[EXECUTION COPY]
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STOCK PURCHASE AGREEMENT
by and among
CIMNET, INC.
REALTIME INFORMATION SYSTEMS PTY LIMITED.
and
Sellers listed on the Signature page hereto
Dated as of April 14, 2000
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CIMNET, INC.
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
1. DEFINITIONS...............................................................1
2. PURCHASE AND SALE OF SHARES...............................................6
(A) BASIC TRANSACTION.....................................................6
(B) PURCHASE PRICE........................................................6
(C) THE CLOSING...........................................................6
(D) DELIVERIES AT THE CLOSING.............................................6
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.................6
(A) REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................6
(i) Authorization of Transaction.....................................7
(ii) Noncontravention.................................................7
(iii) Broker's Fees....................................................7
(iv) Shares...........................................................7
(v) Investment Representations.......................................8
(B) REPRESENTATIONS AND WARRANTIES OF BUYER...............................8
(i) Organization of Buyer............................................9
(ii) Authorization of Transaction.....................................9
(iii) Noncontravention.................................................9
(iv) Brokers' Fees....................................................9
(v) Investment.......................................................9
(vi) Shares...........................................................9
(vii) Legal Compliance.................................................9
(viii)Litigation......................................................10
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET.........................10
(A) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.....................11
(B) CAPITALIZATION.......................................................11
(C) NONCONTRAVENTION.....................................................12
(D) SUBSIDIARIES.........................................................12
(E) FINANCIAL STATEMENTS.................................................12
(F) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END.....................12
(G) UNDISCLOSED LIABILITIES..............................................14
(H) TAX MATTERS..........................................................15
(I) TANGIBLE ASSETS......................................................16
(J) REAL PROPERTY........................................................16
(K) REAL PROPERTY LEASES.................................................16
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(L) INTELLECTUAL PROPERTY................................................17
(M) CONTRACTS............................................................21
(N) NOTES AND ACCOUNTS RECEIVABLE........................................22
(O) POWERS OF ATTORNEY...................................................22
(P) INSURANCE............................................................22
(Q) LITIGATION...........................................................23
(R) EMPLOYEES............................................................23
(S) EMPLOYEE BENEFITS....................................................24
(T) GUARANTIES...........................................................26
(U) ENVIRONMENT, HEALTH, AND SAFETY......................................26
(V) LEGAL COMPLIANCE.....................................................28
(W) CERTAIN BUSINESS RELATIONSHIPS WITH TARGET...........................29
(X) BROKERS' FEES........................................................29
(Y) DISCLOSURE...........................................................29
(Z) BOOKS AND RECORDS....................................................29
5. PRE-CLOSING COVENANTS....................................................29
(A) GENERAL..............................................................29
(B) NOTICES AND CONSENTS.................................................30
(C) OPERATION OF BUSINESS................................................30
(D) PRESERVATION OF BUSINESS.............................................30
(E) FULL ACCESS..........................................................30
(F) NOTICE OF DEVELOPMENTS...............................................31
(G) EXCLUSIVITY..........................................................31
(H) PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF FINANCIAL
INFORMATION..........................................................31
(I) DELIVERY OF SCHEDULES; ACCEPTANCE....................................31
6. ADDITIONAL COVENANTS.....................................................32
(A) GENERAL..............................................................32
(B) LITIGATION SUPPORT...................................................32
(C) TRANSITION...........................................................32
(D) CONFIDENTIALITY......................................................32
(E) MONITORING INFORMATION...............................................33
(F) LEASES...............................................................33
(G) ADDITIONAL TAX MATTERS...............................................33
(H) COVENANT NOT TO COMPETE..............................................35
7. CONDITIONS TO OBLIGATIONS TO CLOSE.......................................36
(A) CONDITIONS TO OBLIGATION OF BUYER....................................36
(B) CONDITIONS TO OBLIGATIONS OF THE SELLERS.............................38
8. Remedies for Breaches of This Agreement..................................39
(A) SURVIVAL.............................................................39
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER......................39
(C) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS................41
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(D) MATTERS INVOLVING THIRD PARTIES......................................42
(E) DETERMINATION OF LOSS................................................43
(F) EXCLUSIVE REMEDY.....................................................43
(G) PAYMENT..............................................................43
(H) TAX DISPUTES.........................................................43
9. TERMINATION..............................................................43
(A) TERMINATION OF AGREEMENT.............................................43
(B) EFFECT OF TERMINATION................................................44
10. MISCELLANEOUS.........................................................44
(A) THE SELLERS..........................................................44
(B) PRESS RELEASES AND ANNOUNCEMENTS.....................................44
(C) NO THIRD-PARTY BENEFICIARIES.........................................45
(D) ENTIRE AGREEMENT.....................................................45
(E) SUCCESSION AND ASSIGNMENT............................................45
(F) FACSIMILE/COUNTERPARTS...............................................45
(G) HEADINGS.............................................................45
(H) NOTICES..............................................................45
(I) GOVERNING LAW........................................................46
(J) AMENDMENTS AND WAIVERS...............................................46
(K) SEVERABILITY.........................................................46
(L) EXPENSES.............................................................47
(M) CONSTRUCTION.........................................................47
(N) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES....................47
(O) SPECIFIC PERFORMANCE.................................................47
(P) SUBMISSION TO JURISDICTION...........................................47
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Employment Agreement
Exhibit 4(l) Form of Nondisclosure Agreement
ANNEXES
1. Purchase Price Allocation
SCHEDULES
Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the 14th
day of April 2000, by and among CIMNET, INC., a Delaware corporation ("BUYER"),
REALTIME INFORMATION SYSTEMS PTY LIMITED, an Australian corporation ("TARGET"),
and the individuals listed on the signature page hereto (each individually
referred to as "SELLER" and collectively, the "SELLERS"). Buyer and the Sellers
are referred to collectively herein as the "PARTIES."
The Sellers in the aggregate own all of the outstanding capital stock of
Target.
This Agreement contemplates a transaction in which Buyer will purchase from
the Sellers, and the Sellers will sell to Buyer, all of the outstanding capital
stock of Target.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
reasonable expenses, and fees, including all reasonable attorneys' fees and
court costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code Sec. 1504 (or any similar group defined under a similar provision of state,
local or foreign law).
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CIMNET SHARES" has the meaning set forth in SECTION 2(B) below.
"CLIENT SOFTWARE PROGRAM" means any software program developed by
Target for a client to which the Target has assigned and the client has acquired
all Intellectual Property rights in such developed software program.
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"CLOSING" has the meaning set forth in SECTION 2(D) below.
"CLOSING DATE" has the meaning set forth in SECTION 2(D) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the United States Securities and Exchange
Commission.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of Target including, without limitation, the identity, lists or
descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training operations methods and manuals;
personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals; and the Documentation
(excluding user's manual) for any Target Software Program.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code
Sec. 1563.
"CURRENT EMPLOYEE BENEFIT Plan" means each Employee Benefit Plan,
which is sponsored, maintained, or contributed to by Target for the benefit of
the employees of Target, or has been so sponsored, maintained, or contributed to
at any time within six years prior to the Closing Date.
"CUSTOMER CONTRACT OR AGREEMENT" means (i) any contract or agreement
of Target related to (a) information technology or computer support services;
(b) maintenance contracts for application software; (c) maintenance support
arrangements; (d) reengineering and refurbishment arrangements; (e) consulting
arrangements; (f) any other contract computer support services arrangement; and
(g) software development contracts and (ii) agreements related to any other
services provided by Target to clients or customers.
"DISCLOSURE SCHEDULE" has the meaning set forth in SECTION 4 below.
"DOCUMENTATION" means, with respect to a software program, the source
code (with comments), as well as any pertinent commentary or explanation
prepared by or the property of Target to render such materials understandable
and useable by a trained computer programmer, any programs (including
compilers), "workbenches," tools and higher level (or "proprietary") language
necessary for the development, maintenance and implementation of the software
program, and any and all prepared and deliverable materials relating to the
software program, including without limitation all notes, flow charts,
programmer's or user's manuals.
"EMPLOYEE BENEFIT PLAN" means each (a) Employee Pension Benefit Plan,
(b) Employee Welfare Benefit Plan, and (c) personnel policy, stock option plan,
worker's compensation, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, vacation policy, severance pay
plan, policy, or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income
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arrangement, consulting agreement, employment agreement, and other employee
benefit plan, agreement, arrangement, program, practice, or understanding, which
is sponsored, maintained, or contributed to by Target for the benefit of the
employees, former employees, independent contractors, or agents of Target, or
has been so sponsored, maintained, or contributed to at any time since 1974.
"EMPLOYEE PENSION BENEFIT Plan" has the meaning set forth in ERISA
Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT Plan" has the meaning set forth in ERISA
Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4(E)
below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any governmental,
quasi-governmental, state, county, city or other political subdivision of the
United States or any other country, or any agency, court or instrumentality,
foreign or domestic, or statutory or regulatory body thereof.
"GROSS PROFIT MARGIN" means the gross profit of Target as customarily
set forth on the Financial Statements.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 8(D) below.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 8(D) below.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service marks, trade
dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (b) patents, patent applications, and
provisional applications, including all continuations, divisionals and related
applications, (c) copyrights and registrations and applications for registration
thereof, (d) trade secrets and confidential business information (including
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), and (e)
to the extent legally protectable, other proprietary rights.
"JOINT AND SEVERAL" has the meaning set forth in SECTION 10(A)(II)
below.
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"KEY EMPLOYEES" means ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"KNOWLEDGE" means that which is known or understood or should have
been known or understood after reasonable investigation and inquiry, which
inquiry shall include an inquiry of the employees of Target with responsibility
for the matters in question.
"LIABILITY" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"LICENSES" has the meaning set forth in SECTION 4(L) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in SECTION
4(E) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"NON-SOFTWARE INTELLECTUAL PROPERTY" means Intellectual Property
rights in items other than Client Software Programs, Target Software Programs or
Third Party Software Programs, including the Documentation for such software
programs.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PRE-CLOSING TAX PERIOD" means (i) any taxable period ending on or
before the Closing Date, and (ii) with respect to a taxable period that begins
on or before the Closing Date and ends after the Closing Date, the portion of
such taxable period ending on (and including) the Closing Date.
"PRINCIPAL" means ▇▇▇ ▇▇▇▇▇.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"PURCHASE PRICE" has the meaning set forth in SECTION 2(B) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) mechanic's, materialmen's and
similar liens, (b) liens for
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Taxes not yet due and payable (or for Taxes that the taxpayer is contesting in
good faith through appropriate proceedings), (c) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, (d) liens arising in connection with sales of foreign receivables,
(e) liens on goods in transit incurred pursuant to documentary letters of
credit, (f) purchase money liens and liens securing rental payments under
capital lease arrangements, and (g) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SELLERS" has the meaning set forth in the preface above.
"SEVERAL" has the meaning set forth in SECTION 10(A) below.
"SHARES" means the shares of common stock, par value $1.00 per share,
of Target.
"SOFTWARE PROGRAMS" has the meaning set forth in SECTION 4(L) below.
