EXHIBIT 10.6
CONTRIBUTION AGREEMENT
between
MANHATTAN ASSOCIATES, LLC
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
TABLE OF CONTENTS
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1. EXCHANGE OF CAPITAL STOCK; CLOSING.........................................................................1
1.1 Exchange of Stock........................................................................................1
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1.2 Contribution Consideration...............................................................................1
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1.3 Closing..................................................................................................1
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1.4 Further Assurances.......................................................................................1
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1.5 Closing Documents........................................................................................2
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2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER..............................................................3
2.1 Due Organization.........................................................................................3
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2.2 Authorization............................................................................................3
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2.3 Capital Stock Of The Company.............................................................................4
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2.4 Transactions In Capital Stock............................................................................4
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2.5 Subsidiaries.............................................................................................4
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2.6 Corporate History........................................................................................4
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2.7 Financial Statements.....................................................................................4
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2.8 Liabilities And Obligations..............................................................................5
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2.9 Approvals................................................................................................5
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2.10 Accounts and Notes Receivable............................................................................5
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2.11 Intellectual Property....................................................................................5
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2.12 Permits..................................................................................................8
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2.13 Real And Personal Property...............................................................................8
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2.14 Material Contracts And Commitments.......................................................................8
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2.15 Insurance................................................................................................9
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2.16 Employees, Consultants, Etc..............................................................................9
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2.17 Benefit Plans; Erisa Compliance.........................................................................10
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2.18 Conformity With Law; Pending Or Threatened Claims.......................................................13
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2.19 Taxes...................................................................................................14
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2.20 Completeness............................................................................................15
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2.21 Government Contracts....................................................................................15
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2.22 Absence of Changes......................................................................................15
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2.23 Deposit Accounts; Powers of Attorney....................................................................16
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2.23 Relations with Governments..............................................................................16
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2.25 Conflicts of Interest...................................................................................16
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2.26 Environmental Matters...................................................................................17
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2.27 Disclosure..............................................................................................17
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2.28 Restrictions on Transfer of Purchaser shares under Securities Laws and Investment Representations.......17
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3. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................................................19
3.1 Organization and Standing...............................................................................19
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3.2 Authorization and Binding Obligation....................................................................19
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3.3 No Conflicts............................................................................................19
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3.4 Approvals...............................................................................................20
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3.5 Brokerage...............................................................................................20
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3.6 Litigation and Administrative Proceedings...............................................................20
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3.7 Capitalization of Purchaser; Purchaser Shares to be received by Stockholder.............................20
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3.8 Disclosure..............................................................................................20
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3.9 Financial Statements....................................................................................20
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3.10 Liabilities and Obligations.............................................................................21
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3.11 Taxes...................................................................................................21
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3.12 Lock-up Agreement.......................................................................................22
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3.13 Purchaser Shares........................................................................................22
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4. CERTAIN COVENANTS OF THE PARTIES..........................................................................22
4.1 Nondisclosure of Confidential Information...............................................................22
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4.2 Release by Stockholder..................................................................................23
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4.3 Release of Stockholder Guarantees.......................................................................23
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4.4 Option of Stockholder to require that Purchaser repurchase its Purchaser Shares.........................23
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4.5 Execution of Subscription Agreement.....................................................................24
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5. INDEMNIFICATION...........................................................................................24
5.1 Survival................................................................................................24
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5.2 Indemnification by Stockholder..........................................................................24
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5.3 Indemnification by Purchaser............................................................................24
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5.4 Tax Indemnification.....................................................................................25
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5.5 Limitation on Liability.................................................................................26
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5.6 Indemnification Procedures..............................................................................26
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5.7 Tax Matters.............................................................................................27
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5.8 Limitations on Indemnity Obligations....................................................................28
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6. NONCOMPETITION............................................................................................29
6.1 Prohibited Activities...................................................................................29
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6.2 Independent Covenant....................................................................................30
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6.3 Materiality.............................................................................................30
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7. CERTAIN DEFINITIONS.......................................................................................30
8. GENERAL...................................................................................................32
8.1 Cooperation.............................................................................................32
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8.2 Successors and Assigns..................................................................................32
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8.3 Entire Agreement........................................................................................32
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8.4 Counterparts............................................................................................32
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8.5 Brokers and Agents......................................................................................32
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8.6 Payment of Expenses.....................................................................................32
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8.7 Notices.................................................................................................33
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8.8 Governing Law...........................................................................................34
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8.9 Exercise of Rights and Remedies.........................................................................34
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8.10 Time....................................................................................................34
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8.11 Reformation and Severability............................................................................34
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EXHIBITS:
Exhibit A Employment Agreement
Exhibit B Amendment to Purchaser's Operating Agreement
Exhibit C List of Resigning Officers and Directors of the Company
Exhibit D Lock-Up Agreement
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CONTRIBUTION AGREEMENT
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THIS CONTRIBUTION AGREEMENT (the "Agreement") is made as of February
__, 1998, among MANHATTAN ASSOCIATES, LLC, a Georgia limited liability company
("Purchaser") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., an individual resident of the State of
North Carolina ("Stockholder").
WHEREAS, Stockholder desires to exchange his stock comprising all of
the issued and outstanding shares (the "Company Stock") of capital stock of
Performance Analysis Corporation, a North Carolina corporation (the "Company")
for Purchaser Shares (as defined below) and Cash Consideration (as defined
below) on the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. EXCHANGE OF CAPITAL STOCK; CLOSING
1.1 EXCHANGE OF STOCK. On the basis of the representations,
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warranties, covenants and agreements set forth herein, at the Closing (as
defined in Section 1.3 below) Purchaser will purchase from Stockholder, and
Stockholder will sell, convey and assign to Purchaser all of the Company Stock,
which Company Stock constitutes all of the issued and outstanding capital stock
of the Company.
1.2 CONTRIBUTION CONSIDERATION. In consideration of the exchange of
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the Company Stock and the representations, warranties, covenants and agreements
of Stockholder set forth herein, Purchaser (a) is paying to Stockholder (i) cash
equal to the sum of $2,200,000 ("Cash Consideration"), and (b) is issuing and
delivering to Stockholder 53,333 Shares of Purchaser (the "Purchaser Shares")
under Purchaser's Amended and Restated Operating Agreement dated as of February
__, 1998, as amended. The consideration provided for in this Section 1.2 is
referred to herein collectively as the "Contribution Consideration".
1.3 CLOSING. The closing of the purchase and sale of the Company
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Stock (the "Closing") is being held contemporaneously with the execution and
delivery of this Agreement at the offices of Pinna, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.,
Suite 200, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 2:00 p.m. local
time, on the date hereof, or such other place and such other time as the parties
shall agree. The date of the Closing is referred to as the "Closing Date."
1.4 FURTHER ASSURANCES. Each of the parties hereto will cooperate
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with the other and execute and deliver to the other such other instruments and
documents and take such other actions as may be reasonably requested from time
to time by any party hereto as necessary to carry out, evidence and confirm the
intended purposes of this Agreement.
1.5 CLOSING DOCUMENTS. At the Closing, the parties shall have
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delivered to each other the following additional closing documents and
agreements, and taken the following additional actions:
(a) Documents and agreements delivered by or on behalf of
Stockholder to Purchaser:
(i) an Employment Agreement among the Company, Purchaser
and Stockholder in the form attached hereto as
Exhibit A (the "Stockholder Employment Agreement");
(ii) Certificate of Good Standing and Existence of the
Company issued by the Secretary of State of the State
of North Carolina;
(iii) stock certificates of the Company representing all
the issued and outstanding shares of the Company,
accompanied by duly executed stock powers
transferring ownership thereof to Purchaser;
(iv) an amendment to Purchaser's Amended and Restated
Operating Agreement, dated as of February __, 1998,
as amended to date (the "Operating Agreement"), in
the form of Exhibit B, duly executed by Stockholder,
pursuant to which Stockholder agrees to be a party to
the Operating Agreement as an "American Group
Shareholder";
(v) letters of resignation effective at the Closing
executed by officers and directors of the Company
listed on Exhibit C;
(vi) lock-up agreement executed by Stockholder in the form
required by the underwriters of Purchaser's proposed
initial public offering in the form of Exhibit D (the
"Lock-Up Agreement"); and
(vii) resignation of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as an officer and
director of Company;
(viii) certificate of Stockholder attesting to the fact that
all options granted to Stockholder for shares of the
Company Stock have expired; and
(ix) updated shareholder and director minutes ratifying
prior acts of Company as required by the Bylaws of
the Company.
(b) Documents and agreements delivered by or on behalf of
Purchaser to Stockholder, and other actions taken by Purchaser:
(i) a Good Standing and Existence Certificate relating to
Purchaser from the State of Georgia;
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(ii) Secretary's Certificate attesting to the incumbency
of the officers executing this Agreement, the
corporate authorization of the transaction and the
other certificates and agreements delivered by
Purchaser at the Closing;
(iii) stock certificates representing the Purchaser Shares;
(iv) the Stockholder Employment Agreement duly executed by
Purchaser;
(v) the Lock-Up Agreement duly executed by Purchaser; and
(vi) payment of the Cash Consideration.
2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants that all of the following
representations and warranties are true as of the date of this Agreement and on
the Closing Date:
2.1 DUE ORGANIZATION. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of North Carolina and is
duly authorized, qualified and licensed under North Carolina law to own its
properties and assets and to carry on its business in North Carolina. True and
correct copies of the Articles of Incorporation (certified by the Secretary of
State of the State of North Carolina) and Bylaws (certified by the Secretary of
the Company), as each is amended, of the Company are attached to Schedule 2.1.
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Except as disclosed on Schedule 2.1, Stockholder has been the sole director of
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the Company since its organization. The stock records and minute books of the
Company, as heretofore made available to Purchaser, are, to Stockholder's
Knowledge, correct and complete (in the case of the minute books, in all
material respects).
