(C) of the Code.
(c) In no way limiting the foregoing provisions of this Section 6.11,
the Acquiror hereby agrees and covenants that (i) Acquiror has no plan or
intention to sell or otherwise dispose of any of the assets of the Company
acquired in the transaction, except for dispositions made in the ordinary course
of business or transfers described in Section 368(a)(2)(C) of the Code; and (ii)
following the transaction, Acquiror will continue the historic business of the
Company or use a significant portion of the Company's historic assets in
business.
40
(d) The covenants and agreement set forth in this Section 6.11 shall
survive the Closing and the termination of this Agreement, provided that Closing
has occurred.
(e) Notwithstanding anything to the contrary herein, neither party
hereto warrants to the other that the Reorganization will qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Code.
SECTION 6.12 COMPANY OPTIONS. The Company shall not take any action to cash
out exercisable Employee and Director Options or accelerate the exercisability
of any unvested Employee and Director Options prior to or as a result of the
Reorganization.
SECTION 6.13 INSURANCE. Each of the Company and its Subsidiaries shall
maintain all of its existing liability insurance policies through closing.
SECTION 6.14 CHANGE OF COMPANY NAME. The Company agrees to change its
corporate name to a new name bearing no resemblance to its present name as
promptly as practical after Closing so as to permit the use of its present
name by Acquiror or its designee, and shall take all required action in
connection therewith including but not limited to obtaining the approval of
its board of directors and Shareholders to amend its charter to change its
name.
SECTION 6.15 BUYERS AND SHIPPERS AGREEMENT. Prior to and after Closing
Company and the Former Company Equityholders shall use their best efforts to
amend the Buyers and Shippers Agreement to eliminate the option of Buyers and
Shippers Enterprises, Inc. contained therein to purchase an equity interest in
the Company or to clarify to Acquiror's satisfaction that such option arises and
is exercisable only in connection with an initial public offering of the Company
Common Stock and that Buyers and Shippers Enterprises, Inc. shall have no rights
or claims against Acquiror relating thereto as a result of or following Closing.
SECTION 6.16 COMPANY LIQUIDATION AND DISSOLUTION. The Company shall be
dissolved as promptly as practical after the Closing and after the Company, in
complete winding up and liquidation, shall distribute to its Shareholders in
exchange for and upon surrender for cancellation of their certificates, shares
of Acquiror Common Stock to be delivered to the Company pursuant to Section 3.01
hereof. Acquiror shall not be obligated to issue fractional shares of Acquiror
Common Stock in connection with the distribution of shares by Company to its
Shareholders. Instead the Company shall make appropriate arrangements
satisfactory to Acquiror for the purchase or sale for cash which shall be paid
by Acquiror to the Company for the account of the shareholders entitled to
fractional interests in lieu of their fractional interests in Acquiror Common
Stock.
SECTION 6.17 RESTRICTIONS ON DISPOSITION OF SHARES. The Company is
receiving shares of Acquiror Common Stock hereunder in accordance with the
Reorganization and without any present intention towards the distribution or
resale thereof other than in distribution by the Company in connection with its
completion liquidation and dissolution as an integral part of the
Reorganization. Shares of Acquiror Common Stock to be received pursuant to this
Agreement
41
shall be distributed by Company to its Shareholders who covenant and warrant
that the shares so received are acquired for their own accounts and not with the
present view towards the distribution thereof and will not dispose of such
shares except (a) pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or (b) in any other transaction which, in
the opinion of counsel acceptable to Acquiror is except from registration under
the Securities Act of 1933, as amended, or the Rules and Regulations of the
Securities and Exchange Commission thereunder. In order to effectuate the
covenants of this Section 6.18, an appropriate endorsement will be placed on the
certificate of the Acquiror Common Stock of the Acquiror at the time of
distribution of such shares by the Company pursuant to this Agreement, and stop
transfer instructions shall be placed with the transfer agent for the
securities.
SECTION 6.18 EMPLOYEE BENEFIT COVENANTS.