"SUBSIDIARY" means any corporation, limited liability company,
partnership or other similar entity with respect to which another specified
corporation, limited liability company, partnership or other similar entity has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors or otherwise similarly control such entity.
"TARGET" has the meaning set forth in the preface above.
"TARGET SOFTWARE PROGRAM" means any software program, including its
Documentation, owned by Target and excluding Client Software Programs. All
Target Software Programs are listed in SECTION 4(L)(II) of the Disclosure
Schedule.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY SOFTWARE PROGRAM" means any software program, including
the Documentation, developed by a third party and used by Target in developing
either a Target Software Program or a Client Software Program, or used by Target
in conducting its internal
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business. All Third Party Software Programs are listed in SECTION 4(L)(III) of
the Disclosure Schedule.
2. PURCHASE AND SALE OF SHARES
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, Buyer agrees to purchase from each of the Sellers, and each of
the Sellers agrees to sell to Buyer, all of the Shares held of record by such
Seller for the consideration specified below in this SECTION 2.
(b) PURCHASE PRICE The purchase price (the "PURCHASE PRICE") for the
Shares to be purchased by Buyer, or such wholly-owned subsidiary of Buyer as
Buyer shall so designate, from the Sellers pursuant to the terms hereof shall be
an aggregate of (i) 1,194,131 shares of Buyer's common stock representing
approximately 24.3% of the total number of shares of Cimnet Common stock
outstanding (the "Cimnet Shares") and (ii) $10,000 in immediately available
funds (the "Cash Portion"). Buyer agrees to deliver to each Seller at the
Closing (as defined below) upon the surrender of the certificates representing
the outstanding Target Shares held of record by such Seller, a pro rata share of
the Cimnet Shares and the Cash Portion as set forth on Annex I hereto.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Buyer in Robesonia,
PA commencing at 9:00 a.m. local time on the second business day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby or such other date as Buyer and
the Sellers may mutually determine (the "CLOSING DATE"); provided, however, that
the Closing Date shall be no later than April 14, 2000, which date may be
extended with the mutual consent of Buyer and the Sellers.
(d) DELIVERIES AT THE Closing. At the Closing, (i) the Sellers will
deliver to Buyer the various certificates, instruments, and documents referred
to in SECTION 7(A) below, (ii) Buyer will deliver to the Sellers the various
certificates, instruments, and documents referred to in SECTION 7(B) below,
(iii) each Seller will deliver to Buyer stock certificates representing all
Shares held of record by such Seller, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) Buyer will deliver to the Sellers the
consideration specified in SECTION 2(B) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each Seller
represents and warrants to Buyer that the statements contained in this SECTION
3(A) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
SECTION 3(A)) with respect to himself only except as set forth in Annex III
attached hereto.
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(i) AUTHORIZATION OF TRANSACTION. Such Seller has full power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of such Seller, enforceable in accordance with its terms
and conditions, except that (A) such enforceability may be subject to
bankruptcy, insolvency, reorganization, moratorium or other laws, decisions
or equitable principles now or hereafter in effect relating to or affecting
the enforcement of creditors' rights or debtors' obligations generally, and
to general equity principles, and (B) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought. Such Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval
of any Governmental Authority in order to consummate the transactions
contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any Governmental Authority to which such Seller is subject
or (B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which such Seller is a party or
by which he is bound or to which any of his assets is subject.
(iii) BROKER'S FEES. Such Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
Buyer or Target could become liable or obligated.
(iv) SHARES Seller holds of record and owns beneficially the
number of Shares set forth next to his name in SECTION 4(B) of the
Disclosure Schedule, free and clear of any restrictions on transfer (other
than any restrictions under the Securities Act and state securities laws),
claims, Taxes, Security Interests, options, warrants, rights, contracts,
calls, commitments, equities, and demands, other than this Agreement and
other than as set forth in contracts and agreements between such Seller and
Target which shall be terminated prior to Closing. The Sellers hold all of
the issued and outstanding shares of Target and upon the consummation of
the transaction contemplated hereby, Buyer will hold all of the issued and
outstanding shares of Target. Such Seller is not a party to any option,
warrant, right, contract, call, put, or other agreement or commitment
providing for the disposition or acquisition of any capital stock of Target
(other than this Agreement) and other than contracts and agreements between
such Seller and Target which shall be terminated prior to Closing). Such
Seller is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of Target.
Seller hereby further represents and warrants that there are no pending or,
to
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such Seller's knowledge, threatened suits, claims or actions by any former
holders of Shares or options, rights, warrants or other interests in the
equity of Target with respect to the repurchase of their equity interest in
Target; and
(v) INVESTMENT REPRESENTATIONS. Each Seller that will
receive Cimnet Shares pursuant to SECTION 2(B) hereby makes the following
representations and warranties:
(A) Such Seller has substantial experience in evaluating
and investing in private placement transactions so that such Seller is
capable of evaluating the merits and risks of its investment in the
Cimnet Shares. Such Seller, by reason of Seller's business or
financial experience, has the capacity to protect such Seller's own
interests in connection with the acquisition of the Cimnet Shares
hereunder. Such Seller is an "accredited investor" as defined in Rule
501 of Regulation D promulgated pursuant to the Securities Act. Such
Seller is familiar with the business and financial condition,
properties, operations and prospects of Buyer. Seller has had an
opportunity to discuss the Buyer's business and financial condition,
properties, operations and prospects with Buyer's management. Such
Seller has also had an opportunity to ask questions of officers of
Buyer, which questions were answered to such Seller's satisfaction.
Such Seller understands that such discussion was intended to describe
certain aspects of the Buyer's business and financial condition,
properties, operations and prospects, but were not a thorough or
exhaustive descriptive.
(B) Such Seller understands that the Cimnet Shares may
be "restricted securities" under the applicable federal securities
laws and that the Securities Act and the rules of the Commission
provide in substance that such Seller may dispose of the Securities
only pursuant to an effective registration statement under the
Securities Act or an exemption therefrom, and it understands that
Buyer has no obligation or intention to register the Securities, or to
take action so as to permit sales pursuant to the Securities Act
(including Rule 144 thereunder). Otherwise, such Seller understands
that under the Commission's rules, such Seller may dispose of the
Securities only in transactions that are exempt from registration
under the Securities Act. As a consequence of all of the foregoing,
such Seller understands that such Seller may have to bear the economic
risk of the investment in the Securities for an indefinite period of
time.
(B) REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to the Sellers that the statements contained in this SECTION 3(B) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this SECTION
3(B)), except as set forth in Annex IV attached hereto:
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(i) ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation;
(ii) AUTHORIZATION OF TRANSACTION. Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and the Cimnet Shares and to perform its obligations
hereunder and thereunder. This Agreement constitutes the valid and legally
binding obligation of Buyer, enforceable in accordance with its terms and
conditions. Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Governmental
Authority in order to consummate the transactions contemplated by this
Agreement;
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any Governmental Authority to which Buyer is subject or any
provision of its charter or bylaws or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to
which Buyer is a party or by which it is bound or to which any of its
assets is subject;
(iv) BROKERS' FEES Buyer has no Liability or Obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated;
(v) INVESTMENT Buyer is not acquiring the Shares with a view
to or for sale in connection with any distribution thereof within the
meaning of the Securities Act; and
(vi) SHARES The Cimnet Shares have been duly authorized and,
when issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable.
(vii) LEGAL COMPLIANCE. Buyer has complied with all laws
(including rules and regulations thereunder) of all Governmental
Authorities in all materials respects, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against Buyer alleging any failure to comply with any
such law or regulation, except where the failure to comply would not have a
material adverse effect on Buyer.
(viii) LITIGATION There is no material litigation, action,
suit, Tax audit, proceeding or investigation pending or, to the Buyer's
knowledge, threatened with respect to the Buyer, any of the assets of the
Buyer or any of the transactions
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contemplated hereby before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, or any other entity, which, if adversely determined, would
have a material adverse effect upon Buyer, any of the assets of the Buyer
or the conduct by Buyer of its business. The Buyer is not in default with
respect to any order, writ, injunction or decree of any court or Federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality which, if not cured, would be expected to
have a material adverse effect upon Buyer.
4. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET. The Sellers represent
and warrant to Buyer that the statements contained in this SECTION 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this SECTION 4), except as
set forth in the disclosure schedule delivered by the Sellers to Buyer on the
date hereof (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule may be updated
one or more times prior to the date which is five (5) days prior to the Closing
Date. Any updated Disclosure Schedule shall be delivered at or before the
Closing. An updated Disclosure Schedule shall only be deemed to modify a
representation and/or warranty made as of the date of the Agreement in the
event, and only in the event, that the Sellers acted in good faith and used
their best efforts when preparing the original Disclosure Schedule delivered to
Buyer as of the date of this Agreement. In the event any such updated Disclosure
Schedule indicates a Material adverse change from the information previously
provided to Buyer, Buyer shall be entitled to terminate this Agreement
notwithstanding any other provision contained in this Agreement by written
notice delivered to the Sellers, subject to the next sentence. An event or
matter will be deemed to be "MATERIAL," to have a "MATERIAL" change in or in
respect of, to have a "MATERIAL ADVERSE EFFECT" or to be "MATERIALLY" affected
if, in the opinion of Buyer, acting reasonably, the loss that may reasonably be
expected to occur to Target or Buyer with respect to such event or matter, when
taken together with all other related losses that may reasonably be expected to
occur to Target or Buyer as a result of any such events or matters, would exceed
$10,000 in the aggregate or if such event or matter constitutes a criminal
violation of law; PROVIDED, that, the termination rights will not arise unless
the aggregate amount of all such material adverse losses exceeds $20,000. For
purposes of this paragraph, the word "LOSS" shall mean any and all direct or
indirect payments, obligations, assessments, losses, losses of income,
liabilities, costs and expenses paid or incurred, or reasonably likely to be
paid or incurred, or that are reasonably expected to occur, including without
limitation, penalties, interest on any amount payable to a third party as a
result of the foregoing, and any legal or other expenses reasonably expected to
be incurred in connection with defending any demands, claims, actions or causes
of action that, if adversely determined, could reasonably be expected to result
in losses, and all amounts paid in settlement of claims or actions; provided,
however, that losses shall be net of any insurance proceeds entitled to be
received from a nonaffiliated insurance company on account of such loss (after
taking into account any cost incurred in obtaining such proceeds). A Customer
Contract or Agreement is "MATERIAL" if during the twelve months ended December
31, 1999 or during the current fiscal year such Customer Contract or Agreement
produced or may reasonably be expected to produce, as the case may be, $10,000
of Gross Profit Margin less any bad debt specifically related to such Customer
Contract or Agreement. Any item intended to be disclosed
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must be identified with the particular representation or warranty it is intended
to limit and shall not be deemed to limit any other representation, warranty or
covenant in the Agreement; provided, that sections of the Disclosure Schedule
may contain specific cross-references to other sections of the Disclosure
Schedule. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this SECTION 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Target is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
requires such qualification. Target has full corporate power and authority to
carry on the business in which it is engaged and to own and use the properties
owned and used by it. SECTION 4(A) of the Disclosure Schedule lists the
directors and officers of Target. The Sellers have delivered to Buyer correct
and complete copies of the charter and bylaws of Target (as amended to date).