2.2 AUTHORIZATION. Stockholder has the full legal right, power and
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authority to enter into this Agreement. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
and thereby do not and will not (a) violate or conflict with any provision of
the Company's Articles of Incorporation or Bylaws, (b) to Stockholder's
Knowledge, violate or conflict with any provision of, or be an event that is (or
with the passage of time will result in) a violation of, or result in the
modification, cancellation or acceleration of (whether after the giving of
notice or lapse of time or both), any obligation under, or result in the
imposition or creation of any Encumbrances (hereinafter defined) upon any of the
assets of the Company or Stockholder pursuant to any Contract (as defined in
Section 2.14) or any mortgage, lien or lease to which Stockholder is a party or
by which the Company or Stockholder is bound, or (c) to Stockholder's Knowledge,
violate or conflict with any Legal Requirement applicable to the Company or
Stockholder or any of its or his properties or assets or any other material
restriction of any kind or character to which it or he is subject. This
Agreement has been duly executed and delivered by Stockholder, and at the
Closing the Stockholder Employment Agreement and the Lock-Up Agreement will be
duly executed and delivered by Stockholder, and, assuming the due execution and
delivery hereof and thereof by Purchaser, this
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Agreement constitutes, and at the Closing the Stockholder Employment Agreement
and the Lock-Up Agreement will each constitute, the legal, valid and binding
obligation of Stockholder, enforceable against Stockholder in accordance with
its terms, except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally and by the exercise of judicial discretion in accordance with
equitable principles.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
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Company consists solely of 100,000 shares of voting common stock of which 1,000
are issued. All of the issued and outstanding shares of the capital stock of the
Company are owned by Stockholder free and clear of Encumbrances. The Company
Stock has been duly authorized and validly issued, is fully paid and
nonassessable, and to Stockholder's Knowledge, such shares were offered, issued,
sold and delivered by the Company in compliance with all applicable state and
federal securities laws. The Company Stock was not issued in violation of the
preemptive rights of any past or present stockholder. The Company's stock record
book, as heretofore made available to Purchaser, is correct and complete in all
respects material to Purchaser.
2.4 TRANSACTIONS IN CAPITAL STOCK. No right of first refusal, option,
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warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any of its authorized but unissued capital stock. In
addition, there are no (a) outstanding securities or obligations that are
convertible into or exchangeable for any shares of the capital stock or other
equity securities of the Company, or (b) contracts, arrangements or commitments,
written or otherwise, under which the Company is or may become bound to sell or
otherwise issue any shares of its capital stock or any other equity securities.
Without limiting the generality of the foregoing, there is no basis upon which
any person (other than Stockholder) may claim to be in any way the record or
beneficial owner of, or to be entitled to acquire (of record or beneficially),
any shares of the capital stock or other equity securities of the Company, and
no person has made or threatened to make, or, to the Company's and Stockholder's
Knowledge, will in the future make, any such claim. In addition, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. There has been no transaction or
action taken with respect to the equity ownership of the Company in
contemplation of the transaction described in this Agreement.
2.5 SUBSIDIARIES. The Company does not presently own, of record or
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beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. The Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.6 CORPORATE HISTORY. The Company has no corporate predecessors and
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has not acquired from any other entity material assets in transactions other
than in the ordinary course of business. The Company has not been a subsidiary
or division of another corporation, and has not been previously acquired and
divested by another corporation.
2.7 FINANCIAL STATEMENTS. Copies of the following financial
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statements (the "Financial Statements") of the Company are attached hereto as
Schedule 2.7: (a) the Company's balance sheets
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determined on a cash method basis of accounting as of December 31, 1997
(hereinafter referred to as the "Balance Sheet Date"); (b) the Company's audited
balance sheet determined as of the Balance Sheet Date (hereinafter referred to
as the "Balance Sheet"); and (c) statements of earnings and retained earnings
for the year ended on the Balance Sheet Date. The Company has positive working
capital as of the Closing Date.
2.8 LIABILITIES AND OBLIGATIONS. Except (i) as set forth or provided
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for in the Balance Sheet, (ii) as set forth on Schedule 2.8, or (iii) for
Permitted Liens, to Stockholder's Knowledge, the Company has no material
liabilities or obligations of any nature (whether, due or to become due,
absolute, accrued, contingent or otherwise, and, to Stockholder's Knowledge,
whether or not determined or determinable) and there is no existing condition,
situation or set of circumstances which could result in such a liability or
obligation, except for liabilities or obligations under any Contract, but only
so long as no default by the Company exists under any such Contract.
2.9 APPROVALS. To Stockholder's Knowledge, No authorization, consent
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or approval of, or registration or filing with, any governmental authority or
any other person is or was required to be, and has not been, obtained or made by
the Company or Stockholder in connection with the execution, delivery or
performance of this Agreement.
2.10 ACCOUNTS AND NOTES RECEIVABLE. Schedule 2.10 sets forth an
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accurate list of the accounts and notes receivable of the Company as of December
31, 1997, including receivables from and advances to employees and Stockholder
and amounts that are not reflected in the Balance Sheet. Such list includes an
aging of all accounts and notes receivable showing amounts due in 30 day aging
categories. Unless paid prior to the Closing Date, to Stockholder's Knowledge,
the accounts receivable are or will be as of the Closing Date collectible net of
the respective reserves shown on the Balance Sheet.
2.11 INTELLECTUAL PROPERTY AND TECHNOLOGY.
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(a) No registrations of patents, copyrights, trademarks, service
marks, trade names, and any other Intellectual Property (collectively
"Registrations") have been issued to Company; no Registrations of Company are
pending; no Registrations of Company have been withdrawn or abandoned; and no
Registrations of Company have lapsed.
(b) Schedule 2.11(b) sets forth an accurate and complete list and
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description of all marks used by the Company and the nature of Company's rights;
if any, associated therewith.
(c) To Stockholder's Knowledge, in the case of any commercially
available shrink-wrap or click-wrap software programs (such as Lotus 1-2-3 or
Microsoft Word), the Company has not made and is not using any unauthorized
copies of any such software programs and, to Stockholder's Knowledge, none of
the employees, agents or representatives of the Company have made or are using
any such unauthorized copies, except as would not have a Material Adverse
Effect. The shrink-wrap and click-wrap software programs used by the Company are
hereafter collectively and individually referred to as "Shrink Wrap Software."
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(d) (i) Schedule 2.11(d)(i) is an accurate and complete list
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and description of all Technology that Company developed ("Owned Technology").
To Stockholder's Knowledge, Company owns the Intellectual Property attributable
to the Owned Technology and has the right to license the use of the Owned
Technology to any person, firm or corporation. To Stockholder's Knowledge, the
Owned Technology and the Intellectual Property attributable thereto are free and
clear of any liens and security interests.
(ii) Schedule 2.11(d)(ii) is an accurate and complete list
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and description of all Technology, other than the Owned Technology and Shrink
Wrap Software, that is either (x) offered or provided to Company's customers, or
(y) used by Company in connection with offering or providing the Owned
Technology to Company's customers (collectively, the "Third Party Technology").
(iii) Schedule 2.11(d)(i) and Schedule 2.11(d)(ii) includes the
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name, product description, and language in which the Technology is written and
the type of hardware platform(s) on which the Technology runs.
(iv) Owned Technology and Third Party Technology are hereafter
referred to collectively as "Company's Technology."
(v) To the best of Stockholder's knowledge, the Owned
Technology has been developed by Company's employees and ▇▇▇▇▇ ▇▇▇▇▇▇▇.
(e) Schedule 2.11(e) identifies each license agreement or other
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written or oral agreement or permission which Company has granted to any third
party with respect to any of the Company's Technology and the Intellectual
Property therein ("License Agreement"). To Stockholder's Knowledge, the
Company's Technology has only been provided to those third parties indicated in
Schedule 2.11(e).
(f) Schedule 2.11(f) identifies each agreement with a third party
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authorizing Company to use, sublicense and/or distribute the Third Party
Technology ("Third Party License Agreement").
(g) Set forth in Schedule 2.11(g) is the source code escrow
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agreement entered into by Company relating to the Company's Technology.
(h) Company has not received any notice of default under any of the
License Agreements or Third Party License Agreements and, to Stockholder's
Knowledge, no notice of default has been threatened. To Stockholder's Knowledge,
the License Agreements and Third Party License Agreements are in full force and
effect.
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(i) No Technology other than the Owned Technology, Third Party
Technology and Shrink Wrap Software is required to operate Company's business as
currently conducted and as contemplated by Company's existing product and
service plans.
(j) To Stockholder's Knowledge, none of the Intellectual Property
listed on Schedule 2.11(b) and the Company's Technology, used by or through
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Company has violated or infringed upon, or is violating or infringing upon, any
software or intellectual property right of any person.
(k) To Stockholder's Knowledge, none of the Intellectual Property
listed on Schedule 2.11(b) and none of the Company's Technology are owned by or
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registered in the name of Stockholder, any current or former owner, or
shareholder, partner, director, executive, officer, employee, salesman, agent,
customer, contractor or representative of Company nor to Stockholder's
knowledge, does any such person have any interest therein or right thereto,
including, but not limited to, the right to royalty payments. Company has
granted no third party any exclusive rights related to any Intellectual Property
listed on Schedule 2.11(b) or Company's Technology.
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(l) To Stockholder's Knowledge, no former employer of any employee or
consultant of Company has made or has threatened a claim against Company or that
Company or such employee or consultant is misappropriating or violating the
Intellectual Property of such former employer.
(m) Except as noted in Schedule 2.11(m), to Stockholder's knowledge,
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the Owned Technology software is "Millennium Compliant" after having conducted a
reasonable investigation of the Owned Technology. For the purposes of this
Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing processes
of the Owned Technology software (collectively, "Processes") perform in an
accurate manner regardless of the date in time on which the Processes are
actually performed and regardless of the date input to the Owned Technology
software prior to January 1, 2010, and whether or not the dates are affected by
leap years;
(ii) The Owned Technology software accept, store, sort, extract,
sequence, and otherwise manipulate date inputs and date values, and return and
display date values, in an accurate manner regardless of the dates used prior to
January 1, 2010;
(iii) The Owned Technology software will function without
interruptions caused by the date in time on which the Processes are actually
performed or by the date input to the Owned Technology software and Third Party
Technology software prior to January 1, 2010;
(iv) The Owned Technology software accepts and responds to four
(4) digit year date input in a manner that resolves any ambiguities as to the
century in an accurate manner; and
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(v) The Owned Technology software display, print, and provide
electronic output of date information in ways that are unambiguous as to the
determination of the century.
(n) To Stockholder's Knowledge, no employee or independent contractor
of Company has disclosed the source code of Company's Technology to any third
party other than Company's escrow agent indicated in Schedule 2.11(g).