(a) Acquiror shall offer or cause to be offered employment to all
employees of the Company at substantially the same base salary rate at which
each such employee is being paid by the Company immediately prior to the Closing
and with such employee benefits maintained by Acquiror or, if no such benefits
are maintained by Acquiror within the State in which such employees work, with
such benefits, to the extent practicable, which are comparable to those provided
to such employees immediately prior to the Closing, , PROVIDED THAT Acquiror
will cause to be waive any waiting time limitations applicable under the medical
and dental plans offered. Effective as of the Closing, all employees of the
Company who accept Acquiror's offer of employment will become employees of the
Acquiror ("Hired Employees").
(b) As of the Closing and without any waiting period, Acquiror will use
commercially reasonable best efforts to provide all Hired Employees (and their
dependents) who are covered under the Company's medical or dental plans
immediately prior to Closing with medical and dental benefit coverage under
group health plans maintained by Acquiror and will use commercially reasonable
best efforts to waive any pre-existing condition exclusions or limitations
applicable to such persons under such medical and dental plans.
(c) Acquiror acknowledges that effective as of the Closing, it is a
successor to the obligations under COBRA, to the extent required by law, with
respect to the employees of the Company.
(d) For purposes only of Acquiror's 401(k) Plan and the rate at which
Hired Employees earn paid vacation, Acquiror shall credit Hired Employees with
their time in active service for the Company as if it had been time in active
service with the Acquiror.
(e) The Company shall, not more than five business days after the
signing of this Agreement, provide its employees with written notice to its
employees of the termination of their employment upon the Closing. Such written
notice shall be accompanied by a written offer of employment provided to the
Company by Acquiror. The Company shall have sole responsibility and liability
for any and all obligations under the WARN Act, and any applicable State
facility closing or lay-off laws, for the termination of its employees occurring
on or PRIOR TO the Closing. Acquiror shall have sole responsibility and
liability for any and all obligations under the WARN Act, and any applicable
State facility closing or lay-off laws, for any termination of Hired Employees
occurring after the Closing.
42
(f) The covenants and agreement set forth in this Section 6.18 shall
survive the Closing and the termination of this Agreement, provided that the
Closing has occurred.
ARTICLE VII
CONDITIONS TO THE REORGANIZATION
SECTION 7.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE
REORGANIZATION. The obligations of the parties hereto to consummate the
Reorganization, or to permit the consummation of the Reorganization, are subject
to the satisfaction or, if permitted by applicable Law, waiver of the following
conditions:
(a) no court of competent jurisdiction shall have issued or entered any
order, writ, injunction or decree, and no other Governmental Entity shall have
issued any order, which is then in effect and has the effect of making the
Reorganization illegal or otherwise prohibiting its consummation;
(b) any waiting period (and any extension thereof) applicable to the
consummation of the Reorganization under any applicable competition, merger
control or similar Law shall have expired or been terminated; and
(c) this Agreement and the Reorganization shall have been unanimously
approved by the Company's shareholders.
SECTION 7.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Reorganization, or to permit the consummation
of the Reorganization, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) each of the representations and warranties of Acquiror contained in
this Agreement that is qualified by materiality shall be true, complete and
correct on and as of the Closing Date as if made at and as of the Closing Date
(other than representations and warranties which address matters only as of a
certain date which shall be true, complete and correct as of such certain date)
and each of the representations and warranties that is not so qualified shall be
true, complete and correct in all material respects on and as of the Closing
Date as if made at and as of the Closing Date (other than representations and
warranties which address matters only as of a certain date which shall be true,
complete and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate of an authorized officer of Acquiror to such
effect;
(b) Acquiror shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on
43
or prior to the Closing Date and the Company shall have received a certificate
of an authorized officer to that effect;
(c) Acquiror shall have executed and delivered a signed counterpart of
the Escrow Agreement;
(d) Xxxxx Xxxxx, Xxx Xxxxxxxx and Xxxxx Xxxxxxx shall have entered into
a retention and noncompetition agreement, substantially in the form attached
hereto as Exhibit F (the "RETENTION AGREEMENT"), and Xxxx Xxxxxxxx shall have
entered into a Consulting Services Agreement substantially in the form attached
hereto as Exhibit G (the "Consulting Services Agreement");
(e) the Company shall have received a legal opinion from Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, legal counsel to Acquiror, in substantially the form
attached hereto as Exhibit H;
(f) Acquiror shall have executed and delivered a registration rights
agreement in the form attached hereto as Exhibit I; and
(g) Acquiror shall have filed a Notification for Listing of Additional
Shares with NASDAQ covering the Acquiror Common Stock to be issued in connection
with the Reorganization.