The minute books containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors, the stock
certificate books, and the stock record books of Target are correct and
complete. Target is not in default under or in violation of any provision of its
charter or bylaws. The execution and delivery of this Agreement and the
effectuation of the transactions contemplated hereby has been duly authorized by
all of the directors of Target, and Target will deliver to Buyer on the date
hereof and at the Closing complete and correct copies, certified by its
secretary, of the resolutions duly and validly adopted by its directors
evidencing such authorization (which resolutions will not have been modified,
revoked or rescinded in any respect prior to, and will be in full force and
effect at, the Closing). No other corporate act or proceeding on the part of
Target or the Sellers is necessary for the due and valid authorization of this
Agreement or the transactions contemplated hereby.
(b) CAPITALIZATION. The entire authorized capital stock of Target
consists of (i) 10,000,000 shares of common stock, par value $1.00 per share, of
which 117 Shares are issued and outstanding, (ii) 1,000 shares of DE Stock, of
which two (2) shares are issued (the common shares and DE shares shall be
referred to as the "Shares") , and (iii) no shares are held in treasury. All of
the issued and outstanding Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective Sellers
as set forth in SECTION 4(B) of the Disclosure Schedule. Except as set forth in
Section 4(b) of the Disclosure Schedule, there are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights, or other agreements or commitments to which Target is a party
or which are binding upon Target providing for the issuance, disposition, or
acquisition of any of their capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, deferred bonus programs, or
similar rights with respect to Target. There are no voting
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trusts, proxies, or any other agreements or understandings with respect to the
voting of the capital stock of Target.
(c) NONCONTRAVENTION. Except as disclosed in Section 4(c) of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any Governmental Authority to which Target is
subject or any provision of the charter or bylaws of Target or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which Target is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Target does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency, which it has not already obtained, in order for the Parties to
consummate the transactions contemplated by this Agreement.
(d) SUBSIDIARIES. Target has no Subsidiaries.
(e) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT A are the
financial statements (collectively the "FINANCIAL STATEMENTS"), including
balance sheets, income statements, and cash flow statements, for Target prepared
in accordance with GAAP for each of the fiscal years ended December 31, 1998 and
1999 (the fiscal year ended December 31, 1999 being referred to herein as the
"MOST RECENT FISCAL YEAR END"). The Financial Statements for the years ended
December 31, 1998 and 1999 have been reviewed by ▇▇▇▇ Roughly Pty, Limited. The
Financial Statements fairly present the financial position of Target as of the
respective dates thereof and Target's results of operations and cash flows for
the periods indicated.
(f) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END Except as set
forth in SECTION 4(F) of the Disclosure Schedule, since December 31, 1999, there
has not been any material adverse change in the assets, Liabilities, business,
financial condition, operations or results of operations of Target or, to
Seller's Knowledge, the future prospects of Target. Without limiting the
generality of the foregoing, since that date:
(i) Target has not sold, leased, transferred, conveyed,
assigned or disposed of any of its Material assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
(ii) Target has not entered into any contract, lease,
sublease, license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses) either involving more than $10,000 or
outside the Ordinary Course of Business;
(iii) No party (including Target) has accelerated,
terminated, modified, or canceled any contract, lease, sublease, license or
sublicense (or series of related
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contracts, leases, subleases, licenses and sublicenses) to which Target is
a party or by which it is bound or notified Target in writing of such
involving more than $10,000;
(iv) Target has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) Target has not made any capital expenditure (or series
of related capital expenditures) either involving more than $5,000 singly
or $10,000 in the aggregate, or outside the Ordinary Course of Business;
(vi) Target has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) either
involving more than $5,000 individually or $10,000 in the aggregate or
outside the Ordinary Course of Business;
(vii) Target has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
either involving more than $5,000 singly or $10,000 in the aggregate or
outside the Ordinary Course of Business;
(viii) Target has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other Liabilities;
(ix) Target has not settled, canceled, compromised, waived,
or released any right, claim action or proceeding (or series of related
rights, claims, actions or proceedings) either involving more than $5,000
or outside the Ordinary Course of Business;
(x) Target has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property other than in the
Ordinary Course of Business;
(xi) There has been no change made or authorized in the
charter or bylaws of Target;
(xii) Target has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion or exercise) any of its
capital stock;
(xiii) Target has not declared, set aside, or paid any
dividend or distribution with respect to its capital stock or redeemed,
purchased, or otherwise acquired any of its capital stock except as
contemplated by SECTION 4(F)(XXI);
(xiv) Target has not experienced any material damage,
destruction or loss (whether or not covered by insurance) to its property;
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(xv) Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business giving rise to any claim or right
on its part against the person or on the part of the person against it;
(xvi) Target has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(xvii) Target has not granted an increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and key employees;
(xviii) Target has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance, (G) severance, or
(H) other plan, contract or commitment for any of its directors, officers,
and employees, or modified or terminated any existing such plan, contract
or commitment;
(xix) Target has not made any other change in employment
terms for any of its directors, officers, and full-time staff employees ;
(xx) Target has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xxi) Target has not made any dividend, consulting or other
payment to the Sellers, except for (A) normal payments to the Sellers for
their employment salaries (not to exceed current compensation levels) and
(B) payments set forth in SECTION 4(F)(XXI) of the Disclosure Schedule;
(xxii) There has not been any other Material occurrence,
event, incident, action, failure to act, or transaction by Target (or, to
Seller's Knowledge, by any third party involving Target) outside the
Ordinary Course of Business; and
(xxiii) Target has not committed to do any of the foregoing.
(g) UNDISCLOSED Liabilities. Target does not have any Liability (and
there is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against it giving rise to
any Liability) which is individually in excess of $5,000, except for (i)
Liabilities reflected in the most recent audited balance sheet included in the
Financial Statements, (ii) Liabilities which have arisen since the date of the
most recent audited balance sheet included in the Financial Statements in the
Ordinary Course of Business (none of which relates to any breach of contract,
breach of warranty, tort, infringement, or violation of law or arose out of any
charge, complaint, action, suit, proceedings, hearing, investigation, claim, or
demand), and (iii) Liabilities that are not required to be set forth in the
Financial Statements or the notes thereto in accordance with GAAP assuming in
all cases that the Financial Statements,
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including the most recent balance sheet, are required to include all footnote
disclosures required for year end financial statements under GAAP.
(h) TAX MATTERS.
(i) Target has filed or caused to be filed all Tax Returns
that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by Target (whether or not shown on
any Tax Return) have been paid. Target currently is not the beneficiary of
any extension of time within which to file any Tax Return. Neither Target
nor any Seller has received any notice of any claim by an authority in a
jurisdiction where Target does not file Tax Returns that Target is or may
be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of Target that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) Target has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party.
(iii) To the Knowledge of any Seller or director or officer
(or employee responsible for Tax matters) of Target there is no Basis for
any authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of Target either (A) claimed or raised by any authority in
writing or (B) as to which any of the Sellers and the directors and
officers (and employees responsible for Tax matters) of Target has
Knowledge based upon personal contact with any agent of such authority.
SECTION 4(H) of the Disclosure Schedule lists all Tax Returns filed with
any Governmental Authority with respect to Target for taxable periods ended
on or after December 31, 1993, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Sellers have delivered to Buyer correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Target since December 31,
1993.
(iv) Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) Target has not filed a consent under Code Section 341(f)
concerning collapsible corporations. Target is not, and has not been during
the applicable period specified in Code Section 897(c)(1)(A)(ii), a United
States real property holding corporation within the meaning of Code Section
897(c)(2). Target has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662. Target is not a party to any Tax allocation or sharing agreement.
Target has never been (or has any Liability for unpaid Taxes because it
once was) a member of an Affiliated Group
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during any part of any consolidated return year within any part of which
consolidated return year any corporation other than Target also was a
member of the Affiliated Group.
(vi) Section 4(h) of the Disclosure Schedule sets forth with
respect to Target as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Closing) the basis of Target in its
assets.
(vii) The unpaid Taxes of Target (including any Taxes of
Target attributable to the exercise of options by Target employees or the
repurchase of options held by Target employees) do not exceed the reserve
for Tax Liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on the
face of the Financial Statements (rather than in any notes thereto) and
used in the computation of the Net Working Capital as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of Target in filing its Tax Returns.
(viii) To the extent that any act or omission of any Seller
with respect to Taxes or Tax Returns creates or could create Tax Liability
for Target, Seller shall be included in each reference to "Target" in this
Section 4(h).
(ix) The certificates, statements or other documents with
respect to Target's Taxes delivered by Sellers or Target to Buyer pursuant
to Section 6 and Section 7 of this Agreement are and will be true, correct
and complete.
(i) TANGIBLE ASSETS. Target owns or leases all tangible assets
necessary for the conduct of its business as presently conducted. To the
Seller's Knowledge, each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(j) REAL PROPERTY. Target owns no real property.
(k) REAL PROPERTY LEASES. SECTION 4(K) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to Target. The
Sellers have delivered to Buyer correct and complete copies of the leases and
subleases listed in SECTION 4(K) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in SECTION 4(K) of the
Disclosure Schedule:
(i) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, subject to (x) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and
moratorium laws and other similar laws of general application affecting
enforcement of creditors' rights generally and (y) equitable principles of
general applicability which may limit the availability of equitable
remedies including specific performance (regardless of whether enforcement
is sought in a proceeding in equity or at law);
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(ii) The Sellers shall use their best efforts to ensure that
the lease or sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms immediately
following the Closing;
(iii) Target is not and to Seller's Knowledge no other party
to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(iv) No party to the lease or sublease has repudiated any
provision thereof;
(v) There are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) Target has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vii) All facilities leased or subleased thereunder have
received all approvals of Governmental Authorities (including licenses and
permits) required to be obtained by Target in connection with the operation
thereof and Target has operated and maintained and to Seller's Knowledge
other parties have operated and maintained such facilities in accordance
with applicable laws, rules, and regulations; and
(viii) The real property listed in Sections 4(j) and 4(k) of
the Disclosure Schedule represents all of the real property necessary to
operate the business of Target in the manner that it is currently being
operated.
(l) INTELLECTUAL PROPERTY
(i) Target is the sole and exclusive owner of all right,
title and interest in and has good, valid and marketable title to, or, as
to third party rights identified in SECTION 4(L)(I) of the Disclosure
Schedule, has obtained a license to use all Non-Software Intellectual
Property used by Target in the operation of Target's business, free and
clear of all mortgages, pledges, liens, security interests, conditional
sales agreements, or encumbrances. Each item of Non-Software Intellectual
Property will be owned or licensed for use by Target on identical terms and
conditions immediately subsequent to the Closing hereunder.