2.12 PERMITS. To Stockholder's Knowledge, The Company owns or
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possesses all franchises, licenses, permits, consents, approvals and
authorizations (collectively herein referred to as "Permits"), of any public or
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other Government Authority which are necessary for the conduct of its business
as currently conducted. Each of the foregoing is in full force and effect, and
the Company is in compliance with all of its obligations with respect thereto,
except where the failure to be in compliance would not individually or in the
aggregate, have a Material Adverse Effect; and no event has occurred which
permits, or upon giving the notice or lapse of time or otherwise would permit,
revocation or termination of any of the foregoing.
Stockholder has delivered to Purchaser on Schedule 2.12 a complete and
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correct list of all Permits held by the Company.
2.13 REAL AND PERSONAL PROPERTY.
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(a) Schedule 2.13(a) contains an accurate list of all
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leaseholds and other interests of every kind and description in real
property owned by the Company and leases or licenses or other rights to
possession thereof. The Company does not own, nor has it ever owned,
any real property.
(b) Schedule 2.13(b) contains an accurate list of all items
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of tangible personal property of every kind or description having a
cost or fair market value in excess of $2,000 owned or held by the
Company (the "Fixed Assets"). Stockholder makes no representation or
warranty, express or implied, with respect to the condition or
suitability of Fixed Assets, and such Fixed Assets are being conveyed
"as is".
(c) The Company has good and marketable title to, or holds by
valid lease or license the Fixed Assets, in each case free and clear of
all Encumbrances except Permitted Liens. The Company makes no
representation or warranty regarding the validity of the lessor's title
to any real properties in which the Company has only a leasehold
interest.
2.14 MATERIAL CONTRACTS AND COMMITMENTS. Except as provided in
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Section 2.8, Section 2.11(e), and Schedule 2.13(a), the Company has delivered to
Purchaser or its representatives, true and complete copies of all written
contracts, commitments and other agreements to which the Company is a party or
by which it or any of its properties is bound involving an annual commitment or
annual payment by any party thereto of more than $5,000 individually, or which
have a fixed term extending
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more than 12 months from the date hereof and which involve a total commitment or
payment by any party thereto of more than $10,000 (including, but not limited
to, joint venture or partnership agreements, contracts with any customers,
suppliers, employees, labor organizations, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, leases, licenses, options to purchase
real or personal property, liens, pledges or other security agreements) (herein
collectively referred to as the "Contracts"). Attached hereto as Schedule 2.14
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is a list of the Contracts. To Stockholder's Knowledge, the Company has complied
in all material respects with all commitments and obligations pertaining to any
such Contract, and is not in material default under any such Contract and no
notice of default has been received, nor to Stockholder's Knowledge is there any
default on the part of any other party to such Contract nor does the Company
have any reason to believe any such party will terminate any such contract. The
Company has no notice or knowledge that such contract will be terminated or
materially modified by virtue of the consummation of the transaction
contemplated by this Agreement. The Company is not a party to any contract or
agreement which, singly or in the aggregate, materially and adversely affects
the business, operations, properties, assets or condition (financial or
otherwise) of the Company.
2.15 INSURANCE. Schedule 2.15 sets forth an accurate list of all
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insurance policies carried by the Company. To Stockholder's Knowledge there have
been no insurance (excluding, health insurance) loss runs or worker's
compensation claims received for the past three (3) policy years. Stockholder
has delivered to Purchaser complete copies of all policies currently in effect.
Such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Closing Date. The Company's insurance has
never been canceled and the Company has never been denied coverage.
2.16 EMPLOYEES, CONSULTANTS, ETC.
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(a) Schedule 2.16 sets forth an accurate and complete list of
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(i) all officers and directors of the Company, and (ii) all employees
of the Company, setting forth in each case the rate of compensation
(and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each director, officer and employee.
There are no consultants (except for professional services rendered by
accountants and attorneys), independent contractors and other agents
currently performing services to the Company.
(b) Schedule 2.16 also sets forth an accurate and complete
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schedule showing all employment agreements and any other agreements to
which the Company is a party or by which it is bound, containing terms
providing for (i) compensation or other benefits or consequences upon
the happening of a change of control of the Company, and (ii) deferred
compensation; together in each case with copies of such plans,
agreements and any trusts related thereto, and classifications of
employees covered thereby.
(c) The Company has fully complied with the verification
requirements and the recordkeeping requirements of the Immigration
Reform and Control Act of 1986 ("IRCA"); to the best of Stockholder'
Knowledge, the information and documents on which the Company
9
relied in complying with IRCA are true and correct; and there have not
been any discrimination complaints filed against the Company pursuant
to IRCA.
(d) No employees of the Company are represented by any labor
union or covered by any collective bargaining agreement with respect to
such employees' employment with the Company nor, to the best of
Stockholder's Knowledge, is any campaign to establish such
representation in progress.
(e) The Company has not received or been notified of any
complaint by any employees, applicant, union, or other party of any
discrimination or other conduct forbidden by law.
(f) To Stockholder's Knowledge, the Company has filed all
required reports and information that are due on or before the Closing
Date and otherwise has complied with all applicable regulatory
requirements within the jurisdiction of the United States Equal
Employment Opportunity Commission, United States Department of Labor
and state and local human rights and/or civil rights agencies.
(g) The Company has not received any notice from any of its
employees to terminate his or her employment or to seek a modification
in the terms of his or her employment.
2.17 BENEFIT PLANS; ERISA COMPLIANCE.
-------------------------------
(a) Schedule 2.17 contains a list of all "employee pension
-------------
benefit plans" (as defined in Section 3(2) of Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred
to in this Section 2.17 as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA) (sometimes referred to in
this Section 2.17 as "Welfare Plans") and all other Benefit Plans, as
defined below, currently maintained in whole or in part, contributed
to, or required to be contributed to by the Company for the benefit of
any present or former officer, employee or director of the Company. For
purposes of this Agreement, the term "Benefit Plan" shall mean any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical, dependent care,
cafeteria, employee assistance, scholarship or other plan, program,
arrangement or understanding (whether or not legally binding)
maintained in whole or in part, contributed to, or required to be
contributed to by the Company for the benefit of any present or former
officer, employee or director of the Company which is not a Pension
Plan or Welfare Plan. The Company has delivered to Purchaser true,
complete and correct copies of (i) each Pension Plan, Welfare Plan and
Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof) and all amendments (none of which amendments will
materially increase the costs of the plan), (ii) the three annual
reports on Form 5500 most recently filed with the Internal Revenue
Service ("IRS") with respect to each Pension Plan or Welfare Plan (if
any such report was required), (iii) the most
10
recent IRS determination letter request for each Pension Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") and all rulings or determinations
concerning such Pension Plan requested of the IRS subsequent to the
date of that letter, (iv) the most recent actuarial report for each
Pension Plan and Welfare Plan for which an actuarial report is required
by ERISA, (v) the most recent summary plan description for each Pension
Plan and Welfare Plan for which such summary plan description is
required by ERISA and each summary of material modifications prepared,
as required by ERISA, after the last summary plan description, (vi)
each trust agreement and/or group annuity contract relating to any
Benefit Plan and (vii) all other information reasonably requested by
Purchaser.
(b) Each Pension Plan maintained and each pension plan formerly
maintained that is or was intended to be qualified under Section 401(a)
of the Code has been the subject of a determination letter from the IRS
to the effect that such plan is qualified under Section 401(a) of the
Code or can still be submitted in a timely manner to the IRS for such a
letter, and no such determination letter has been revoked nor has
revocation of any such letter been threatened, nor has any such plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs, and all amendments
required to be adopted before the Closing Date for any such Pension
Plan to continue to be so qualified have been or will be duly and
timely adopted; provided however, that to the extent that this
representation applies to terminated pension plans, this representation
refers to the qualified status of any such plan through the time of its
termination. The Company has paid all premiums (including any
applicable interest, charges and penalties for late payment) due the
Pension Benefit Guaranty Corporation ("PBGC") with respect to each such
Pension Plan for which premiums to the PBGC are required. No such
Pension Plan in whole or in part maintained by the Company has been
terminated or partially terminated under circumstances which would
result in liability to the PBGC.
(c) To Stockholder's Knowledge, each of the Pension Plan,
Welfare Plan and Benefit Plans sponsored by, and each of the benefit
plans formerly sponsored by, the Company: (i) has been in substantial
compliance with all reporting and disclosure requirements of (x) Part 1
or Subtitle B of Title I of ERISA, if applicable, or (y) other
applicable law, (ii) has had the appropriate required Form 5500 (or
equivalent annual report) filed timely with the appropriate
governmental entity for each year of its existence, (iii) has at all
times complied with the bonding requirements of (x) Section 412 of
ERISA, if applicable, or (y) other applicable law, (iv) has no issue
pending (other than the payment of benefits in the normal course) nor
any issue resolved adversely to the Company which may subject the
Company or any of its subsidiaries to the payment of material penalty,
interest, tax or other obligation, nor is there any basis for any
imposition of any such liability, and (v) has been maintained in all
respects in compliance with the applicable requirements of ERISA, the
Code and other applicable law not otherwise covered hereunder so as not
to give rise to any material liabilities to the Company.
11
(d) All voluntary employee benefit associations maintained by
the Company and intended to be exempt from federal income tax under
Section 501(c)(9) of the Code have been submitted to and approved as
exempt from federal income tax under Section 501(c)(9) of the Code by
the IRS, and nothing has occurred or failed to occur which would cause
the loss of such exemption.
(e) The execution of this Agreement or the consummation of the
transactions contemplated by this Agreement will not give rise to any,
or trigger any, change of control, severance or other similar
provisions in any Pension Plan, Welfare Plan or Benefit Plan. The
consummation of any transaction contemplated by this Agreement will not
result in any (i) payment (whether of severance pay or otherwise)
becoming due from the Company to any officer, employee, former employee
or director thereof or to the trustee under any "rabbi trust" or
similar arrangement; (ii) benefit under any Benefit Plan of the Company
being established or becoming accelerated, vested or payable; or (iii)
payment or series of payments by the Company, directly or indirectly,
to any person that would constitute a "parachute payment" within the
meaning of Section 280G of the Code.
(f) Except as may be required by federal or North Carolina law,
the Company provides no material post-retirement medical, health,
disability or death protection coverage nor contributes to or maintains
any employee welfare benefit plan which provides for medical, health,
disability or death benefit coverage following termination of
employment by any officer, director or employee except as is required
by Section 4980B(f) of the Code or other applicable statute, nor has it
made any representations, agreements, covenants or commitments to
provide that coverage.