SECTION 7.03 CONDITIONS TO THE OBLIGATIONS OF ACQUIROR. The obligations of
Acquiror to consummate the Reorganization, or to permit the consummation of the
Reorganization, are subject to the satisfaction or, if permitted by applicable
Law, waiver of the following further conditions:
(a) each of the representations and warranties of the Company contained
in this Agreement that is qualified by materiality shall be true, complete and
correct on and as of the Closing Date as if made at and as of the Closing Date
(other than representations and warranties which address matters only as of a
certain date which shall be true, complete and correct as of such certain date)
and each of the representations and warranties that is not so qualified shall be
true, complete and correct in all material respects on and as of the Closing
Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true,
complete and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by this Agreement, and Acquiror shall
have received a certificate of the President and Treasurer of the Company to
such effect;
(b) the Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date and Acquiror
shall have received a certificate of the President and Treasurer of the Company
to that effect;
44
(c) no Company Material Adverse Effect shall have occurred since the
date of this Agreement;
(d) the Escrow Agent and the Shareholders' Agent shall have executed
and delivered the Escrow Agreement;
(e) there shall not be pending any action, proceeding, claim or
counterclaim which seeks to or would, or any order, decree or injunction
(whether preliminary, final or appealable) which would, require Acquiror to hold
separate or dispose of any of the stock or assets of the Company or impose
material limitations on the ability of Acquiror to control in any material
respect the business, assets or operations of either Acquiror or the Company;
(f) Acquiror shall have received a legal opinion from Xxxxxxxx, Xxxxxxx
& Xxxxxxx, A Professional Corporation, legal counsel to the Company, in
substantially the form attached hereto as Exhibit J;
(g) Acquiror and the Company shall have received, each in form and
substance reasonably satisfactory to Acquiror, all authorizations, consents,
orders and approvals of all Governmental Entities and officials and all third
party consents set forth on SCHEDULE 5 hereto;
(h) all of the employees of the Company set forth on SCHEDULE 6 hereto
shall be employed by the Company and shall not have given any notice that they
will not continue to be employed by Acquiror following the Closing Date;
(i) Acquiror and each of Xxxxx Xxxxx, Xxx Xxxxxxxx and Xxxxx Xxxxxxx
shall have entered into a Retention Agreement, and Acquiror and Xxxx Xxxxxxxx
shall have entered into a Consulting Services Agreement;
(j) each shareholder of the Company shall have executed and delivered a
Shareholder Agreement;
(k) each shareholder of the Company shall have executed and delivered
an Irrevocable Proxy to Acquiror within five (5) business days of the date of
this Agreement;
(l) The Company shall have delivered copies of the executed Master
Agreement and runtime License Agreement it has entered into with Oracle; and
(m) The Company shall have delivered (i) a written waiver of Xxxxx
Xxxxxxxx waiving his right to options to purchase 20,000 shares of Company
Common Stock and confirming that the total number of shares of Company Common
Stock with respect to which he holds options is 51,250, and (ii) a certified
copy of resolutions of the Company's Board of
45
Directors confirming Xxxxx Xxxxxxxx'x option(s) to purchase a maximum of 51,250
shares of Company Common Stock.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Company contained in this Agreement, the
Exhibits to this Agreement, the Company Disclosure Schedule, the certificates
delivered pursuant to Section 7.03(a) and (b) (collectively, the "ACQUISITION
DOCUMENTS") shall survive the Closing and remain in full force and effect until
the second anniversary of the Closing Date; PROVIDED, HOWEVER, that the
representations and warranties dealing with Taxes shall survive the Closing and
remain in full force and effect until thirty (30) calendar days after the
expiration of the applicable statute of limitations governing such claims, and
the covenant contained in Section 6.15 relating to the Buyers and Shippers
Agreement shall survive the Closing and remain in full force and effect until
that agreement is revised as set forth in Section 6.15. If written notice of a
claim has been given prior to the expiration of the applicable representations
and warranties, then the relevant representations and warranties shall survive
as to such claim, until such claim has been finally resolved. Except as set
forth in this Section 8.01, the representations and warranties of each party
hereto shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers, directors, representatives
or agents whether prior to or after the execution of this Agreement. This
Section 8.01 shall not limit any covenant or agreement of the parties hereto
that by its term contemplates performance after the Closing Date.