(ii) Target is the sole and exclusive owner of all right,
title and interest in and has good, valid and marketable title to all
Intellectual Property in and to the Target Software Programs listed in
SECTION 4(L)(II) of the Disclosure Schedule (representing all Target
Software Programs owned by Target), free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements,
encumbrances or charges of any
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kind. The Intellectual Property rights in and to each Target Software
Program will be owned on identical terms and conditions immediately
subsequent to the Closing hereunder.
(iii) SECTION 4(L)(III) of the Disclosure Schedule sets
forth all Third Party Software Programs licensed by Target. Target has the
right and license to use, pursuant to Third Party Software license
agreements, all Third Party Software used in connection with, and as
incorporated into, the Target Software Programs or the Client Software
Programs or in conducting Target's own business and all use of each of such
licensed Third Party Software Programs by Target has been in compliance
with the respective license agreements.
(iv) Sellers have delivered to Buyer correct and complete
copies of all documents pertaining to statutory Intellectual Property,
including but not limited to, all trademark, service ▇▇▇▇, trade name,
copyright, and patent, registrations and applications used by Target in
conducting its own business and all documents pertaining to licenses,
agreements, and permissions (as amended to date) to use any Intellectual
Property used by Target in conducting its own business, and have made
available to Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each
such item. With respect to each item of Non-Software Intellectual Property
used in the conduct of the business of Target as heretofore conducted:
(A) the identified owner possesses all right, title, and
interest in and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand is pending or, to the
Knowledge of any of the Sellers, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
(D) other than pursuant to Customer Contracts entered
into in the Ordinary Course of Business, Target has never agreed to
indemnify any person or entity for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item.
Notwithstanding the foregoing, with respect to any Non-Software
Intellectual Property that is not owned by Target, the representations
and warranties contained in the immediately preceding sentence shall
be limited to Seller's Knowledge.
(v) SECTION 4(L)(V) of the Disclosure Schedule sets forth
the form and placement of the proprietary legends and copyright notices
displayed in or on the Non-Software Intellectual Property and Target
Software Programs. In no instance has the
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eligibility of the Non-Software Intellectual Property and Target Software
Programs for protection under applicable intellectual property laws been
forfeited to the public domain by omission by Target of any required notice
or any other action taken by Target.
(vi) Target has enforced the trade secret protection program
set forth in SECTION 4(l)(vi) of the Disclosure Schedule as it relates to
the Non-Software Intellectual Property, the Third Party Software Programs,
the Client Software Programs and the Target Software Programs, and there
has been no violation of such program by any person or entity. The
Documentation relating to the Target Software Programs and the Third Party
Software Programs (except for end user manuals and other items generally
delivered to end users or other customers or clients), (i) has at all times
been maintained in strict confidence, (ii) has been disclosed by Target
only to employees having a "need to know" the contents thereof in
connection with the performance of their duties to Target or as otherwise
specified in any third party license agreements and (iii) has not been
disclosed to any third party, except as otherwise allowed pursuant to any
third party license agreements.
(vii) All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated in
the conception and development of Target Software Programs have executed
nondisclosure agreements, the form of which is set forth in SECTION
4(L)(VII) of the Disclosure Schedule, and either (l) have been party to a
written agreement with Target that has accorded Target full, effective,
exclusive and original ownership of all Target Software Programs, or (2)
have executed appropriate instruments of assignment in favor of Target as
assignee that have conveyed to Target full, effective, and exclusive
ownership of all Target Software Programs.
(viii) Section 4(l)(viii) of the Disclosure Schedule
contains a complete list of all software libraries, compilers and other
third party software used in the development of the Target Software
Programs.
(ix) The Target Software Programs and the Client Software
Programs will perform in accordance with the warranties, if any set forth
in Target's licenses to, or agreements with, the end users.
(x) The use of the Target Software Programs and the Client
Software Programs and the license, sale or lease of the Target Software
Programs and the Client Software Programs, or of any part thereof, or of
any copy, or of any part thereof, do not and will not infringe on,
misappropriate, or contribute to the infringement of, any copyright, trade
secret, patents or any other exclusionary right, of any third party in
either the United States or any foreign country. No person or entity has
asserted against Target a claim that the use, license, sale or lease of any
Target Software Program, the Client Software Programs, the Third Party
Software Programs, or any part thereof, infringes, misappropriates or
contributes to the infringement of any patent claim, copyright or trade
secret right of any third party in either the United States or any foreign
country, and the Sellers are not aware of any Basis for any such claim.
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(xi) Except with respect to demonstration or trial copies, no
portion of the Target Software Programs or the Client Software Programs
contains any "back door," "time bomb," "Trojan horse," "worm," "drop dead
device," "virus" or other software routines or hardware components
designed to permit unauthorized access; to disable or erase software,
hardware, or data; or to perform any other such similar actions.
(xii) Except as set forth in SECTION 4(L)(XII) of the
Disclosure Schedule, Sellers have made available to Buyer correct and
complete copies of all third party licenses, sublicenses, agreements, and
permissions (as amended to the date hereof) as to Non-Software
Intellectual Property and Third Party Software Programs licensed or
sublicensed to Target (collectively, the "LICENSES"). Except as set forth
in SECTION 4(L)(XII) of the Disclosure Schedule, with respect to each such
License:
(A) the License is legal, valid, binding, enforceable
and in full force and effect;
(B) the License will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the Closing;
(C) Target is not and to the Sellers' Knowledge no other
party to the License is in breach or default and to the Sellers'
Knowledge, no event has occurred which with notice or lapse or time
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) to the Sellers' Knowledge, no underlying item of the
property covered by the License is subject to any outstanding
judgment, order, decree, stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceedings,
hearing, investigation, claim, or demand is pending or to the Sellers'
Knowledge, is threatened which challenges the legality, validity, or
enforceability of any underlying item of the property covered by the
License; and
(F) except as may have been necessary in preparing and
delivering a Client Software Program, in accordance with the terms of
the applicable client engagement, Target has not granted any
sublicense or similar right with respect to any License.
(xiii) The Target Software Programs and, to the extent used
in accordance with the applicable documentation, the Client Software
Programs (i) are year 2000 compatible, which shall include, but is not
limited to, date data century recognition, and calculations that
accommodate same century and multi-century formulas and date values; (ii)
operate or will operate in accordance with their specifications prior to,
during and after the calendar year 2000; and (iii) shall not end abnormally
or provide invalid or
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incorrect results as a result of date data, specifically including date
data which represents or references different centuries or more than one
century; provided, that any third party software used by clients in
conjunction with Target Software Programs or Client Software Programs for
which Target was not directly or indirectly responsible for determining
year 2000 compliance properly exchanges date data.
(M) CONTRACTS. SECTION 4(M) of the Disclosure Schedule lists the
following contracts, agreements, and other written arrangements to which Target
is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $10,000 per annum;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property or for the furnishing or
receipt of services which either calls for performance over a period of
more than one year or involves more than the sum of $50,000;
(iii) any written arrangement concerning a partnership or
joint venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $10,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement imposing confidentiality
restriction or restrictions on the ability of Target to compete;
(vi) any written arrangement involving any of the Sellers
and their Affiliates not referred to in clause (vii) below;
(vii) any written arrangement with any of its directors,
officers, and employees in the nature of a collective bargaining agreement,
employment agreement, or severance agreement;
(viii) any written arrangement under which the consequences
of a default or termination could have a material adverse effect on the
assets, Liabilities, business, financial condition, operations or results
of operations, or future prospects of Target;
(ix) any written arrangement involving a Governmental
Authority;
(x) any written Customer Contract or Agreement; or
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(xi) any other written arrangement (or group of related
written arrangements) either involving more than $10,000 or not entered
into in the Ordinary Course of Business.
The Sellers have delivered to Buyer a correct and complete copy of each written
arrangement listed in SECTION 4(M) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed: (A) the written
arrangement is legal, valid, binding, enforceable, subject to (x) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other similar laws of general application affecting enforcement of
creditors' right' generally and (y) equitable principles of general
applicability which may limit the availability of equitable remedies including
specific performance (regardless of whether enforcement is sought in a
proceeding in equity or at law), and in full force and effect; (B) the written
arrangement will continue to be legal, valid, binding, enforceable and in full
force and effect on the same or substantially similar terms immediately
following the Closing; (C) Target is not and, to the Seller's Knowledge, no
other party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (D) no party
has repudiated any provision of the written arrangement. Target is not a party
to any verbal contract, agreement, or other arrangement which, if reduced to
written form, would be required to be listed in SECTION 4(M) of the Disclosure
Schedule under the terms of this SECTION 4(M). No unfilled Material Customer
Contract or Agreement obligating Target to perform services will result in a
loss to Target upon completion of performance pursuant to their terms. Target is
not a party to any contract, agreement or other arrangement which was entered
into on terms which would not be considered market standard if such arrangement
was entered into in an arms-length transaction. None of Target's ten (10)
highest grossing revenue customers in the year ended December 31, 1999 has
Materially curtailed or terminated its relationship with it or has indicated
that it will stop, or Materially decrease the rate of, buying services from it,
other than as a result of the completion of projects by Target in the Ordinary
Course of Business.
(n) NOTES AND ACCOUNTS RECEIVABLE All notes and accounts receivable
of Target are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are presently current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Financial
Statements (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
Target.
(o) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Target.
(p) INSURANCE. SECTION 4(P) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which Target has been a party, a
named insured, or otherwise the beneficiary of coverage at any time within the
past three (3) years:
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(i) The name, address, and telephone number of the agent;
(ii) The name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) The policy number and the period of coverage;
(iv) The scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) A description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect, subject to (x) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other similar laws of general application affecting enforcement of
creditors' rights generally and (y) equitable principles of general
applicability which may limit the availability of equitable remedies including
specific performance (regardless of whether enforcement is sought in a
proceeding in equity or at law); (B) the policy will continue to be legal,
valid, binding, and enforceable and in full force and effect on identical terms
immediately following the Closing Date; (C) Target is not in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Target has been covered during the past three (3) years
by insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. SECTION 4(P) of the
Disclosure Schedule describes any self-insurance arrangements affecting Target.
(q) LITIGATION. Section 4(q) of the Disclosure Schedule sets forth
each instance in which Target (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge or (ii) is a party or, to the
Knowledge of any of the Sellers, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any Governmental Authority
or before any arbitrator. None of the Sellers has any reason to believe that any
such charge, complaint, action, suit, proceeding, hearing, or investigation may
be brought or threatened against Target.
(r) EMPLOYEES. SECTION 4(R) of the Disclosure Schedule lists the
employees employed by Target and the annual compensation or rate of pay
(including bonus) for each as of the date of this Agreement, with each such
employee identified as (i) salaried or hourly, (ii) exempt or nonexempt, (iii)
union or nonunion, (iv) full-time or part-time, (v) temporary, permanent, or
leased, and (vi) active or nonactive (e.g., leave of absence, Family Medical
Leave Act, disability, layoff, etc.). To Seller's Knowledge no key employee or
group of full-time employees has any plans to terminate employment with Target.
Target is not a party to or bound
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by any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. Target has not committed any unfair labor practice as defined by
applicable law. None of the Sellers has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of Target.
(s) EMPLOYEE BENEFITS.