(g) No Pension Plan or pension plan subject to Title IV of ERISA
(i) that the Company maintains or maintained, or (ii) to which the
Company is or was obligated to contribute, other than any such plan
that is or was a "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA) had, as of its most recent annual
valuation date, an "unfunded benefit liability" (as such term is
defined in Section 4001(a)(18) of ERISA), based on actuarial
assumptions which have been furnished to Purchaser. None of such plans
subject to Section 302 of ERISA has an "accumulated funding deficiency"
(as such term is defined in Section 302 of ERISA), whether or not
waived. None of the Company, any officer of the Company or any of the
Pension Plan or Welfare Plans (including the Pension Plans and prior
pension plans) which are subject to ERISA, or any trusts created
thereunder, or any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406, 407
or 408 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject the Company or any officer
of the Company to the tax or penalty on prohibited transactions imposed
by such Section 4975 of the Code or to any liability under Section
502(i) or (1) of ERISA which would have a Material Adverse Effect on
the Company. No "reportable event" (as that term is defined in Section
4043 of ERISA) with respect to which the 30-day notice requirement has
not been waived has occurred and is continuing with respect to any such
Pension Plan. The Company has not suffered a "complete withdrawal" or a
"partial withdrawal" (as such terms are defined in Section 4203 and
12
Section 4205, respectively, of ERISA) since the effective date of such
Sections 4203 and 4205 for which the Company has any material liability
outstanding .
(h) With respect to any Welfare Plan to Stockholder's Knowledge,
(i) each such Welfare Plan that is a group health plan, as such term is
defined in Section 5000(b)(1) of the Code, complies in all material
respects with any applicable requirements of Part 6 of Title I of ERISA
and Section 4980B(f) of the Code, and (ii) each such Welfare Plan
(including any such plan covering retirees or other former employees)
may be amended or terminated with respect to health benefits without
material liability to the Company on or at any time after the Closing
Date.
(i) All contributions required by law or by a collective
bargaining or other agreement to be made under the Pension Plan,
Welfare Plan or Benefit Plans with respect to all periods through
December 31, 1997 will have been made by such date by the Company. No
changes in contribution rates or benefit levels have been implemented
or negotiated (but not yet implemented), with respect to any Pension
Plan, Welfare Plan or Benefit Plan since the date on which the
information provided in the attached schedule has been provided, and no
such changes are scheduled to occur, except for any voluntary changes
made by participants.
(j) The Company does not have any material liability or
obligation for taxes, penalties, contributions, losses, claims,
damages, judgments, settlement costs, expenses, costs, or any other
liability or liabilities of any nature whatsoever arising out of or in
any manner relating to any Pension Plan, Welfare Plan or Benefit Plan
(including but not limited to employee benefit plans such as foreign
plans which are not subject to ERISA), that has been, or is,
contributed to by any entity, whether or not incorporated, which is
deemed to be under common control (as defined in Section 414 of the
Code), with the Company.
2.18 CONFORMITY WITH LAW; PENDING OR THREATENED CLAIMS.
-------------------------------------------------
(a) No Conflict. To the best of the Stockholder's Knowledge,
-----------
neither the execution and delivery of this Agreement, nor the
consummation of the transaction contemplated hereunder will (i) violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, or other restriction of any government, governmental
agency, or court to which the Company is subject or any provision of
the Bylaws of the Company, or (ii) conflict with, result in a breach of
or constitute a default under, or require any notice under any
agreement, contract, lease instrument, or other arrangement to which
the Company is a party by which is bound.
(b) Legal Proceedings and Threatened Claims. Unless otherwise
---------------------------------------
disclosed on Schedule 2.18(b), the Company is not (i) subject to any
----------------
outstanding injunction, judgment, order, decree, ruling or charge or
(ii) a party to or to Stockholder's Knowledge, threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator, including without limitation, any threat of condemnation or
13
the exercise of eminent domain. Neither the Company nor Stockholder has
any reason to believe that any such action, suit proceeding, hearing,
or investigation may be brought or threatened against the Company.
2.19 TAXES.
-----
(a) The Company has timely filed all federal and other Tax
Returns which are required to be filed; and there are no waivers or
extensions of the statute of limitations, audits or examinations in
progress, judicial proceedings, or claims against the Company for Taxes
(including penalties and interest) for any period or periods prior to
and including the Balance Sheet Date and no notice of any claim,
whether pending or threatened, for Taxes has been received and not
paid. The Company is not a party to any Tax allocation or sharing
agreement (i.e., any agreement or arrangement for the payment of Tax
liabilities or payment for Tax benefits with respect to a consolidated,
combined or unitary Tax Return which includes the Company); there are
no requests for rulings in respect of any Tax pending by the Company
with any tax authority; and no penalty or deficiency in respect of any
Taxes which has been assessed against the Company remains unpaid. The
amounts shown as accruals for Taxes on the Balance Sheet delivered to
Purchaser as a part of Schedule 2.7 are sufficient for the payment of
------------
all Taxes of all kinds for any time or arising or incurred in
connection with periods on or before the Balance Sheet Date and the
Company has reserved an amount sufficient to pay all Taxes for the Tax
period prior to December 31, 1997. Copies of Tax Returns and franchise
tax returns of the Company for their last three (3) fiscal years, or
such shorter period of time as it has existed, are attached hereto as
Schedule 2.19. For purposes of this Section 2.19, "Tax" shall mean any
------------
United States or other federal, state, provincial, local or foreign
income, gross receipts, property, sales, goods and services use,
license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, transfer or excise tax, or
any other tax, custom, duty, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or
penalty, imposed by any governmental authority. "Tax Return" shall mean
any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
(b) Stockholder is not a foreign person subject to withholding
under Section 1445 of the Code and the regulations promulgated
thereunder.
(c) To Stockholder's Knowledge, the Company has complied in all
material respects with all applicable laws, rules and regulations
relating to the filing of Tax Returns.
(d) To Stockholder's Knowledge, there is no pending claim by any
taxing authority in any jurisdiction in which the Company does not pay
Taxes or file Tax Returns that the Company is required to pay Taxes or
file Tax Returns.
(e) The Company has not made an election under Section 341(f)
of the Code.
14
(f) The Company has not agreed nor is required to make any
adjustment under Section 481(a) of the Code.
2.20 COMPLETENESS. The certified copies of the Articles of
------------
Incorporation and Bylaws, both as amended to date, attached hereto as Schedule
--------
2.1, and to Stockholder's Knowledge, the copies of all leases, instruments,
---
agreements, licenses, permits, certificates or other documents that are included
on schedules attached hereto are complete and correct.
2.21 GOVERNMENT CONTRACTS. The Company is not now and in the last
--------------------
five years has not been a party to any governmental contracts subject to price
redetermination or renegotiation.
2.22 ABSENCE OF CHANGES. Since the Balance Sheet Date, there has not
------------------
been:
(a) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Company;
(c) any change in the authorized capital of the Company or its
securities outstanding or any change in the ownership interests or any
grant by the Company of any options, warrants, calls, conversion rights
or commitments;
(d) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
Company;
(e) any material increase in the compensation, bonus, sales
commissions, fringe benefits or fee arrangement payable or to become
payable b the Company to any of its officers, directors, stockholders,
employees, consultants or agents, or any change in the method by which
sales commissions are calculated and paid;
(f) any work interruptions, labor grievances or claims filed;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person,
except for the sale of personal artwork to Stockholder for $1,000,
other than in the ordinary course of business including, without
limitation, Stockholder and his affiliates, other than the transaction
with Purchaser contemplated by this Agreement;
(h) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including without limitation
any indebtedness or obligation of Stockholder or any affiliate thereof;
15
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of the Company or requiring consent of any party to
the transfer and assignment of any such assets, property or rights
other than rights of Purchaser;
(j) any purchase or acquisition, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets in
excess of $10,000.00;
(k) to Stockholder's Knowledge, any waiver of any material
rights or claims of the Company;
(l) to Stockholder's Knowledge, any breach, amendment or
termination of any material contract, agreement, license, permit or
other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course
of its business; or
(n) any authorization, approval, agreement or commitment to do
any of the foregoing.
2.23 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 2.23 contains
------------------------------------ -------------
an accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
No person, corporation, firm or other entity holds a general or special power of
attorney from the Company.
2.24 RELATIONS WITH GOVERNMENTS. To Stockholder's Knowledge, the
--------------------------
Company has at all times complied, and is in compliance, with the Foreign
Corrupt Practices Act and with all foreign laws and regulations relating to
prevention of corrupt practices.
2.25 CONFLICTS OF INTEREST. To Stockholder's Knowledge, except as
---------------------
disclosed in Schedule 2.25, neither (i) any past or present officer or director
-------------
of the Company, nor (ii) any corporation, partnership, trust or other entity of
which any such past or present officer or director of the Company has a direct
or indirect interest or is a director, officer, stockholder, partner or trustee,
is or has ever been a party, directly or indirectly, to any transaction with the
Company involving in excess of $5,000,
16
including, without limitation, any agreement or other arrangement providing for
the furnishing of services by or to the Company or the rental of any property
from or to the Company, or otherwise requiring or contemplating payments by or
to the Company. Except as disclosed in Schedule 2.25, to Stockholder's
-------------
Knowledge, no present officer or director owns directly or indirectly any
interest in any corporation, firm, partnership, trust or other entity or
business which is a competitor, customer, client or supplier of the Company,
other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by all such persons.
2.26 ENVIRONMENTAL MATTERS. Except for matters that would not
individually or in the aggregate result in a Material Adverse Effect, to
Stockholder's Knowledge, each of the Company and all of its assets are in
compliance with, and are not subject to any liability under, applicable federal,
state and local environmental, regulation or code or requirements relating to
manufacture, storage, transport, generation, use, treatment, disposal or
handling of pollutants, contaminants, hazardous or toxic wastes, substances, or
materials ("Environmental Laws"). To Stockholder's Knowledge, the Company is not
------------------
required to hold any permits and registrations required by the Environmental
Laws for the operation of its business. The Company has not received any notice,
oral or written, of any environmental or public health or safety liability or
violation. To Stockholder's Knowledge, the Company has not buried, dumped,
disposed of, spilled or released any pollutants, contaminants or hazardous or
toxic wastes, substances or materials, including paint and similar substances,
which would constitute a violation of the Environmental Laws.