SECTION 8.02 INDEMNIFICATION.
(a) Subject to the limitations set forth in this Article VIII, the
Former Company Equityholders, up to the maximum amount as to each Former Company
Equityholder set forth in subparagraph (b) below, will indemnify and hold
harmless Acquiror and its officers, directors, agents and employees, and each
person, if any, who controls or may control Acquiror within the meaning of the
Securities Act (hereinafter referred to individually as an "INDEMNIFIED PERSON"
and collectively as "INDEMNIFIED PERSONS") from and against any and all losses,
costs, damages, liabilities and expenses arising from claims, demands, actions,
causes of action, including, without limitation, reasonable legal fees, net of
any recoveries by Acquiror under insurance policies or indemnities from third
parties (collectively, "DAMAGES") arising out of or relating to (i) any
misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by the
Company in the Acquisition Documents, (ii) any and all liabilities, claims, or
obligations of the Acquiror which arise at any time out of the Company Stock
Options Plan, or (iii) the Buyers and Shippers Agreement. The Escrow Fund shall
be security for this indemnity obligation subject to the limitations in this
Agreement. Claims for indemnification first shall be made against the Escrow
Fund and if the Escrow Fund is depleted or has been released, then against any
or all of the Former Company Equityholders. The amount of the liability of each
of the Former Company Equityholders for Damages arising out of a particular
claim (a "Subject Claim") shall be equal to the Former
46
Company Equityholders share of such Damages based on his, her or its share of
the Acquisition Consideration received by the Former Company Equityholders,
subject to the aggregate limitations set forth in subsection 8.02(b). Any
amounts paid by Former Company Equityholders as indemnification payments
hereunder will be treated by Acquiror and the Former Company Equityholder as
reductions to the Acquisition Consideration paid to Company hereunder.
(b) (i) Subject to subparagraph (ii) below, the maximum aggregate
amount which each Former Company Equityholder shall be liable for under the
indemnification obligations set forth in this Section 8.02 is an amount equal to
the value of the aggregate Acquisition Consideration received and receivable by
the Former Company Equityholder as set forth in Schedule 3 hereof as determined
as of the Closing based upon the Acquiror Stock Price.
(ii) Notwithstanding subparagraph (i) above, the maximum aggregate
amount which each of Insight Capital Partners II, L.P. ("Insight"), Insight
Capital Partners (Cayman) II, L.P. ("Insight Cayman") and Imprimis SB, L.P. are
liable for under the indemnification obligations set forth in this Section 8.02
shall be adjusted as follows. Upon each occasion that any of Insight, Insight
Cayman and Imprimis SB, L.P. receives a notice from Acquiror that a claim is
being made hereunder, then its maximum aggregate liability under subparagraph
(i) above, shall be adjusted upward or downward by an amount equal to the
difference between (1) the aggregate Net Proceeds received from its sale of any
Acquiror Common Stock in a public sale since the last occasion upon which its
maximum aggregate liability was calculated hereunder, and (2) an amount equal to
the number of shares sold (as adjusted for stock dividends, stock splits and the
like) multiplied by the Acquiror Stock Price at Closing (as adjusted for stock
dividends, stock splits and the like). For purposes of this subparagraph, Net
Proceeds shall mean the gross proceeds from the public sale of the Acquiror
Common Stock less underwriting commissions and discounts, if any. Insight,
Insight Cayman, and Imprimis SB, L.P.'s liability with respect to a Subject
Claim hereunder shall be limited to the amount that the maximum aggregate
liability, as calculated hereunder in connection with the Subject Claim, exceeds
the aggregate amount of all Damages heretofore paid by it pursuant to Subsection
8.02(a).