(i) SECTION 4(S)(I) of the Disclosure Schedule provides a
list of each Current Employee Benefit Plan.
(ii) True, correct, and complete copies of each Current
Employee Benefit Plan, and related trusts, if applicable, including all
amendments thereto, have been furnished to Buyer. There have also been
furnished to Buyer, (A) with respect to each Current Employee Benefit Plan
required to file such report or description, the most recent report on Form
5500 and the most recent summary plan description, and (B) with respect to
each Current Employee Benefit Plan intended to be qualified within the
meaning of Section 401(a) of the Code, the most recent favorable
determination letter, if any, from the Internal Revenue Service.
(iii) With respect to the Employee Benefit Plans:
1. Neither Target nor any corporation, trade, business,
or entity under common control with Target, within the meaning of
Section 414(b), (c), (m), or (o) of the Code, or Section 4001 of
ERISA, ("COMMONLY CONTROLLED ENTITY") contributes to or has an
obligation to contribute to, nor has Target or any Commonly Controlled
Entity at any time contributed to or had an obligation to contribute
to, either a Multiemployer Plan or a plan subject to Title IV of
ERISA.
2. Target and each Fiduciary have performed all
obligations, whether arising by operation of law or by contract,
required to be performed by each of them in connection with the
Employee Benefit Plans, and there have been no defaults or violations
by any party with respect to the Employee Benefit Plans.
3. All reports and disclosures relating to the Employee
Benefit Plans required to be filed with or furnished to Governmental
Authorities, participants, or beneficiaries have been filed or
furnished in accordance with applicable law in a timely manner, and
each Employee Benefit Plan has been administered in compliance with
its governing documents and all applicable law.
4. Each of the Employee Benefit Plans intended to be
qualified under Section 401(a) of the Code (A) satisfies in form the
requirements of such Section, except to the extent amendments are not
required by law to be made until a date after the Closing Date, (B)
has received a favorable determination letter from the Internal
Revenue Service regarding such qualified status, which covers
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all amendments to the Employee Benefit Plans, and (C) has not been
operated in a way that would adversely affect its qualified status.
5. Target has not made any payments, is not obligated to
make any payments, or is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G.
6. There are no actions, suits, or claims pending (other
than routine claims for benefits) or threatened against, or with
respect to, any of the Employee Benefit Plans or their assets.
7. All contributions required to be made to the Employee
Benefit Plans pursuant to their terms and the provisions of ERISA, the
Code, or any other applicable law have been timely made.
8. There has been no Prohibited Transaction with respect
to any Employee Benefit Plan or Fiduciary, and no act, omission, or
transaction has occurred that would result in imposition (directly or
indirectly) upon Target of (A) breach of fiduciary duty liability
under Section 409 of ERISA, (B) a civil penalty assessed pursuant to
subsections (c), (i), or (l) of Section 502 of ERISA, or (C) a tax
imposed pursuant to Chapter 43 of Subtitle D of the Code.
9. There is no matter pending (other than routine
qualification determination filings) with respect to any of the
Employee Benefit Plans before the Internal Revenue Service, the
Department of Labor, the PBGC, or other Governmental Authority.
10. Each trust funding an Employee Benefit Plan, which
trust is intended to be exempt from federal income taxation pursuant
to Section 501(c)(9) of the Code, satisfies the requirements of such
section and has received a favorable determination letter from the
Internal Revenue Service regarding such exempt status and has not,
since receipt of the most recent favorable determination letter, been
amended or operated in a way that would adversely affect such exempt
status.
11. With respect to any employee benefit plan, within
the meaning of Section 3(3) of ERISA, which is not listed in SECTION
4(S)(I) of the Disclosure Schedule, but which is sponsored,
maintained, or contributed to, or has been sponsored, maintained, or
contributed to within six years prior to the Closing Date, by any
Commonly Controlled Entity, (A) no withdrawal liability, within the
meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied, (B) no liability to the PBGC has
been incurred by any Commonly Controlled Entity, which liability has
not been satisfied, (C) no accumulated funding deficiency, whether or
not waived, within the meaning of
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Section 302 of ERISA or Section 412 of the Code has been incurred, and
(D) all contributions (including installments) to such plan required
by Section 302 of ERISA and Section 412 of the Code have been timely
made.
12. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (A)
require Target or Buyer to make a larger contribution to, or pay
greater benefits or provide other rights under, any Employee Benefit
Plan than it otherwise would, whether or not some other subsequent
action or event would be required to cause such payment or provision
to be triggered, (B) create or give rise to any additional vested
rights or service credits under any Employee Benefit Plan, or (C)
conflict with the terms of any Employee Benefit Plan.
13. All continuation of coverage obligations set forth
in Section 4980B of the Code and Sections 601 through 609 of ERISA
have been performed.
(iv) Target is not a party to any agreement, nor has it
established any policy or practice, requiring it to make a payment or
provide any other form of compensation or benefit to any person performing
services for Target upon termination of such services that would not be
payable or provided in the absence of the consummation of the transactions
contemplated by this Agreement.
(v) In connection with the consummation of the transactions
contemplated by this Agreement, no payments of money or other property,
acceleration of benefits, or provisions of other rights have or will be
made under the Employee Benefit Plans that would result in imposition of
the sanctions imposed under Section 280G or 4999 of the Code, whether or
not some other subsequent action or event would be required to cause such
payment, acceleration, or provision to be triggered.
(vi) Each Employee Welfare Benefit Plan may be unilaterally
amended or terminated in its entirety without liability to Target except as
to benefits vested and accrued thereunder prior to such amendment or
termination.
(t) GUARANTIES. Target is not a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other person.
(u) ENVIRONMENT, HEALTH, AND SAFETY
(i) Target and its predecessors and Affiliates has complied
with all laws (including rules and regulations thereunder) of any
Governmental Authority concerning the environment, public health and
safety, and employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against any of them alleging any failure to comply with
any such law or regulation.
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(ii) Target does not have any Liability (and there is no
Basis related to the past or present operations, properties, or facilities
of Target and its predecessors and Affiliates for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
or demand against Target giving rise to any Liability) under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, the Federal Water
Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe Drinking
Water Act of 1974, the Toxic Substances Control Act of 1976, the Refuse Act
of 1989, or the Emergency Planning and Community Right-to-Know Act of 1986
(each as amended), any other law (or rule or regulation thereunder) of any
Governmental Authority or common law remedy concerning release or
threatened release of hazardous substances, public health and safety, or
pollution or protection of the environment.
(iii) Target does not have any Liability (and Target and its
predecessors and Affiliates have not handled or disposed of any substance,
arranged for the disposal of any substance, or owned or operated any
property or facility in any manner that could form the Basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to any
statute) against Target giving rise to any Liability) for damage to any
site, location, or body of water (surface or subsurface) or for illness or
personal injury under any applicable environmental law.
(iv) Target does not have any Liability (and there is no
Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against Target giving
rise to any Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder) of any
Governmental Authority concerning employee health and safety.
(v) Target does not have any Liability (and Target has not
exposed any employee to any substance or condition that could form the
Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common law
or pursuant to statute) against Target giving rise to any Liability) for
any illness of or personal injury to any employee.
(vi) Target has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all laws of
any Governmental Authority (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, worker health and safety,
and pollution or protection of the environment, including laws relating to
emissions, discharge, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or
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handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes.
(vii) To the Knowledge of the Sellers, all properties and
equipment used in the business of Target have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1, 2 trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(viii) To the Knowledge of the Sellers, no pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or waste
ever has been buried, stored, spilled, leaked, discharged, emitted, or
released on any real property that Target owns or ever has owned or that
Target leases or ever has leased.
(v) LEGAL COMPLIANCE
(i) Target has complied with all laws (including rules and
regulations thereunder) of all Governmental Authorities, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand,
or notice has been filed or commenced against Target alleging any failure
to comply with any such law or regulation.
(ii) Target has complied with all applicable laws (including
rules and regulations thereunder) relating to the employment of labor,
employee civil rights, and equal employment opportunities.
(iii) Target has not violated in any respect or received a
notice or charge asserting any violation of the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇
Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Act, or the Federal Trade Act, each as amended.
(iv) Target has complied with all applicable laws (including
rules and regulations thereunder) relating to the residency status of
foreign individuals which are employees of Target and obtaining the
requisite visas, permits and other documentation to permit such individuals
to work in the United States.
(v) Target has not:
(A) made or agreed to make any contribution, payment, or
gift of funds or property to any governmental official, employee, or
agent where either the contribution, payment, or gift or the purpose
thereof was illegal under the laws of any Governmental Authority;
(B) established or maintained any unrecorded fund or
asset for any purpose, or made any false entries on any books or
records for any reason; or
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(C) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any other
person, to any candidate for public office with regards to any
Governmental Authority.
(vi) Target has filed in a timely manner all reports,
documents, and other materials it was required to file (and the information
contained therein was correct and complete in all respects) under all
applicable laws (including rules and regulations thereunder).
(vii) Target has possession of all records and documents it
was required to retain under all applicable laws (including rules and
regulations thereunder).
(w) CERTAIN BUSINESS RELATIONSHIPS WITH TARGET. Except as set forth in
SECTION 4(W) of the Disclosure Schedule, none of the Sellers and their
Affiliates has been involved in any business arrangement or relationship with
Target within the past twelve (12) months, and none of the Sellers and their
Affiliates owns any property or right, tangible or intangible, which is used in
the business of Target.
(x) BROKERS' FEES. Target does not have any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(y) DISCLOSURE. The representations and warranties contained in this
SECTION 4 along with the Disclosure Schedule and any other written information,
statement or certificate provided by the Sellers with the exception of forward
looking statements and projections, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained in this SECTION 4 not misleading.
(z) BOOKS AND RECORDS. The Sellers have furnished Buyer with true and
complete copies of the books and records relating to the ownership and operation
of Target. The books and records reflect all minutes and written consents
adopted by the Boards of Directors of Target. The books and records have been
maintained in accordance with applicable legal requirements, comprise all of the
books and records relating to the ownership and operation of Target, reflect all
proceedings and transactions customarily contained in corporate books and
records. During the three year period prior to the date hereof, neither Target
nor any of the Sellers on behalf of Target has paid or given or has authorized
or committed to the payment or gift of money or anything of value to any
official or employee of any Governmental Authority or any political party or
candidate for political office for the purpose of influencing any governmental
action or decision in order to obtain or retain business or to direct business
to any other party.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the earlier of the Closing or
termination of this Agreement.
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(a) GENERAL. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in SECTION 7 below).
(b) NOTICES AND CONSENTS. The Sellers will or will cause Target to
give any notices to third parties required by this Agreement or the transactions
contemplated hereby, and will or will cause Target to obtain all third-party
consents required by this Agreement or the transactions contemplated hereby or
in connection with the matters pertaining to Target disclosed or required to be
disclosed in the Disclosure Schedule. The Sellers will take additional actions
(and the Sellers will cause Target to take all additional actions) that may be
deemed reasonably necessary, proper, or advisable by Buyer in connection with
any other notices to, filings with, and authorizations, consents, and approvals
of Governmental Authorities and third parties that he, she, it or Target may be
required to give, make, or obtain as reasonably required by this Agreement or
the transactions contemplated hereby in order that Buyer is able to conduct the
business of Target in the same manner as it is currently being conducted.