2.27 DISCLOSURE. This Agreement and the Schedules hereto do not and
----------
will not include any untrue statement of a material fact.
2.28 RESTRICTIONS ON TRANSFER OF PURCHASER SHARES UNDER SECURITIES
-------------------------------------------------------------
LAWS AND INVESTMENT REPRESENTATIONS.
-----------------------------------
(a) Stockholder understands that Stockholder must bear the
economic risk of the investment in the Purchaser Shares for an
indefinite period of time because the Purchaser Shares are not
registered under the Securities Act of 1933, as amended (the "1933
Act") or the securities laws of any state or other jurisdiction.
Stockholder has been advised that there is currently no public market
for the Purchaser Shares and that the Purchaser Shares are not being
registered under the 1933 Act upon the basis that the transactions
involving its sale are exempt from such registration requirements, and
that reliance by Purchaser on such exemption is predicated in part on
the Stockholder's representations set forth in this Agreement.
Stockholder acknowledges that no representations of any kind concerning
the future ability to offer or sell the Purchaser Shares in a public
offering or otherwise have been made to Stockholder by Purchaser or any
other person or entity. Stockholder understands that Purchaser makes no
covenant, representation or warranty with respect to the registration
of securities under the Securities Exchange Act of 1934, as amended, or
its dissemination to the public of any current financial or other
information concerning Purchaser. Accordingly, Stockholder acknowledges
that there is no assurance that there will ever be any public market
for the
17
Purchaser Shares or, that the Stockholder will be able to publicly
offer or sell any Purchaser Shares.
(b) Stockholder represents and warrants that Stockholder is able
to bear the economic risk of losing Stockholder's entire investment in
Purchaser, which investment is not disproportionate to Stockholder's
net worth, and that Stockholder has adequate means of providing for
Stockholder's current needs and personal contingencies without regard
to the investment in Purchaser. Stockholder acknowledges that an
investment in Purchaser involves a high degree of risk. Stockholder
acknowledges that Stockholder and Stockholder's advisors have had an
opportunity to ask questions of and to receive answers from the
officers of Purchaser and to obtain additional information in writing
to the extent that Purchaser possesses such information or could
acquire it without unreasonable effort or expense: (i) relative to
Purchaser and the Purchaser Shares; and (ii) necessary to verify the
accuracy of any information, documents, books and records furnished.
Stockholder represents, warrants and covenants to Purchaser that
Stockholder is a resident of the state indicated in the introductory
clause of this Agreement and will be the sole party in interest as to
the Purchaser Shares acquired hereunder and is acquiring the Purchaser
Shares for Stockholder's own account, for investment only, and not with
a view toward the resale or distribution thereof.
(c) Stockholder agrees that Stockholder will not attempt to
pledge, transfer, convey or otherwise dispose of the Purchaser Shares
except pursuant to the repurchase option set forth in Section 4.4 or in
a transaction that is the subject of either (i) an effective
registration statement under the 1933 Act and any applicable state
securities laws, or (ii) an opinion of counsel, which opinion of
counsel shall be satisfactory to Purchaser, to the effect that such
registration is not required. Purchaser may rely on such an opinion of
Stockholder's counsel in making such determination. Stockholder
consents to the placement of legends on any certificates or documents
representing any of the Purchaser Shares stating that the Purchaser
Shares have not been registered under the 1933 Act or any applicable
state securities laws and setting forth or referring to the
restrictions on transferability and sale thereof. Stockholder is aware
that Purchaser will make a notation in its appropriate records, and
notify its transfer agent, with respect to the restrictions on the
transferability of the Purchaser Shares.
(d) Stockholder represents and warrants that he is familiar with
the business in which Purchaser is engaged and, based upon his
knowledge and experience in financial and business matters, is familiar
with investments of this sort that Stockholder is undertaking herein,
is fully aware of the problems and risks involved in making an
investment of this type, and is capable of evaluating the merits and
risks of this investment. Stockholder represents and warrants that
Stockholder is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated pursuant to the 1933 Act. Stockholder also
acknowledges that he is not acquiring the Purchaser Shares based upon
any representation, oral or written, by any person with respect to the
future value of, or income from, the Purchaser Shares but rather upon
Stockholder's own independent
18
examination and judgment as to the prospects of Purchaser. Stockholder
acknowledges that Purchaser has made no oral or written representations
or warranties in connection with the issuance of the Purchaser Shares
and Purchaser has not made or delivered to Stockholder any financial
projections or forecasts.
(e) Stockholder represents and warrants that these Purchaser
Shares are being issued to Stockholder without any form of general
solicitation or advertising of any type by or on behalf of Purchaser or
any of its officers, directors, affiliates, agents or representatives.
2.29 CLOSING CASH BALANCE Stockholder represents and warrants that
--------------------
the Company's cash balance as of the Closing is not less than $800,000
and included in that amount are sufficient reserves to pay all Taxes
contemplated under Section 2.19 of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Stockholder as follows:
3.1 ORGANIZATION AND STANDING. Purchaser is a limited liability
-------------------------
company duly organized, validly existing and in good standing under the laws of
the State of Georgia, and Purchaser is duly authorized, qualified and licensed
under all applicable laws, regulations, and ordinances of public authorities to
own its properties and assets and to carry on its business in the places and in
the manner as it is now conducted except for where the failure to be so
authorized, qualified or licensed would not have a material adverse affect on
its business.
3.2 AUTHORIZATION AND BINDING OBLIGATION. Purchaser has full
------------------------------------
corporate power and authority to enter into and perform this Agreement and the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Purchaser have been duly and validly authorized by all
necessary action. This Agreement has been duly executed and delivered by
Purchaser and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and by the
exercise of judicial discretion in accordance with equitable principles.
3.3 NO CONFLICTS. The execution, delivery and performance of this
------------
Agreement by Purchaser and the issuance and delivery of the Purchaser Shares to
be received by Stockholder pursuant to this Agreement (a) will not violate the
Articles of Organization or the Operating Agreement of Purchaser; (b) will not
violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority applicable to Purchaser; and
(c) will not, either alone or with the giving of notice or the passage of time
or both, conflict with, constitute grounds for termination of, or result in a
breach of the terms, conditions or provisions of, or constitute a default under
any material agreement, instrument, license or permit to which Purchaser is now
subject.
19
3.4 APPROVALS. The execution, delivery and performance of this
---------
Agreement by Purchaser and the issuance and delivery of the Purchaser Shares to
be received by Stockholder pursuant to this Agreement do not require (a) the
consent, approval or authorization of any governmental or regulatory authority
having jurisdiction over Purchaser or of any third party that have not been
obtained, or (b) the submission or filing of any notice, report or other filing
with any governmental or regulatory authority having jurisdiction over
Purchaser.
3.5 BROKERAGE. Purchaser has not entered into any agreements for
---------
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement.
3.6 LITIGATION AND ADMINISTRATIVE PROCEEDINGS. To Purchaser's
-----------------------------------------
Knowledge, there is no litigation, proceeding or investigation pending or, to
the best knowledge of Purchaser, threatened against Purchaser in any federal,
state or local court, or before any administrative agency, that seeks to enjoin
or prohibit, or otherwise questions the validity of, any action taken or to be
taken pursuant to or in connection with this Agreement.
3.7 CAPITALIZATION OF PURCHASER; PURCHASER SHARES TO BE RECEIVED BY
---------------------------------------------------------------
STOCKHOLDER. As of the date of this Agreement, 10,000,004 Shares were issued and
-----------
outstanding pursuant to Purchaser's Operating Agreement. Except as set forth on
Schedule 3.7, (a) no right of first refusal, warrant, call, conversion right or
------------
commitment of any kind exists which obligates Purchaser to issue any of its
Shares, and (b) there are no (i) outstanding securities or obligations that are
convertible into or exchangeable for any shares of the capital stock or other
equity securities of Purchaser, or (ii) contracts, arrangements or commitments,
written or otherwise, under which Purchaser is or may become bound to sell or
otherwise issue any shares of its capital stock or any other equity securities,
except for options to purchase Shares granted pursuant to Purchaser's Option
Plan and except as contemplated in connection with Purchaser's contemplated
initial public offering. The Purchaser Shares to be received by Stockholder
pursuant to this Agreement will, when issued and delivered to Stockholder, be
duly and validly issued, fully paid, nonassessable and free of preemptive rights
or other restrictions other than those imposed pursuant to securities laws and
those expressly provided for in this Agreement. The Purchaser Shares delivered
to Stockholder pursuant to this Agreement have not been registered under the
Securities Act.
3.8 DISCLOSURE. No representation, warranty or covenant made by
----------
Purchaser in this Agreement or any Schedule hereto contains any untrue statement
of a material fact.
3.9 FINANCIAL STATEMENTS. Copies of the following financial statements
--------------------
of Purchaser are attached hereto as Schedule 3.9: (a) the Purchaser's balance
sheet (the "Purchaser Balance Sheet") as of December 31, 1997 and for the two
prior years, and (b) statements of earnings and retained earnings for the year
then ended and for the two prior years. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
period indicated. Purchaser has positive working capital as of the Closing Date.
20
3.10 LIABILITIES AND OBLIGATIONS. Except (i) as set forth or provided
----------------------------
for in the Purchaser Balance Sheet or (ii) as set forth on Schedule 3.10, to
--------------
Purchaser's Knowledge, Purchaser has no material liabilities or obligations of
any nature (whether known or unknown, due or to become due, absolute, accrued,
contingent or otherwise, and to Purchaser's Knowledge whether or not determined
or determinable) and there is no existing condition, situation or set of
circumstances which could result in such a liability or obligation, except for
liabilities or obligations under any contract, but only so long as no default by
Purchaser exists under any such contract.