(iii) Notwithstanding subparagraphs (ii) and (iii) above, on the
second anniversary of the Closing, the maximum amount which Insight, Insight
Cayman and Imprimis SB, L. P. shall be liable under the indemnification
obligations with respect to the representations and warranties dealing with
Taxes shall be reduced to ten percent (10%) of the maximum amount to which
they would otherwise be liable for their indemnification obligations pursuant
to subparagraph (ii) above.
(c) Nothing in this Agreement shall limit the liability (i) of the
Company for any willful breach of any representation, warranty or covenant if
the Reorganization does not close, or (ii) of any Former Company Equityholder in
connection with any breach of the Shareholder Agreement or Irrevocable Proxy.
SECTION 8.03 DAMAGE THRESHOLD; LIMITATION. Notwithstanding the
foregoing, other than claims pursuant to Section 8.02(a)(ii) or Section
8.02(a)(iii) for which there is no threshold, Acquiror may not receive any
shares from the Escrow Fund unless and until an Officer's Certificate or
Certificates (as defined in Section 8.05 below) identifying Damages the
aggregate
47
amount of which exceeds $100,000 has been delivered to the Escrow Agent as
provided in Section 8.05 below and such amount is determined pursuant to this
Article VIII to be payable, in which case Acquiror shall receive shares equal in
value to the full amount of Damages in accordance with Section 8.05(b). In
determining the amount of any Damage attributable to a breach, any materiality
standard contained in a representation, warranty or covenant of the Company
shall be disregarded.
SECTION 8.04 ESCROW PERIOD. The Escrow Period shall terminate with
respect to the Escrow Shares as follows: (a) if prior to or on the one-year
anniversary of the Closing, the option under the Buyers and Shippers Agreement
is resolved to Acquiror's satisfaction as set forth in Section 6.15 hereof, the
Escrow Period with respect to the Escrow Shares attributable to such option as
set forth in Schedule 3 hereto shall thereupon terminate; (b) with respect to
the Escrow Shares attributable to Imprimis SB, L.P., Insight Capital Partners
(Cayman) II, L.P., and Insight Capital Partners II, L.P., at the one-year
anniversary of the Closing; and (c) after the one-year anniversary of the
Closing, upon the resolution to Acquiror's reasonable satisfaction as set forth
in Section 6.15 hereof of the option under the Buyers and Shippers Agreement, as
to all remaining Escrow Shares, if any; PROVIDED, HOWEVER, that a portion of the
Escrow Shares, which is reasonably necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate theretofore delivered to the Escrow Agent
prior to termination of the Escrow Period with respect to facts and
circumstances existing prior to expiration of such Escrow Period, shall remain
in the Escrow Fund until such claims have been resolved. Acquiror shall deliver
to the Escrow Agent a certificate specifying the Closing.
SECTION 8.05 CLAIMS UPON ESCROW FUND.
(a) Upon receipt by the Escrow Agent on or before the last day of the
Escrow Period of a certificate signed by any officer of Acquiror (an "OFFICER'S
CERTIFICATE"):
(i) stating that Damages exist in an aggregate amount greater
than $100,000 or that Damages exist for claims under Section
8.02(a)(ii) or Section 8.02(a)(iii); and
(ii) specifying in reasonable detail the individual items of
such Damages included in the amount so stated, the date each such item
was paid, or properly accrued or arose, the nature of the
misrepresentation, breach of warranty or claim to which such item is
related,
the Escrow Agent shall, subject to the provisions of Section 8.06 and 8.07
below, deliver to Acquiror out of the Escrow Fund, as promptly as practicable,
Escrow Shares or other assets held in the Escrow Fund having a value equal to
such Damages in accordance with Section 8.05(b).