(c) OPERATION OF BUSINESS. The Sellers will not cause or permit
Target to engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business,
except as provided hereby or disclosed on the Disclosure Schedule as of the date
hereof. Without limiting the generality of the foregoing, the Sellers will not
cause or permit Target to engage in any practice, take any action, embark on any
course of inaction, or enter into any transaction of the sort described in
SECTION 4(F) above, except for transactions disclosed on the Disclosure
Schedule.
(d) PRESERVATION OF Business. The Sellers will use its reasonable
best efforts to cause Target to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
employees.
(e) FULL ACCESS
(i) Each of the Sellers will permit, and the Sellers will
cause Target to permit, representatives of Buyer to have reasonable access
during normal business hours, and in a manner so as not to interfere with
the normal business operations of Target, to the headquarters office of
Target and all books, records, contracts, Tax records, and documents of or
pertaining to Target. During Buyer's on-site investigation, Buyer shall not
discuss any aspects of the operation of Target with any employee of Target,
and Buyer shall direct all requests for information and material only
through the Key Employees, unless otherwise agreed to by Buyer and the
Principal in writing. Buyer shall not contact or speak or correspond with
any lender, customer, employee or other person associated in business with
Target without the written consent of Target.
(ii) Upon completion of the accounting review and business,
legal and accounting due diligence by Buyer and so long as this Agreement
has not been
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terminated, Buyer shall arrange with the Sellers a mutually agreeable time
and place at which Buyer may conduct interviews with designated key
employees and/or customers of Target mutually agreed to by Buyer and the
Principal. Such interviews shall be in strict conformity with a format
mutually agreed to by Buyer and the Principal and shall take place and be
completed wholly within the last ten (10) days prior to Closing.
(f) NOTICE OF DEVELOPMENTS. The Sellers will give prompt written
notice to Buyer of any material development affecting the assets, Liabilities,
business, financial condition, operations or results of operations, or, to the
extent of the Knowledge of Sellers, future prospects of Target. Each Party will
give prompt written notice to the others of any material development affecting
the ability of the Parties to consummate the transactions contemplated by this
Agreement. No disclosure by any Party pursuant to this SECTION 5(F) however,
shall be deemed to amend or supplement Annex III, Annex IV, or the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(g) EXCLUSIVITY. None of the Sellers will (and the Sellers will not
cause or permit Target to) (i) solicit, initiate, or encourage the submission of
any proposal or offer from any person relating to any (A) liquidation,
dissolution, or recapitalization, (B) merger or consolidation, (C) acquisition
or purchase of securities or assets, or (D) similar transaction or business
combination involving Target or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. The Sellers will notify Buyer
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(h) PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF FINANCIAL
INFORMATION. Target will prepare and deliver to Buyer, on a monthly basis until
the Closing Date, the financial and other information listed on Exhibit A
hereto.
(i) DELIVERY OF SCHEDULES; ACCEPTANCE. Buyer acknowledges that the
preparation and delivery of the Schedules to the Agreement may not be prepared
and/or final at the time of the execution and delivery of the Agreement. As
such, the parties agree as follows:
(i) The Sellers shall have the right to deliver the
Schedules to the Agreement and/or to amend, restate and update the
Schedules to the Agreement up to the date which is five (5) days prior to
the Closing Date; provided that Sellers comply with SECTION 4 of this
Agreement;
(ii) at least five (5) days prior to the Closing Date, the
Sellers shall deliver to Buyer a complete copy of the proposed final
Schedules to the Agreement noting all changes from the Schedules provided
upon execution of the Agreement; provided that Sellers comply with SECTION
4 of this Agreement; and
(iii) Buyer shall notify Sellers at or prior to the Closing
that either (i) Buyer accepts such revised Schedules, in which case they
shall become part of this
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Agreement as if in existence on the date of this Agreement and all such
disclosures made in such amended Schedules shall be deemed disclosed as if
they had been disclosed in the Schedules as of the date of this Agreement
or (ii) that Buyer in its sole discretion does not accept such Schedules
and elects to terminate this Agreement subject to the terms of Section 4
above. In the event there is no material change to the Disclosure Schedule
from the schedules delivered upon the signing of this Agreement, Buyer
shall have no right to terminate this Agreement as a result of such changed
Disclosure Schedule.
6. ADDITIONAL COVENANTS. The Parties further agree as follows:
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
SECTION 8 below). The Sellers acknowledge and agree that from and after the
Closing Buyer will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort of Target.
(b) LITIGATION SUPPORT. After the Closing, in the event and for so
long as any Party actively is contesting or defending against any charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction which
occurred on or prior to the Closing Date involving Target, each of the other
Parties will, upon the reasonable request of such Party (which shall include
reasonable notice and during reasonable business hours), cooperate with him or
it and his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under SECTION 8 below).
(c) TRANSITION. No Seller will take any action that primarily is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of Target from maintaining the
same business relationships with Target after the Closing for a period of
twenty-four (24) months thereafter as it maintained with Target prior to the
Closing. Each Seller will refer all customer inquiries relating to the lines of
businesses of Target to Buyer from and after the Closing for a period of
twenty-four (24) months thereafter.
(d) CONFIDENTIALITY. Each of the Sellers will treat and hold as such
all of the Confidential Information and refrain from using any of the
Confidential Information except in connection with this Agreement for a period
of three (3) years from the Closing, and deliver promptly to Buyer or destroy,
at the request and option of Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in his or its possession. In the event
that any of the Sellers is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or
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similar process) to disclose any Confidential Information, such Seller will
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
SECTION 6(D). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Seller shall use his reasonable best
efforts to obtain, at the reasonable request of Buyer, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Buyer shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
(e) MONITORING INFORMATION. Prior to the Closing, the Sellers shall
cause Target to deliver such information as may reasonably be requested by
Buyer.
(f) LEASES. The Sellers shall cause prior to the Closing Date,
Target to obtain from its landlords (to the extent required under the pertinent
premises lease) written consent to the assignment of all leases being indirectly
assumed by Buyer, which assignments are deemed to have resulted from the
transactions contemplated by this Agreement.
(g) ADDITIONAL TAX MATTERS
(i) The Sellers shall cause to be prepared, and Target shall
file or cause to be filed, with the appropriate Governmental Authorities
all Tax Returns required to be filed by Target for any taxable period
ending on or prior to the Closing Date and Target shall remit any Taxes due
in respect of such Tax Returns. Buyer shall prepare and cause Target to
file with the appropriate Governmental Authorities all Tax Returns required
to be filed by it for any taxable period ending after the Closing Date.
(ii) Buyer and the Sellers recognize that each of them will
need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by Buyer and/or Target to
the extent such records and information pertain to events occurring on or
prior to the Closing Date; therefore, Buyer agrees to cause Target to (A)
use its best efforts to properly retain and maintain such records for a
period of six (6) years from the date the Tax Returns for the year in which
the Closing occurs are filed or until the expiration of the statute of
limitations with respect to such year, whichever is later, and (B) allow
the Sellers and their agents and representatives at times and dates
mutually acceptable to the Parties, to inspect, review and make copies of
such records as such other party may deem necessary or appropriate from
time to time, such activities to be conducted during normal business hours
and at the requesting Party's expense.
(iii) The Sellers shall reimburse Buyer for the Taxes
relating to Pre-Closing Tax Periods, but which are payable in respect of
Tax Returns to be filed by Buyer pursuant to SECTION 6(G)(I) hereof within
ten (10) business days after receipt by the Sellers of signed copies of
such Tax Returns as filed; however, only to the extent such
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Taxes are in excess of the reserve for such Tax Liability used to determine
the Net Working Capital of Target.
(iv) For purposes of this Agreement, in the case of any
Taxes payable for a taxable period that begins on or before and includes
(but does not end on) the Closing Date, the portion of such Tax for the
Pre-Closing Tax Period shall (x) in the case of any Taxes not based on or
related to gross or net income, revenues or other receipts (including, but
not limited to, real property Taxes), be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the Pre-Closing Tax Period and the
denominator of which is the number of days in the entire taxable period,
and (y) in the case of any Taxes based on or related to gross or net
income, revenues or other receipts be deemed to include the amount which
would be payable if the relevant taxable period ended on and included the
Closing Date.
(v) Neither Buyer nor Target shall be liable for any Taxes
resulting solely from the conversion by Target to the accrual basis of tax
accounting from the cash basis of Tax accounting. The Sellers shall
reimburse Buyer for any Taxes for which either Buyer or Target become
liable due solely to such conversion.
(vi) The Sellers and Buyer shall join in making a timely
election under Section 338(h)(10) of the Code and any similar state law
provisions in all applicable states (including any statutes comparable to
under Section 338(g) of the Code) with respect to the sale and purchase of
the Shares pursuant to this Agreement (the "Section 338(h)(10) Elections"),
and each party shall provide to the others all necessary information to
permit such elections to be made. To facilitate such elections, at the
Closing, the Sellers shall deliver to the Buyer an Internal Revenue Service
Form 8023 and any similar form prescribed under applicable state Tax law
(the "Forms") with respect to the Section 338(h)(10) Elections, which Forms
shall have been duly executed by an authorized person for Sellers and shall
include such attachments to the Forms as are necessary to include the
consent of each Seller to the Section 338(h)(10) Elections ("Consent").
Each such Consent shall be executed by the respective Seller under
penalties of perjury and shall otherwise comply with any requirements set
forth in the Code, applicable Treasury regulations and on the Forms. Buyer
shall use reasonable efforts to assist Seller in reducing any Tax
liabilities resulting from the Section 338(h)(10) Elections. All Taxes
attributable to the Section 338(h)(10) Elections made pursuant to this
Section 6(g)(v) shall be the liability of the Sellers, including, but not
limited to, Taxes on ordinary income attributable to the deemed sale of the
Target's accounts receivable and other similar assets pursuant to the
Section 338(h)(10) Elections; provided, that should any additional state
income Taxes be imposed by reason of the treatment of a portion of the gain
realized on the deemed sale of the Target's assets as ordinary income
rather than capital gain, Buyer shall reimburse the Sellers for such
additional Tax liability. The amount (if any) payable by Buyer to Sellers
pursuant to the immediately preceding sentence with respect to a particular
state shall be the excess (if any) of (i) the amount of state income Tax
actually imposed on the gain realized on the
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deemed sale of the Target's assets, over (ii) the amount of state income
Tax that would have been imposed on such gain if all such gain were taxed
at the state income Tax rate applicable to capital gains. In connection
with such elections, within sixty (60) days following the Closing Date,
Buyer and the Sellers shall act together in good faith to determine and
agree upon the allocation of the "deemed sale price" to the assets of
Target in accordance with Treasury Regulation Section 1.338(h)(10)-1(f) and
the other regulations under Section 338 of the Code. Notwithstanding the
generality of the immediately preceding sentence, Buyer and the Sellers
agree that the "deemed sale price" shall be allocated to the fixed assets
and the monetary assets of Target at their fair market value as of the
Closing Date as determined in accordance with GAAP, consistently applied,
and the balance of the "deemed sale price" shall be allocated to goodwill
and other intangible assets of Target. The parties agree that for purposes
of this allocation, (A) the portion of the "deemed sale price" allocated to
the non-competition covenant shall not exceed [$50,000,] and (B) the fair
market value of the fixed assets is their depreciated value. Both Buyer and
the Sellers shall report the tax consequences of the transactions
contemplated by this Agreement consistently with such allocations and shall
not take any position inconsistent with such allocations in any Tax Return
or otherwise. The Sellers shall be liable for, and shall indemnify and hold
Buyer and Target harmless against, any Taxes or other costs attributable to
(i) a failure on the part of the Sellers to take all actions required of
them under this Section 6(g)(vi); or (ii) a failure on the part of Target
to qualify as an "S corporation" for which the Section 338(h)(10) Elections
may be made.