3.11 TAXES.
-----
(a) Purchaser has timely filed all federal and other Tax
Returns which are required to be filed; and there are no waivers or
extensions of the statute of limitations, audits or examinations in
progress, judicial proceedings, or claims against Purchaser for Taxes
(including penalties and interest) for any period or periods to and
including December 31, 1997 and no notice of any claim, whether pending
or threatened, for Taxes has been received and not paid. The Purchaser
is not a party to any Tax allocation or sharing agreement (i.e., any
agreement or arrangement for the payment of Tax liabilities or payment
for Tax benefits with respect to a consolidated, combined or unitary
Tax Return which included the Purchaser); there are no requests for
rulings in respect of any Tax pending by the Purchaser with any tax
authority; and no penalty or deficiency in respect of any Taxes which
has been assessed against the Purchaser remains unpaid. The amounts
shown as accruals for Taxes on the Balance Sheet delivered to
stockholder as a part of Schedule 3.9 are sufficient for the payment of
all Taxes for any time or arising or incurred in connection with
periods on or before December 31, 1997 and Purchaser has reserved an
amount sufficient to pay all such Taxes. For purposes of this Section
3.11, "Tax" shall mean any United States or other federal, state,
provincial, local or foreign income, gross receipts, property, sales,
goods and services use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together
with any interest or penalty, imposed by any governmental authority.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return,
claim for refund, amended return and declaration of estimated Tax.
(b) Purchaser is not a foreign person subject to withholding
Section 1445 of the Code and the regulations promulgated thereunder.
(c) Purchaser has complied in all material respects with all
applicable laws, rules and regulations relating to information
reporting with respect to payments made to third parties and the
withholding of and payment of withhold Taxes and has timely withheld
from employee wages and other payments and paid over to the proper
taxing authorities all amounts required to be so withheld and paid over
for all periods under all applicable laws or it has finally resolved
and fully satisfied any liability for any failure to comply with any
such matters.
21
(d) To Purchaser's Knowledge, there is no pending claim by any
taxing authority in any jurisdiction in which the Purchaser does not
pay Taxes or file Tax Returns that the Purchaser is required to pay
Taxes or file Tax Returns.
(e) The Purchaser has not made an election under Section 341(f)
of the Code.
(f) The Purchaser has not agreed nor is required to make any
adjustment under Section 481(a) of the Code.
3.12 LOCK-UP AGREEMENT. To Purchaser's Knowledge, the Lock-Up
-----------------
Agreement being executed by the Stockholder will not be more restrictive, in any
manner, than the Lock-Up Agreement that will be executed by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ in
connection with the proposed initial public offering of Purchaser if such
offering occurs.
3.13 SUBSCRIPTION AGREEMENT. The Subscription Agreement (as defined in
----------------------
Section 4.5) shall be the same for all shareholders of Purchaser converting
their membership interests in Manhattan Associates, LLC to shares in Manhattan
Associates, Inc.
3.14 PURCHASER SHARES. The Purchaser Shares represent, and will
----------------
represent as of the Closing Date 0.5305% of the issued and outstanding Shares of
Purchaser. The Purchaser Shares are of the same class and character, and have
the same anti-dilution and preemptive rights, if any, as the shares of Purchaser
owned by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; provided, however, that such anti-dilution and
preemptive rights shall only automatically terminate upon consummation of the
transaction contemplated by the Subscription Agreement which will occur
substantially contemporaneously with the Purchaser's initial public offering.
"Substantially contemporaneously" shall mean the consummation of the transaction
contemplated by the Subscription Agreement and initial public offering occurring
within ten (10) days of each other.
4. CERTAIN COVENANTS OF THE PARTIES
4.1 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Stockholder will not
-------------------------------------------
disclose for any reason or purpose whatsoever any Confidential Information that
would have a material adverse effect on Purchaser or Company or use Confidential
Information to compete against the Purchaser or Company except to the extent
that (i) such information becomes known to the public though no fault of
Stockholder; (ii) such disclosure is required by law; or (iii) Stockholder
discloses such information as appropriate in the performance of Stockholder's
duties under the Stockholder Employment Agreement. For purposes of this
Agreement, "Confidential Information" shall mean the Company's or Purchaser's
customer and supplier list, marketing arrangements, business plans, projections,
financial information, training manuals, pricing manuals, market strategies,
internal performance statistics, software source code and other competitively
sensitive information concerning the Company or Purchaser which is material to
the Company or Purchaser and has not been previously disclosed to the public.
For purposes of this Agreement, "Trade Secret" shall mean Purchaser's
and Company's source code, heuristics and algorithms and any other information
deemed to be a trade secret under North
22
Carolina law and identified to Stockholder as a trade secret after the date of
this Agreement by Company or Purchaser. Stockholder's obligations in this
Section 4.1 with respect to Trade Secrets shall remain in effect for as long as
such information remains a Trade Secret through no fault of Stockholder.
Employee's obligations with respect to all Confidential Information shall remain
in effect during the term of Stockholder's Employment Agreement and for two (2)
years immediately following the termination of this Stockholder's Employment
Agreement, for any reason whatsoever.
4.2 RELEASE BY STOCKHOLDER. STOCKHOLDER HEREBY AGREES AND CONFIRMS
----------------------
THAT HE HEREBY FULLY RELEASES, ACQUITS AND FOREVER DISCHARGES THE COMPANY, FROM
ANY AND ALL LIABILITY, CLAIM, DAMAGE, SUIT, COST, EXPENSE OR OBLIGATION OF ANY
NATURE WHATSOEVER WHETHER KNOWN OR UNKNOWN, ARISING IN RESPECT OF OR IN
CONNECTION WITH ANY TIME OR PERIOD OF TIME PRIOR TO THE DATE HEREOF, EXCEPT FOR
COMPENSATION PAYABLE TO STOCKHOLDER BY THE COMPANY FOR THE MOST RECENT STANDARD
PAYROLL PERIOD BASED UPON THE COMPANY S STANDARD PRACTICES WHICH HAVE NOT BEEN
PAID PLUS THE REASONABLE REIMBURSABLE EXPENSES BASED UPON THE PAST PRACTICES OF
STOCKHOLDER THAT HAVE NOT BEEN PAID AND EXCEPT FOR ANY RIGHTS UNDER THE
CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 1985.
4.3 RELEASE OF STOCKHOLDER GUARANTEES. Purchaser agrees that it will
---------------------------------
take all commercially reasonable actions to have Stockholder released within 30
days following the Closing from the following obligations of the Company for
which he is personally liable: (i) SOFI IV (office lease); (ii) BMW Financial
Services (car lease); (iii) American Express (credit card); and (iv) 360
Communications (cellular phone account). If Purchaser is unable to secure a
release within the stated time period, then Purchaser shall either pay in full
the applicable obligation and close the account, or provide Stockholder with
indemnification satisfactory to Stockholder for any continuing personal
liability under such obligation.
4.4 OPTION OF STOCKHOLDER TO REQUIRE THAT PURCHASER REPURCHASE ITS
--------------------------------------------------------------
PURCHASER SHARES. In the event Purchaser does not close an initial public
----------------
offering of its equity interests on or before December 31, 1998, Stockholder
shall have the option, by giving Purchaser written notice on or before March 1,
1999, to require that Purchaser repurchase all of the Purchaser Shares held by
Stockholder for $1,333,325. The repurchase shall be closed within 20 days after
the date on which Stockholder gives the notice required hereunder of his
exercise of such option. The place, date and hour for such closing shall be set
forth in a written notice from Stockholder to Purchaser, which notice shall be
given at least 10 days prior to the closing date. At the closing, Purchaser
shall pay the full purchase price payable for the Purchaser Shares to
Stockholder in immediately available funds. For purposes of clarification, the
option set forth in this Section 4.4 to require Purchaser to repurchase the
Purchaser Shares shall only apply to the Purchaser Shares that Stockholder
acquires at Closing and not to any shares of Purchaser acquired hereafter
whether under an option agreement or any other agreement.
23
4.5 EXECUTION OF SUBSCRIPTION AGREEMENT. Stockholder agrees that he
-----------------------------------
will execute a Subscription and Contribution Agreement (the "Subscription
Agreement") providing for the contribution of his Purchaser Shares to Manhattan
Associates, Inc. in such form and at such time as the Subscription Agreement is
executed by the other holders of shares of Purchaser in contemplation of
Purchaser's proposed initial public offering.
5. INDEMNIFICATION
5.1 SURVIVAL. The representations, warranties, covenants and
--------
agreements of the parties made in this Agreement shall survive (and not be
affected in any respect by) the Closing and any examination or investigation
conducted by or on behalf of the parties hereto and any information which any
party may receive pursuant to the Schedules hereto or otherwise. Notwithstanding
the foregoing, the right of indemnification with respect to each representation
and warranty contained in this Agreement shall terminate (the "Survival Date")
-------------
occurring on the second anniversary of the Closing Date; provided, however, that
-------- -------
(a) the right to indemnification with respect to the representations and
warranties set forth in Sections 2.11, 2.17, 2.19 and 3.14 shall survive until
thirty (30) days after the expiration of the applicable statute of limitations
relating to the matters set forth in such Sections; and (b) the right to
indemnification with respect to such representations and warranties, and the
liability of either party with respect thereto, shall not terminate with respect
to any claim, whether or not fixed as to liability or liquidated as to amount,
with respect to which such party has been given written notice prior to the
Survival Date or such thirtieth (30th) day after the expiration of the
applicable statute of limitations (or extensions or waivers thereof), whichever
shall be applicable thereto in accordance with this Section 5.1.
5.2 INDEMNIFICATION BY STOCKHOLDER. Except as otherwise provided in
------------------------------
Section 5.4, Stockholder covenants and agrees that he will indemnify, defend,
protect and hold harmless Purchaser and the Company, each of their respective
successors and assigns and each of their directors, officers, employees, at all
times from and after the date of this Agreement (subject to any limitation on
the survival of representations and warranties set forth in Section 5.1) against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses ("Losses") including specifically, but without
limitation, reasonable attorneys' fees (except as otherwise provided in Section
5.6(a) with respect to counsel employed at the expense of the indemnified party)
("Legal Expenses") based upon, resulting from or arising out of (a) any
--------------
inaccuracy or breach of any representation or warranty of Stockholder contained
in this Agreement, and (b) the breach by Stockholder of, or the failure by
Stockholder to observe, any of his covenants or other agreements contained in
this Agreement .
5.3 INDEMNIFICATION BY PURCHASER. Except as otherwise provided in
----------------------------
Section 5.4, Purchaser covenants and agrees that it will indemnify, defend,
protect and hold harmless Stockholder and his heirs at all times from and after
the date of this Agreement (subject to any limitation on the survival of
representations and warranties set forth in Section 5.1) against all Losses,
claims, damages, actions, suites, proceedings, demands, assessments,
adjustments, costs and expenses ("Losses") including, specifically, but without
limitation, Legal Expenses (except as otherwise provided in Section 5.6(a) with
respect to counsel employed at the expense of the indemnified party) based upon,
resulting
24
from or arising out of (a) any inaccuracy or breach of any representation or
warranty of Purchaser contained in this Agreement in this Agreement, and (b) the
breach by Purchaser of, or the failure by Purchaser to observe, any of its
covenants or other agreements contained in this Agreement.