(b) For the purpose of compensating Acquiror for its Damages pursuant
to this Agreement, the Escrow Shares in the Escrow Fund shall be valued at the
Acquiror Stock Price.
48
SECTION 8.06 OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent (defined in Section
8.09 below) and for a period of thirty (30) days after such delivery to the
Escrow Agent of such Officer's Certificate, the Escrow Agent shall make no
delivery of Escrow Shares or other property pursuant to Section 8.05 hereof
unless the Escrow Agent shall have received written authorization from the
Shareholders' Agent to make such delivery. After the expiration of such thirty
(30) day period, the Escrow Agent shall make delivery of the Escrow Shares or
other property in the Escrow Fund in accordance with Section 8.05 hereof,
provided that no such payment or delivery may be made if the Shareholders' Agent
shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
and to Acquiror prior to the expiration of such thirty (30) day period.
SECTION 8.07 RESOLUTION OF CONFLICTS; ARBITRATION.
(a) In case the Shareholders' Agent shall so object in writing to any
claim or claims by Acquiror made in any Officer's Certificate, Acquiror shall
have thirty (30) days after receipt by the Escrow Agent of an objection by the
Shareholders' Agent to respond in a written statement to the objection of the
Shareholders' Agent. If after such thirty (30) day period there remains a
dispute as to any claims, the Shareholders' Agent and Acquiror shall attempt in
good faith for forty-five (45) days to agree upon the rights of the respective
parties with respect to each of such claims. If the Shareholders' Agent and
Acquiror should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute the Escrow Shares or other property from the Escrow Fund in
accordance with the terms thereof.
(b) If no such agreement can be reached after good faith negotiation,
either Acquiror or the Shareholders' Agent may, by written notice to the other,
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within fifteen (15) days after such written
notice is sent, Acquiror and the Shareholders' Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The decision of the arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in Section 8.06 hereof, the Escrow
Agent shall be entitled to act in accordance with such decision and make or
withhold payments out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in San
Francisco County, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.07(c), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Acquiror shall be deemed to be the
49
non-prevailing party unless the arbitrators award Acquiror more than one-half
(1/2) of the amount in dispute; otherwise, the Former Company Equityholders for
whom shares of the Company Common Stock otherwise issuable to them have been
deposited in the Escrow Fund shall be deemed to be the non-prevailing party. The
non-prevailing party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative fee of the American Arbitration Association,
and the expenses, including without limitation, attorneys' fees and costs,
reasonably incurred by the other party to the arbitration.
SECTION 8.08 CLAIMS AFTER DEPLETION OF ESCROW FUND. If, after the
depletion of the Escrow Fund, any Indemnified Person shall believe that it is
entitled to indemnification under this Article VIII, Acquiror shall deliver an
Officer's Certificate to the Shareholders' Agent. The Shareholders' Agent shall
have forty-five (45) days after receipt of such Officer's Certificate to either
(i) acquiesce in such claim by giving Acquiror written notice of such
acquiescence or (ii) to object to the claim by giving Acquiror written notice of
the objection. If Shareholder Agent acquiesces in such claim or fails to respond
within the forty-five (45)-day period, such Indemnified Person shall be entitled
to be indemnified pursuant to this Article VIII in respect of the claims covered
by the Officer's Certificate. If the Shareholders' Agent objects with such
forty-five (45)-day period, the dispute shall be resolved in accordance with
Section 8.07.
SECTION 8.09 SHAREHOLDERS' AGENT.