(h) COVENANT NOT TO COMPETE.
(i) For a period of twelve (12) months beyond the term of
his employment with Target, none of the Sellers will (i) engage directly or
indirectly in any business that is substantially similar to the primary
business conducted by Target or Buyer in North America; (ii) service or
solicit any past or current Customer of Target, Buyer or any of Buyer's
subsidiaries with respect to any business that is similar to any business
conducted by Target, Buyer or any of Buyer's subsidiaries; or (iii) offer
employment to or attempt to induce any director, officer, employee, agent,
or Customer of Target, Buyer or any of Buyer's subsidiaries to terminate
such relationship with Target; provided, that the determination of the
scope of business, current customers, and offices covered shall be at the
time of such Seller's termination; provided further, however, that no owner
of less than 1% of the outstanding stock of any publicly traded corporation
shall be deemed to violate (h)(i)(i) above. For purposes of this Section
6(h)(i), "Customer" shall mean any person or legal entity for which
services have been, or are being, performed by Target, Buyer or Buyer's
Subsidiaries but excluding departments, divisions or locations and legal
entities with separate and autonomous contracting authority unrelated to
such areas with which Target has been engaged and which do not and have not
derived a direct benefit from any services performed by the Target.
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(ii) If any Seller commits a breach, or overtly threatens to
commit a breach, of any of the provisions of Section 6(h)(i) above, Buyer
shall have the right and remedy to seek to have the provisions of SECTION
6(H)(I) specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury and continuing damage to Buyer, Target and their
affiliates, and that the exact amount of which would be difficult to
ascertain and that in any event money damages will not provide adequate
remedy and Buyer shall be entitled to seek to obtain injunctive relief
restraining any violation of SECTION 6(H)(I);
(iii) It is expressly understood and agreed that Buyer and
the Sellers consider the restrictions contained in SECTION 6(H)(I) above to
be reasonable and necessary for the purposes of preserving and protecting
the business of Target and goodwill purchased by Buyer; and
(iv) If the final judgment of a court of competent
jurisdiction declares that any term or provision of this SECTION 6(H) is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.
7. CONDITIONS TO OBLIGATIONS TO Close.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in SECTION
3(A) and SECTION 4 above shall be true and correct in all Material respects
at and as of the Closing Date;
(ii) Sellers shall have performed and complied with all of
their covenants hereunder in all Material respects through the Closing;
(iii) Target shall have procured all of the governmental or
third party consents and approvals specified in SECTION 5(B) including any
landlord consents related to any rental property.
(iv) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
within the jurisdiction of any Governmental Authority wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions
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contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(C) adversely affect the right of Buyer to own, operate, or control the
Shares or Target (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) Sellers shall have delivered to Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in SECTION 7(A)(I)-(IV)
is satisfied in all respects;
(vi) Buyer shall have received from each of the Key
Employees executed employment agreements in the form and substance attached
hereto as EXHIBIT B;
(vii) All officers, directors and key employees of Target
and each of the Sellers shall have repaid in full all debts or other
obligations, if any, owed to Target;
(ix) Since December 31, 1999, no Material adverse change
shall have occurred before the Closing in Target's business or its future
business prospects;
(x) All appropriate corporate and shareholder authorizations
of Target shall have been obtained;
(xi) Buyer shall be satisfied that at Closing all facilities
of Target are under legal, valid and binding leases or subleases, each of
which have received all approvals of Governmental Authorities required to
be obtained by Target;
(xii) Sellers shall have delivered to Buyer stock
certificates evidencing all of the stock of Target in good delivery form
and duly endorsed for transfer or accompanied by duly executed stock powers
or other appropriate assignment documents;
(xiii) Sellers shall have caused Target to cancel, and
Target shall have canceled, any stock option and associated plans, deferred
bonus programs, and phantom equity plans outstanding as of the Closing
Date, and Sellers shall have obtained any necessary consents and releases
from affected holders or other individuals, each at no cost or liability to
Buyer and/or Target and Sellers shall produce documents evidencing all such
actions prior to Closing. The payments made by Target and due pursuant to
the cancellation of such programs will vest and be payable to the
recipients in accordance with terms and conditions mutually acceptable to
Sellers and Buyer. In conjunction with the cancellation of such programs,
Sellers shall have caused all employees of Target who have received stock
options to have signed releases and reaffirmed any and all restrictive
covenants to which such eligible employees are currently bound;
(xiv) All Security Interests securing debts of Target which
have been paid in full prior to or at the Closing shall have been fully
released of record to the reasonable satisfaction of Buyer and all Uniform
Commercial Code financing statements
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or other filings of any kind whatsoever, covering or evidencing such debts,
Security Interests shall have been terminated;
(xv) No unsatisfied liens for the failure to pay Taxes of
any nature whatsoever shall exist against Target, or against or in any way
affecting any of the Shares;
(xvi) All deferred Taxes of Target and all other Tax related
issues of Target shall have been assumed and/or discharged by the Sellers;
(xvii) Buyer shall have received a certificate of the
Secretary of Target accompanied with Target's certified certificate of
incorporation and bylaws and certificates of good standing in each
jurisdiction in which Target is required to be qualified to do business.
(xviii) The Sellers shall have delivered to Buyer any
documentation prescribed under Section 1445 of the Code and Treasury
regulations thereunder certifying that the Target is not, and has not been
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, a United States real property holding corporation.
(xix) The Sellers shall have delivered to Buyer all properly
executed Forms and Consents as are required to make the Section 338(h)(10)
Elections provided for under Section 6(g) of this Agreement.
Buyer may waive any condition specified in this SECTION 7(A) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in SECTION
3(B) above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
within the jurisdiction of any Governmental Authority wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated by
this Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
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(iv) Buyer shall have executed and delivered to each Key
Employee an employment agreement in the form and substance attached hereto
as Exhibit B; and
(v) Buyer shall have delivered to the Sellers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in SECTION 7(B)(I)-(III)
is satisfied in all respects.
Sellers may waive any condition specified in this SECTION 7(B) if they
execute a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL. Except as otherwise specifically provided in this
Agreement, all of the representations, warranties and covenants of the Sellers
(other than the representations and warranties of the Sellers contained in
SECTION 3, SECTION 4(H), SECTION 4(S) and SECTION 4(U) above) shall survive the
Closing hereunder (even if Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of two (2) years thereafter. All of the
representations and warranties of the Sellers contained in SECTION 3, SECTION
4(H) and SECTION 4(S) of this Agreement and the representations, warranties and
covenants of Buyer shall survive the Closing (even if Buyer knew or had reason
to know of any misrepresentation or breach of warranty or covenant at the time
of Closing) and continue in full force and effect for the statute of
limitations.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) In the event the Sellers (or in the event any third
party alleges facts that, if true, would mean any of the Sellers has
breached) breach any of their Joint and Several representations,
warranties, and covenants contained herein during the period such
representations, warranties and covenants survive, and provided that Buyer
makes a written claim for indemnification against any of the Sellers
pursuant to SECTION 10(H) below within the applicable survival period, then
each of the Sellers agrees to indemnify Buyer from and against the entirety
of any Adverse Consequences Buyer may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences Buyer may
suffer after the end of the applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(ii) In the event any of the Sellers breaches (or in the
event any third party alleges facts that, if true, would mean any of the
Sellers has breached) any of his Several representations, warranties, and
covenants contained in Section 3(a) herein, and provided that the
particular representation, warranty, or covenant survives the Closing and
that Buyer makes a written claim for indemnification against the Seller
pursuant to SECTION 10(H) below within the applicable survival period, then
the Seller agrees to indemnify Buyer from and against the entirety of any
Adverse Consequences Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse
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Consequences Buyer may suffer after the end of the applicable survival
period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(iii) Each of the Sellers agrees to indemnify Buyer from and
against the entirety of any Adverse Consequences Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any
Liability of Target arising under United States Treasury Reg. ss.1.1502-6
(because Target oncE was a member of an Affiliated Group during any part of
any consolidated return year within any part of which consolidated return
year any corporation other than Target also was a member of the Affiliated
Group).
(iv) Each of the Sellers agree to indemnify Buyer from and
against the entirety of any transfer, stamp or similar Taxes that which may
become due and owing to any Governmental Authority by reason of the sale of
Target to Buyer.
(v) Each of the Sellers agrees to indemnify Buyer from and
against the entirety of any Adverse Consequences which may become due and
owing by reason of Target's failure to properly obtain any visas required
for employees of Target to work in the United States.
(vi) Each of the Sellers shall be liable for, and hereby
indemnifies, Buyer for all Taxes imposed on Target (plus, to the extent
authorized in writing by the Sellers, any costs incurred in contesting such
Taxes, including, but not limited to, reasonable attorneys' and
accountants' fees) (a) with respect to any Pre-Closing Tax Period, (b)
attributable to the Section 338(h)(10) Elections, (c) under Section 1374 of
the Code, or (d) as a result of a breach by the Sellers of any
representation, warranty or covenant contained in this Agreement,
(together, "PRE-CLOSING TAXES"); provided, however, that such indemnity
shall be made only to the extent Pre-Closing Taxes are in excess of the
reserve, if any, for such Tax Liability as reflected in the Financial
Statements and used in the computation of the Net Working Capital. In order
to apportion appropriately any income Taxes relating to any taxable year or
period that begins before and ends after the Closing Date, the Parties
hereto shall, to the extent permitted or not prohibited by applicable law,
elect with the relevant taxing authority, if required or necessary, to
terminate the taxable year of Target as of the Closing Date. In any case
where applicable law does not permit Target to treat such date as the end
of a taxable year or period, then whenever it is necessary to determine the
liability for income Taxes of Target, for a portion of a taxable year or
period, such determination shall (unless otherwise agreed to in writing by
Buyer and the Sellers) be determined in accordance with the provisions of
Section 6(g)(iv) of this Agreement.