5.4 TAX INDEMNIFICATION.
-------------------
(a) Each party agrees to report Stockholder's transfer of shares of
Company to Purchaser in exchange for the Purchaser Shares as a transaction
qualifying for non-recognition treatment to Stockholder pursuant to the Code and
in particular Code Section 721 to the extent the consideration received by
Stockholder consists of Purchaser Shares. Stockholder acknowledges and agrees
that all cash paid to Stockholder under this Agreement shall be fully taxable to
Stockholder and payment of any Taxes by Stockholder relating to such payments
shall not be indemnified by Purchaser.
(b) Subject to the preceding sentence, Purchaser hereby covenants and
agrees for itself, its successors and assigns to indemnify and hold harmless
Stockholder, his heirs and estate, at all times after the Closing Date, against
and in respect of all assessments, claims, or demands for tax, interest,
penalties, and expenses (including, but not limited to, reasonable accounting
and attorney's fees to litigate any assessment along with penalties and interest
in either the U.S. Tax Court or U.S. Federal District Court) arising from the
determination by any federal or state taxing authority that the receipt of
Purchaser Shares by Stockholder is an income recognition event taxable to
Stockholder whether upon receipt of the Purchaser Shares or as a result of
subsequent action by Purchaser or its successors or assigns (other than pursuant
to the options to purchase additional Shares of Purchaser granted to
Stockholder). All of the foregoing costs and expenses incurred plus the income
tax and any penalties or interest assessed thereon shall be payable by Purchaser
within fifteen (15) days of Purchaser's receipt of written notice from
Stockholder.
(c) In the event that Stockholder shall dispose of some or all of his
Purchaser Shares (or any interest in any successor entity to Purchaser) in a
taxable transaction and Purchaser shall have indemnified Stockholder as provided
in the preceding paragraph because the receipt of the Purchaser Shares by
Stockholder is determined to be taxable, Stockholder shall refund to Purchaser
the amount by which the tax on such disposition (the "Disposition") is reduced
as a result of the increased basis of the disposed interest attributable to
consummation of the transactions provided herein and treatment of the receipt of
shares as a taxable transaction. The amount of such refund shall be determined
by calculating the tax that would be due on the Disposition assuming that the
original acquisition basis of the disposed interest was equal to (a) basis of
the stock in the Company contributed for the Purchaser Shares, (b) adjusted by
subsequent allocations of income, loss, and for distributions, to the extent
required by the Code, and (c) subtracting from the hypothetical amount of tax as
so determined the tax actually due on the Disposition, after giving effect to
the increased basis of shares received in this transaction if characterized as a
taxable transaction. Stockholder shall only be required to refund the net tax
savings so determined and not any interest, penalty, or expenses paid by
Purchaser pursuant to this indemnification.
25
5.5 LIMITATION ON LIABILITY. Neither party shall be liable to pay any
-----------------------
Losses unless and until the aggregate amount of Losses exceeds $50,000, then the
indemnifying party shall be liable only for the excess, provided, however, that
this limitation shall not apply to (i) any obligations pursuant to the
Stockholder Employment Agreement, (ii) the repurchase option contained in
Section 4.4 of this Agreement, (iii) the Contribution Consideration indicated in
Section 1.2, (iv) the indemnification set forth in Section 5.4 and 5.7, (v)
Purchaser's representations set forth in Section 3.14, and (vi) Stockholder's
representation set forth in Section 2.29.
5.6 INDEMNIFICATION PROCEDURES.
--------------------------
(a) Promptly after receipt by any person entitled to
indemnification under Section 5.2 or 5.3 (an "indemnified party") of
-----------------
notice of the commencement of any action, suit or proceeding (other
than actions, suits or proceedings with respect to Taxes which are
provided for in Section 5.7 ("Tax Actions")) by a person not a party to
-----------
this Agreement in respect of which the indemnified party will seek
indemnification hereunder (a "Third Party Action"), the indemnified
------------------
party shall notify the person that is obligated to provide such
indemnification (the "indemnifying party") thereof in writing within 30
------------------
days of receipt of such notice. The indemnifying party shall be
entitled to participate in the defense of such Third Party Action and
to assume control of such defense (including settlement of such Third
Party Action) with its own counsel; provided, however, that:
-------- -------
(i) the indemnified party shall be entitled to participate
in the defense of such Third Party Action and to employ
counsel at its own expense (which shall not constitute
Legal Expenses for purposes of this Agreement) to
assist in the handling of such Third Party Action;
(ii) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into
any settlement of such Third Party Action or ceasing to
defend against such Third Party Action, if pursuant to
or as a result of such settlement or cessation,
injunctive or other equitable relief would be imposed
against the indemnified party or the indemnified party
would be adversely affected thereby;
(iii) no indemnifying party shall consent to the entry of any
judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by
each claimant or plaintiff to each indemnified party of
a release from all liability in respect of such Third
Party Action; and
(iv) the indemnifying party shall not be entitled to control
the defense or settlement of any Third Party Action
unless the indemnifying party confirms in writing its
assumption of such defense or settlement and continues
to pursue the defense reasonably and in good faith.
26
After written notice by the indemnifying party to the indemnified party
of its election to assume control of the defense of any such Third Party Action
in accordance with the foregoing, (i) the indemnifying party shall not be liable
to such indemnified party hereunder for any Legal Expenses subsequently incurred
by such indemnified party attributable to defending against such Third Party
Action, and (ii) as long as the indemnifying party is reasonably contesting such
Third Party Action in good faith, the indemnified party shall not admit any
liability with respect to, or settle, compromise or discharge the claim
underlying, such Third Party Action without the indemnifying party's prior
written consent. If the indemnifying party does not assume control of the
defense of such Third Party Action in accordance with this Section 5.6, the
indemnified party shall have the right to defend and/or settle such Third Party
Action in a good faith manner at the cost and expense of the indemnifying party,
and the indemnifying party will reimburse the indemnified party for fees, costs
and expenses required by this Section 5.6 within 30 days of when bills are
received or expenses incurred and will reimburse the final settlement within 10
days after the execution of the settlement documents.
(b) If an indemnified party has actual knowledge of any facts or
circumstances other than the commencement of a Third Party Action which cause it
in good faith to believe that it is entitled to indemnification under this
Section 5, then such indemnified party shall promptly give the indemnifying
party notice thereof in writing, but any failure to so notify the indemnifying
party shall not relieve it from any liability that it may have to the
indemnified party under Section 5.2, 5.3, or 5.4 as the case may be, except to
the extent that the indemnifying party is prejudiced by the failure to give such
notice.
5.7 TAX MATTERS.
-----------
(a) Stockholder shall be responsible for preparing and filing all Tax
Returns for the Company for the Tax periods ending on or prior to December 31,
1997. Such returns will report the operations of the Company consistent with the
past practice of reporting income and expenses on a cash basis method of
accounting. The period from January 1, 1998, up to and including the Closing
Date shall hereinafter referred to as the "Stub Period". Stockholder shall
provide Purchaser sufficient information relating to the Stub Period for
Purchaser to prepare and file all Tax Returns for the Company for the Tax period
subsequent to December 31, 1997. Stockholder shall pay, defend, indemnify and
hold harmless the Company and Purchaser from and against any Taxes imposed upon
the Company for all Tax periods prior to December 31, 1997 after taking into
consideration to the fullest extent possible all Tax benefits, Tax credits and
Tax attributes, attributable to any Taxable period(s) ending on or prior to
December 31, 1997.
(b) Purchaser, at Company's cost and expense, shall be responsible for
preparing and filing all Tax Returns for Tax periods beginning after December
31, 1997. Purchaser and Company jointly and severally shall pay, defend,
indemnify and hold harmless Stockholder from and against any Taxes attributable
to the Tax period beginning after December 31, 1997.
27
(c) If any Tax for which Stockholder is to indemnify Purchaser
pursuant to this Section 5.7 is payable after the Closing Date, Stockholder
shall pay or cause to be paid to Purchaser the amount of such Tax no later
than the later of (i) the tenth business day after Stockholder receives
notice from Purchaser that such tax is due, and (ii) ten (10) business days
before the date such tax is due and payable. Any amount not paid when due
shall bear interest from the date due to the date payment is made in full
at the rate equal to the rates then in effect for the applicable taxing
authority.
(d) If any tax for which Purchaser is to indemnify Stockholder
pursuant to this Section 5.7 is payable after the Closing Date, Purchaser
shall pay or cause to be paid to Stockholder the amount of such Tax no
later than the later of (i) the tenth business day after Purchaser receives
notice from Stockholder that such tax is due, and (ii) ten (10) business
days before the date such Tax is due and payable. Any amount not paid when
due shall bear interest from the date due to the date payment is made in
full at the rate equal to the rates then in effect for the applicable
taxing authority.
(e) Purchaser and Stockholder shall promptly notify each other in
writing upon receipt by them or their affiliates of notice of any pending
or threatened audit or assessment with respect to Taxes for any periods
ending on or prior to December 31, 1997 which Stockholder would be required
to pay Purchaser pursuant to this Section 5.7. Upon Stockholder's
acknowledgment of his liability with respect thereto, Stockholder will have
the right, at his expense, to control any audit, administrative or court
proceeding relating to Taxes for any periods ending on or prior to December
31, 1997; provided, however, that (i) Stockholder shall promptly notify
Purchaser in writing as to any examination by or disputes with taxing
authorities that relate to such periods, and (ii) Purchaser shall be kept
informed and allowed, at its expense, to participate therein.
(f) Purchaser shall be responsible for handling all Tax matters
related to the Company, including dealing with and resolving audit issues,
for all periods, after December 31, 1997; provided, however, that (i)
Purchaser shall promptly notify Stockholder in writing as to any
examination by or disputes with taxing authorities that relate to such
periods, and (ii) Stockholder shall be kept informed and allowed, at his
expense, to participate therein.
(g) Stockholder and Purchaser shall use his or its best efforts to
provide the other with such assistance as may reasonably be requested in
connection with Tax matters including providing information with respect to
the preparation of any Tax Return or other document required to be filed
with any taxing Authority, any audit or other examination by any taxing
Authority, any judicial or administrative proceeding or dispute relating to
liability for Taxes or any claim for indemnification arising under this
Section 5.7 and each shall retain and provide to the other access to such
records and other information as may be relevant to such return, audit,
examination, proceeding or determination.