(a) In the event that the Reorganization is approved, effective upon
and as a result of such vote, and without any further act of any shareholder,
Xxxxxxxxx X. Xxxxx, Xx. shall be constituted and appointed as agent
("SHAREHOLDERS' AGENT") for and on behalf of the Former Company Equityholders to
give and receive notices and communications, to authorize delivery to Acquiror
of the Escrow Shares or other property from the Escrow Fund in satisfaction of
claims by Acquiror, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the Shareholders'
Agent for the accomplishment of the foregoing. Such agency may be changed by the
holders of a majority in interest of the Escrow Fund from time to time upon not
less than ten (10) days' prior written notice to Acquiror. No bond shall be
required of the Shareholders' Agent, and the Shareholders' Agent shall receive
no compensation for his services. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Company
shareholders.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Company
shareholders shall severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
50
(c) The Shareholders' Agent shall have reasonable access to information
about the Company and the reasonable assistance of the Company's officers and
employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Shareholders' Agent shall treat confidentially and
not disclose any nonpublic information from or about the Company to anyone
(except on a need to know basis to individuals who agree to treat such
information confidentially).
SECTION 8.10 ACTIONS OF THE SHAREHOLDERS' AGENT. A decision, act, consent
or instruction of the Shareholders' Agent shall constitute a decision of all
Former Company Equityholders for whom the Escrow Shares otherwise issuable to
them are deposited in the Escrow Fund and shall be final, binding and conclusive
upon each such Former Company Equityholder, and the Escrow Agent and Acquiror
may rely upon any decision, act, consent or instruction of the Shareholders'
Agent as being the decision, act, consent or instruction of each and every such
Former Company Equityholder. The Escrow Agent and Acquiror are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Shareholders' Agent.
SECTION 8.11 THIRD-PARTY CLAIMS. In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall promptly notify the Shareholders' Agent of such
claim, and the Shareholders' Agent and the Former Company Equityholders for whom
Escrow Shares otherwise issuable to them are deposited in the Escrow Fund shall
be entitled, at their expense, to participate in any defense of such claim.
Acquiror shall have the right in its sole discretion to settle any such claim;
PROVIDED, HOWEVER, that Acquiror may not effect the settlement of any such claim
without the consent of the Shareholders' Agent, which consent shall not be
unreasonably withheld. In the event that the Shareholders' Agent has consented
to any such settlement, the Shareholders' Agent shall have no power or authority
to object under Section 8.06 or any other provision of this Article VIII to the
amount of any claim by Acquiror against the Escrow Fund for indemnity with
respect to such settlement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 TERMINATION. This Agreement may be terminated and the
Reorganization may be abandoned at any time prior to the Closing Date,
notwithstanding any requisite adoption and approval of this Agreement, as
follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Acquiror and the Company;
(b) by either Acquiror or the Company, if the Closing Date shall not
have occurred on or before March 31, 2000; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 9.01(b) shall not be available to
any party whose failure to fulfill
51
an obligation under this Agreement has been the cause of or resulted in the
failure of the Reorganization to occur on or before such date;
(c) by either Acquiror or the Company, if any Governmental Order, writ,
injunction or decree preventing the consummation of the Reorganization shall
have been entered by any court of competent jurisdiction and shall have become
final and nonappealable;
(d) by Acquiror, if the board of directors of the Company withdraws,
modifies or changes its approval of this Agreement or the Reorganization in a
manner adverse to Acquiror or its shareholders or shall have resolved to do so
(which shall also constitute a material breach hereof);
(e) by Acquiror, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue,
incomplete or incorrect, in either case such that the conditions set forth in
Section 7.03 would not be satisfied (a "TERMINATING COMPANY BREACH"); PROVIDED,
HOWEVER, that if such Terminating Company Breach is curable by the Company
through the exercise of its reasonable efforts within 10 days and for so long as
the Company continues to exercise such reasonable efforts during such period,
Acquiror may not terminate this Agreement under this Section 9.01(e); and
PROVIDED FURTHER that the preceding proviso shall not in any event be deemed to
extend any date set forth in Section 9.01(b); and
(f) by the Company, upon breach of any representation, warranty,
covenant or agreement on the part of Acquiror set forth in this Agreement, or if
any representation or warranty of Acquiror shall have become untrue, incomplete
or incorrect, in either case such that the conditions set forth in Section 7.02
would not be satisfied (a "TERMINATING ACQUIROR BREACH"); PROVIDED, HOWEVER,
that if such Terminating Acquiror Breach is curable by Acquiror through the
exercise of its reasonable efforts within 10 days and for so long as Acquiror
continues to exercise such reasonable efforts during such period, the Company
may not terminate this Agreement under this Section 9.01(f); and PROVIDED
FURTHER that the preceding proviso shall not in any event be deemed to extend
any date set forth in Section 9.01(b).