(vii) Each of Sellers (1) shall retain or assume and be
liable for all past, present, and future obligations and liabilities of
Target and any Commonly Controlled Entity (as defined in SECTION
4(S)(III)(1)) arising out of any law or contract with respect to (i) each
Employee Benefit Plan and all associated contracts and documents, (ii) each
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employee benefit plan (as such term is described in Section 3(3) of ERISA,
including, but not limited to, any such employee benefit plan that is
exempt from some or all of the provisions of ERISA), which is or was
sponsored, maintained, or contributed to by any Commonly Controlled Entity
either presently or at any time since 1974 ("CONTROLLED GROUP PLAN") and
all associated contracts and documents, and (iii) all employees and former
employees of Target or any Commonly Controlled Entity in connection with
any event commencing, occurring, or failing to occur on or prior to the
Closing Date and (2) agrees to indemnify Buyer and its affiliates
(including Target after it becomes an affiliate) and their directors,
officers, and employees with respect to any loss, damages, liability,
assessment, withdrawal liability assessment, funding deficiency assessment,
taxes, interest, penalties, judgments, employee benefit claims, and PBGC
liability assessments (including any and all costs and fees related to
proceedings establishing such loss, damages, liability, assessment,
withdrawal liability assessment, funding deficiency assessment, taxes,
interest, penalties, judgments, employee benefit claims, or PBGC liability
assessment) arising out of any law or contract, with respect to each (i)
Employee Benefit Plan, (ii) Controlled Group Plan, and (iii) employee or
former employee of Target or any Commonly Controlled Entity [, in each case
with respect to periods prior to the Closing Date]. Notwithstanding any
other provision of this SECTION 8(B) or elsewhere in this Agreement to the
contrary, the indemnity provided in this SECTION 8(B)(VII) shall survive
this Agreement and shall last for as long as the applicable statute of
limitations with respect to the claim resulting in such loss, damages,
liability, assessment, withdrawal liability assessment, funding deficiency
assessment, taxes, interest, penalties, judgments, employee benefit claims,
or PBGC liability assessments and all associated costs and fees and shall
be in addition to any other indemnities provided in this SECTION 8(B) or
elsewhere in this Agreement and shall not be subject to any restrictions,
conditions, or limitations imposed in this SECTION 8(B) or elsewhere in
this Agreement upon this indemnity or any such other indemnities.
(viii) Each of the Sellers agrees to indemnify Buyer from
and against the entirety of any Adverse Consequences Buyer or Target may
suffer resulting from, arising out of, relating to, or caused by Dialog
Software Inc.'s use or lease of Target's leasehold interest.
(ix) Subject to the limitations set forth in Section
8(b)(i)(B) and (C) above, each of the Sellers agrees to indemnify Buyer
from and against the entirety of any Adverse Consequences which Buyer or
Target may suffer resulting from, arising out of, relating to that certain
letter dated June 1, 1999 from Educational Testing Services requesting the
return of funds paid to Target.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS. In the
event Buyer breaches any of its representations, warranties or covenants
contained herein, and provided that any of the Sellers makes a written claim for
indemnification against Buyer pursuant to SECTION 10(H) below within the
applicable survival period, then Buyer agrees to indemnify each of the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences
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the Seller may suffer after the end of the applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach.
(d) MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "INDEMNIFIED PARTY") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "INDEMNIFYING
PARTY") under this SECTION 8, then the Indemnified Party shall notify each
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within thirty (30)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (A) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (B) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party reasonably concludes that the
counsel the Indemnifying Party has selected has a conflict of interest), (C) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (D) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event no Indemnifying Party
notifies the Indemnified Party within thirty (30) days after the Indemnified
Party has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, the Indemnified Party may defend against, or enter
into any settlement with respect to, the matter in any manner it reasonably may
deem appropriate. At any time after commencement of any such action, any
Indemnifying Party may request an Indemnified Party to accept a bona fide offer
from the other parties to the action for a monetary settlement payable solely by
such Indemnifying Party (which does not burden or restrict the Indemnified Party
nor otherwise prejudice him or her) whereupon such action shall be taken unless
the Indemnified Party determines that the dispute should be continued. In such
event, the Indemnifying Party shall be liable for indemnity hereunder only to
the extent of the lesser of (i) the amount of the settlement offer or (ii) the
amount for which the Indemnified Party may be liable with respect to such
action. In addition, the Party controlling the defense of any third party claim
shall deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
(e) DETERMINATION OF LOSS. The amount of indemnification to be paid by
any Party to another Party hereto shall be reduced by any insurance proceeds
received, including both defense and indemnification costs, with respect to any
insurance policy maintained by Target
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STOCK PURCHASE AGREEMENT
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providing coverage with respect to any of the Adverse Consequences. All
indemnification payments under this SECTION 8 shall be deemed adjustments to the
Purchase Price.
(f) EXCLUSIVE REMEDY. Buyer and the Sellers acknowledge and agree that
the foregoing indemnification provisions in this SECTION 8 shall be the
exclusive remedy of both Buyer and the Sellers for any breach of the
representations and warranties of the Parties.
(g) PAYMENT. In the event Buyer or such other Indemnified Party
becomes entitled to indemnity from the Sellers, the Indemnifying Parties shall
promptly pay to Buyer or such other Indemnified Party as may be entitled to
indemnity hereunder in cash the amount of any Adverse Consequences to which
Buyer or such Indemnified Party may become entitled to by reason of the
provisions of this Agreement.
(h) TAX DISPUTES. In the event that any dispute arises between
Target and the Internal Revenue Service or any state Tax authority relating to
an issue in which the Sellers have agreed to indemnify Buyer, the Sellers shall
have the right to associate with Buyer in the defense or settlement of any such
claims. Moreover, Buyer at all times shall act in good faith in order to
minimize the Tax liability as to issues in which the Sellers have agreed to
indemnify Buyer (so long as it does not adversely affect Target) and shall not
settle or compromise any claims without the consent of the Sellers, which
consent shall not be unreasonably withheld.
9. TERMINATION.
(a) TERMINATION OF Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event any of
the Sellers is in breach of any Material representation, warranty or
covenant contained in this Agreement in any Material respect, and the
Sellers may terminate this Agreement by giving written notice to Buyer at
any time prior to the Closing in the event Buyer is in breach of any
Material representation, warranty, or covenant contained in this Agreement
in any Material respect;
(iii) Buyer may terminate this agreement in accordance with
SECTION 4;
(iv) Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing shall
not have occurred on or before March 31, 2000 by reason of the failure of
any condition precedent under SECTION 7(A) hereof (unless the failure
results primarily from Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); or
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(v) The Sellers may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing if the Closing
shall not have occurred on or before March 31, 2000 by reason of the
failure of any condition precedent under SECTION 7(B) hereof (unless the
failure results primarily from any of the Sellers themselves breaching any
representation, warranty, or covenant contained in this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 9(A) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party. Upon
termination, Buyer shall return or destroy all confidential documents, notes or
other written memoranda regarding Target delivered in connection with the
transactions contemplated hereby within five (5) business days thereafter.
10. MISCELLANEOUS.
(a) THE SELLERS.
(i) When any particular Seller (as opposed to the Sellers as
a group) makes a representation, warranty, or covenant herein, then that
representation, warranty, or covenant will be referred to herein as the
"Several" obligation of such Sellers. This means that the particular Seller
making the representation, warranty, or covenant will be solely responsible
for any Adverse Consequences Buyer may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any breach thereof. The
covenants of each of Sellers in Sections 2(A) and 6(h) above concerning the
sale of his Shares to Buyer and the representations and warranties of each
of the Sellers in Section 3(a) above concerning the transaction are the
Several obligations of the Sellers.
(ii) When the Sellers as a group make a representation,
warranty, or covenant herein, then that representation, warranty, or
covenant will be referred to herein as the "JOINT AND SEVERAL" obligation
of the Sellers. This means that each Seller will be responsible for the
entirety of any Adverse Consequences Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any breach
thereof subject, however, to the limitation or liabilities set forth in
Section 8 hereof. The representations and warranties of the Sellers in
SECTION 4 above concerning Target are examples of Joint and Several
obligations.
(b) PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of Buyer and the Sellers;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by law or regulation (in which case the disclosing Party
will advise the other Parties prior to making the disclosure).
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
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STOCK PURCHASE AGREEMENT
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(d) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof; provided, however, that if the Closing does not occur, the
Confidentiality Agreement by and between Buyer and Target shall survive pursuant
to its terms.
(e) SUCCESSION AND Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and the Sellers; provided, however, that Buyer may
assign any or all of its rights and interests hereunder to a wholly-owned
subsidiary of Buyer (in any or all of which cases Buyer nonetheless shall remain
liable and responsible for the performance of all of its obligations hereunder).
(f) FACSIMILE/COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more Parties
hereto, and an executed copy of this Agreement may be delivered by one or more
Parties hereto by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such Party can be
seen, and such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any Party hereto, all Parties
hereto agree to execute an original of this Agreement and provide such
requesting Party with a full set of original signature pages for each of the
Parties hereto other than the requesting Party within two (2) days of the
original execution date hereof.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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If to a Seller:
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
at the address shown for such Seller on Section 4(b) of the
Disclosure Schedule.
if to Buyer:
Cimnet, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone:..(▇▇▇)▇▇▇-▇▇▇▇
Facsimile:..(▇▇▇)▇▇▇-▇▇▇▇
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Delaware.
(j) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and the Sellers. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgement of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
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provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) EXPENSES. Each of Buyer and the Sellers will bear his or its own
costs and expenses (including legal and investment banking fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. None of the Sellers' costs, fees and expenses related to the transaction
contemplated by this Agreement shall be charged to or paid by Target.
(m) CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any statute or law of any Governmental Authority shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has breached
any representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in SECTION 10(P) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) SUBMISSION TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF BUYER AND SELLERS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. ANY LEGAL ACTION OR
PROCEEDING AGAINST ANY SELLER WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT AND
ENFORCED IN A FEDERAL OR STATE COURT LOCATED IN THE SOUTHERN DISTRICT OF NEW
YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE SELLERS HEREBY
IRREVOCABLY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY,
IRREVOCABLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
SELLERS AGREE THAT A JUDGMENT, AFTER
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STOCK PURCHASE AGREEMENT
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EXHAUSTION OF ALL AVAILABLE APPEALS, IN ANY SUCH ACTION OR PROCEEDINGS SHALL BE
CONCLUSIVE AND BINDING UPON THE SELLERS, AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY A SUIT UPON SUCH JUDGMENT, A CERTIFIED COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE JUDGMENT.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
CIMNET, INC.
By:/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name:▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title:Chief Executive Officer
TARGET:
REALTIME INFORMATION SYSTEMS
PTY LIMITED
BY:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director
SELLERS:
/s/ ▇▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (a/k/a ▇▇▇▇▇▇ ▇▇▇▇▇)
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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ANNEX I
PURCHASE PRICE ALLOCATION
Number of Number of Amount of
Name of Seller Target Shares Cimnet Shares Cash Portion
-------------- ------------- ------------- ------------
▇▇▇ ▇▇▇▇▇ 56 571,550 $4,780
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 50 510,312 $4,280
▇▇▇▇▇ ▇▇▇▇▇ 11 112,269 $ 940
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STOCK PURCHASE AGREEMENT