5.8 LIMITATIONS ON INDEMNITY OBLIGATIONS. Notwithstanding any other
------------------------------------
provision in this Section 5 to the contrary, no indemnifying party shall be
liable to an indemnified party for punitive
28
damages pursuant to Section 5.2 or 5.3, as the case may be; provided, that the
claim against such indemnifying party does not involve a Third Party Action in
which punitive damages are sought.
6. NONCOMPETITION
6.1 PROHIBITED ACTIVITIES. Stockholder hereby covenants, acknowledges
---------------------
and agrees as follows:
(a) For a period of two years after the Closing Date (except
as set forth in the following paragraph), Stockholder shall not for any
reason whatsoever, directly or indirectly, for himself or on behalf or
in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature engage, as an officer,
director, shareholder, owner, partner, joint venturer, lender or in any
capacity, whether as an employee, independent contractor, consultant or
advisor, or as a sales representative, engage in any Competitive
Business in any county or other political subdivision of any state of
the United States of America in which the Company is conducting
business as of the Closing or has conducted business during the
12-month period immediately preceding the Closing. For purposes hereof,
the term "Competitive Business" shall mean engaging in a business the
same as or substantially similar to the business of development,
consulting and sales of transportation management and inventory control
software as operated by the Company during the term of Stockholder's
employment by the Company immediately prior to the Closing.
Notwithstanding the foregoing provisions of this paragraph (a)
Stockholder may (i) be a passive investor owning no more than 10% of
the outstanding equity securities of any corporation or other entity
which is in competition with Purchaser the equity securities of which
are listed on a national securities exchange or over-the-counter, or
(ii) invest in or act as an employee, consultant or other position for
Purchaser.
(b) For a period of two years after the Closing Date, Stockholder
shall not offer to employ any person who is, at that time, or which has
been within one (1) year prior to that time, an employee of the
Company;
(c) For a period of two years after the Closing Date, Stockholder
shall not, directly or indirectly, interfere with any contract or
agreement that the Company has with any customer, supplier, associate,
employee, sales or other agent or independent contractor of the Company
or which has been a customer, supplier, employee, sales or other agent
or independent contractor of the Company within one (1) year prior to
that time;
(d) Stockholder acknowledges that the damages that would be
suffered by Purchaser as a result of any breach of the provisions of
this Section 6.1 may not be calculable and that an award of a monetary
judgment for such a breach would be an inadequate remedy. Consequently,
Purchaser shall have the right, in addition to any other rights it may
have, to obtain, in any court of competent jurisdiction, injunctive
relief to restrain any breach or threatened breach of any provision of
this Section 6.1 or otherwise to specifically enforce any
29
of the provisions hereof. This remedy is in addition to damages
directly or indirectly suffered by Purchaser;
(e) In the event that any court finally determines that the time
period or the geographic scope of any such covenant is unreasonable or
excessive and any covenant is to that extent made unenforceable, the
parties agree that the restrictions of this Section 6.1 shall remain in
full force and effect for the greatest time period and within the
greatest geographic area that would not render it unenforceable. The
parties intend that each of the covenants in Sections 6.1(a), (b), (c)
and (d) shall be deemed to be a separate covenant.
6.2 INDEPENDENT COVENANT.
--------------------
(a) It is specifically agreed that the period of two (2) years
stated at the beginning of this Section 6, during which the agreements
and covenants of Stockholder made in this Section 6 shall be
effective, shall be computed by excluding from such computation any
time during which Stockholder is in violation of any provision of this
Section 6.
(b) Notwithstanding anything herein to the contrary, if (i) the
Purchaser or Company fail to make any monetary payment owed under the
Stockholder Employment Agreement, (ii) the Purchaser fails to satisfy
its repurchase obligation set forth in Section 4.4., or (iii) Purchaser
or Company otherwise materially breaches the Stockholder Employment
Agreement; then Stockholder shall no longer be obligated to the terms
of this Section 6 upon Purchaser's failure to cure such breach within
ten (10) days after Purchaser's receipt of notice from Employee. For
purposes of determining whether a material breach has occurred under
Section 6.2(a)(iii) above the parties shall submit the matter to
arbitration under Section 15 of the Stockholder Employment Agreement
within thirty (30) days after Purchaser's receipt of written notice of
such breach.
6.3 MATERIALITY. Stockholder hereby agrees that this covenant is a
-----------
material and substantial part of this transaction.
7. CERTAIN DEFINITIONS
"Affiliate" (whether or not capitalized) shall mean, with respect to
---------
any person, any other person that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with
such first person. As used in this definition, "control" shall mean possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or other ownership
interest, by contract or otherwise).
"Encumbrances" shall mean mortgages, liens, pledges, encumbrances
------------
(legal or equitable), claims, charges, security interests, covenants,
conditions, voting and other restrictions, rights-of-way, easements, options,
encroachments, rights of others and any other matters affecting title, except,
in the case of the Purchaser Shares, for restrictions on the sale or other
disposition thereof imposed by federal or state securities laws.
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"GAAP" shall mean generally accepted accounting principles.
----
"Government Authority" shall mean any government or state (or any
--------------------
subdivision thereof), whether domestic, foreign or multinational, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any government court or tribunal.
"Intellectual Property" means Company's trade secrets, copyrights and
---------------------
patent rights described in Section 2.11, to the extent the Company has any.
"Knowledge" shall mean facts that are known by Stockholder.
---------
"Legal Requirement" shall mean any law, statute, ordinance, code, rule,
-----------------
regulation, standard, judgment, decree, writ, ruling, arbitration award,
injunction, order or other requirement of any Government Authority.
"Lien" shall mean all liens including judgment and mechanics' liens
----
(regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options, or other charges, encumbrances or restrictions.
"Material Adverse Effect" shall mean any material adverse change in or
------------------------
effect on, or any change that may reasonably be expected to have a material
adverse effect on, (i) the business, operations, assets, liabilities, condition
(financial or otherwise), results of operations, or prospects of the Company or
(ii) the ability of the Company or Stockholder to consummate the transactions
contemplated by this Agreement.
"Permitted Liens" shall mean (a) liens for ad valorem real or personal
----------------
property taxes or assessments not at the time due, (b) liens and respective
pledges or deposits under workers' compensation laws or similar legislation,
carriers', warehousemen's, mechanics', laborers' and materialmen's and similar
liens, if the obligation secured by such liens are not then delinquent, and (c)
existing Liens, if any, disclosed on Schedule 7 hereto.
"Person" (whether or not capitalized) shall mean and include an
------
individual, corporation, company, limited liability company, limited liability
partnership, partnership, joint venture, association, trust, and other
unincorporated organization or entity and a governmental entity or any
department or agency thereof.
"Purchaser's Knowledge" shall mean facts that are known by Purchaser's
----------------------
executive officers and directors.
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"Technology" shall mean any computer program, operating system,
----------
applications system, firmware or software of any nature, whether operational,
under development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation thereof, whether in machine-
readable form, programming language or any other language or symbols and whether
stored, encoded, recorded or written on disk, tape, film, memory device, paper
or other media of any nature and all current and historical data bases, research
records, test information, market surveys, know-how, inventories, processes and
procedures.
8. GENERAL
8.1 COOPERATION. Stockholder and Purchaser shall each deliver or cause
-----------
to be delivered to the other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
Stockholder will cooperate and use his best efforts to have the present
officers, directors and employees of the Company cooperate with Purchaser on and
after the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
8.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
------------------------
parties hereunder may not be assigned except by operation of law to any entity
under common control with Purchaser or any parent or subsidiary of Purchaser or
with the prior written consent of the other parties, and shall be binding upon
and shall inure to the benefit of the parties hereto, the successors and
permitted assigns of Purchaser, and the heirs and legal representatives of
Stockholder. If this Agreement is assigned by Purchaser, Purchaser shall not be
released from any of its obligations under this Agreement.
8.3 ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
----------------
hereto and the Schedules delivered pursuant hereto) and the other writings
specifically identified herein or contemplated hereby contain the entire
agreement and understanding between Stockholder and Purchaser with respect to
the transactions contemplated herein and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement
may be modified or amended only by a written instrument executed by Stockholder
and Purchaser.
8.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
8.5 BROKERS AND AGENTS. Each party represents and warrants that it
------------------
employed no broker or agent in connection with this transaction and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commission of brokers employed or alleged to have been
employed by such indemnifying party.
8.6 PAYMENT OF EXPENSES. Each of the parties hereto shall pay all its
-------------------
own costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby;
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provided, however, that the fees and expenses for outside legal, accounting,
-------- -------
business consulting and financial advice to the Company and Stockholder incurred
in connection with the transactions provided for in this Agreement shall be paid
by Stockholder and not Company, and further provided that Purchaser shall pay
------- --------
the reasonable fees expenses for outside accounting services incurred in
connection with the preparation of the Financial Statements required by
Purchaser pursuant to this Agreement.
8.7 NOTICES. All notices of communication required or permitted
-------
hereunder shall be in writing and may be given by any of the following methods:
(i) personal delivery; (ii) facsimile transmission; (iii) registered or
certified mail, postage prepaid, return receipt requested; or (iv) overnight
delivery service requiring acknowledgment of receipt. Any such notice or
communication shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
(a) If to Purchaser, addressed to:
Manhattan Associates, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 770/955-0302
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President and
Chief Executive Officer
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 404/365-9532
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to Stockholder, addressed to:
▇▇▇ ▇▇▇▇▇▇▇▇▇
c/o Performance Analysis Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 808/322-8217
with a copy to:
33
Pinna, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 919/782-0452
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt or (iii) in the case
of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt.
8.8 GOVERNING LAW. This Agreement shall be construed in accordance
-------------
with the laws of the State of North Carolina. Purchaser agrees to submit to the
exclusive jurisdiction of the North Carolina courts to resolve any dispute under
this Agreement.
8.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
-------------------------------
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
8.10 TIME. Time is of the essence of this Agreement.
----
8.11 REFORMATION AND SEVERABILITY. In case any provision of this
----------------------------
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such a manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"PURCHASER"
MANHATTAN ASSOCIATES, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President and
Chief Executive Officer
"STOCKHOLDER"
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
35