SECTION 9.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of any party hereto
or any of its affiliates or any of its or their officers or directors, and all
rights and obligations of each party hereto shall cease; PROVIDED, HOWEVER, that
nothing herein shall relieve any party hereto from liability for the willful or
intentional breach of any of its representations and warranties or the willful
or intentional breach of any of its covenants or agreements set forth in this
Agreement; PROVIDED further, that the provisions of Section 6.03(b), Section
9.05, Section 10.03, Section 10.05 and this Section 9.02 shall remain in full
force and effect and survive any termination of this Agreement.
SECTION 9.03 AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective boards of directors at any
time prior to the Closing Date; PROVIDED, HOWEVER, that, after the approval of
this Agreement by the shareholders
52
of the Company, no amendment may be made, except such amendments that have
received the requisite shareholder approval and such amendments as are permitted
to be made without shareholder approval under the BCL. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 9.04 WAIVER. At any time prior to the Closing, any party hereto may
(a) extend the time for or waive compliance with the performance of any
obligation or other act of any other party hereto or (b) waive any inaccuracy in
the representations and warranties contained herein or in any document delivered
pursuant hereto. 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.
SECTION 9.05 EXPENSES. All Expenses incurred by Acquiror in connection with
this Agreement and the Reorganization shall be paid by the Acquiror. Acquiror
shall also pay the Expenses incurred by the Company in connection with this
Agreement and the Reorganization without; PROVIDED, HOWEVER, that if the
Expenses incurred by the Company in connection with this Agreement and the
Reorganization exceed One Hundred Thousand Dollars ($100,000), then any amount
paid by Acquiror in excess of One Hundred Thousand Dollars ($100,000) shall
constitute "Damages" recoverable under Article VIII and the Escrow Agreement and
such Damages shall not be subject to the Damages threshold set forth in Section
8.03.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or by a nationally recognized courier service to the respective
parties at following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 10.01).
53
(a) If to Acquiror: QRS Corporation
0000 Xxxxxx Xxx Xxxxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: President
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxxxxx
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
(b) If to the Company: Rockport Trade Systems, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxxxx X. Xxxxx, Xx.
c/x Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
54
(c) If to the Shareholder's Agent: Xxxxxxxxx X. Xxxxx, Xx.
c/x Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Imprimis SB, L.P.
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxx
Insight Capital Partners II, L.P.
c/o Insight Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
SECTION 10.02 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 Reorganization is not affected in any manner materially 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 to
the fullest extent permitted by applicable Law in order that the Reorganization
may be consummated as originally contemplated to the fullest extent possible.
SECTION 10.03 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties hereto; PROVIDED, HOWEVER, that
Acquiror may assign its rights, interests and obligations hereunder to any
subsidiary of Acquiror (which assignment shall not relieve Acquiror of any of
its obligations hereunder). Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and permitted assigns any rights or
remedies under or by reason of this Agreement.
55
SECTION 10.04 INCORPORATION OF SCHEDULES. The Company Disclosure Schedule
and all Schedules and Exhibits attached hereto and referred to herein are hereby
incorporated herein and made a part of this Agreement for all purposes as if
fully set forth herein.
SECTION 10.05 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REFERENCE TO CONFLICTS OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
APPLICATION OF CALIFORNIA LAW).
SECTION 10.06 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
SECTION 10.07 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.
SECTION 10.08 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.
SECTION 10.09 ENTIRE AGREEMENT. This Agreement (including the Company
Disclosure Schedule and other Schedules) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
QRS CORPORATION, a Delaware corporation
By: _______________________________
Name:
Title:
ROCKPORT TRADE SYSTEMS, INC.,
a Massachusetts corporation
By: _______________________________
Name:
Title:
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